You’ve heard that investing in property can be quite profitable. Whether you plan to flip it (buying a property, fixing it up, then selling for a profit) or rent it out, real estate is a way to expand your investment portfolio and generate increased cash flow.

But even when you know what kind of property you want to buy and how you want to manage it, you have to find a way to finance the purchase. If you decide to put a down payment on the property, you have to know where to come up with the money. You also need some cash to close on the property, then you have to be able to make the monthly mortgage payments. So where do you start?

You could start with your savings, but wisdom says your savings are better left where they are. Even if you use some of your savings, you never want to dip too deep into that pool, else you risk losing your financial cushion. So where else can you look?

One smart place to get the money would be to tap into your home equity. If you’ve built up some equity in your primary home, you can get a home equity loan that will give you the cash to use as a down payment.

There are several advantages to home equity loans. The first being that where traditional first mortgages can take weeks to close, a home equity loan may take only several days. The second is that the mortgage interest is tax-deductible. (You should always check with your tax advisor.) And third, home equity loans offer flexibility–some are even available with interest-only payment options where you can choose, when you want to pay only the interest due for that month; though you can still pay as much principal as you want.

Now that you’ve found a way to finance the down payment, how do you finance the rest of the investment property? There are several loans available that are good for the purchase of an investment property. Some loans allow you to “state your income,” meaning that you don’t have to document your income. It makes the mortgage process easier because there is less paperwork, but you need to have a good credit score to do so.

Then, there are option ARMs that allow a significantly lower monthly payment. In fact, option ARMs give you just that–options. You can choose a 30-year traditional mortgage payment, a 15-year payment, an interest-only payment or a minimum payment, where you pay less than the interest due for that month. This kind of payment becomes very handy when you’re juggling a mortgage for your own home as well as an investment home. Just be careful which option ARM you choose–many have rates that can adjust very quickly and very often. Look for an option ARM that offers a fixed interest rate, that doesn’t allow you to defer too much interest and doesn’t have pre-payment penalties.

Coming up with a down payment to buy an investment property doesn’t have to be hard, especially when you don’t want to dip into your savings. Neither does financing the rest of the property. However, everyone’s situation is different. Contact a Home Loan Expert today to find out which mortgage best fits your individual situation and investment goals.

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This Post Has 16 Comments

  1. I am looking at a rental property listed at a price of $560K. If fully rented it makes $5,500.00 a month. My credit score is above 700. But I only have about 10% down payment, and I do not have a home equity. Do I have a shot at getting a 30 year fixed loan?

    Thanks

    1. Hi Hamad:

      I’m going to have someone reach out to you so you know where you stand one way or the other. Thanks for asking!

      Kevin Graham

  2. My wife and I are looking to invest in a rental home for 149K and we are trying to find out the best way to go about the down payment, and sifting through all the loan options. We are in the mid to high 600’s for credit but just recently purchased our primary home (due to a move across the country), so I’m not sure about a home equity loan. Together we make about 175K, and we really are interested in this opportunity to invest.

    1. Hi Brian:

      We can definitely have someone reach out to you to look into your options. A Home Loan Expert will be reaching out shortly.

      Thanks,
      Kevin Graham

  3. You’re article title was about finding the down payment on an investment property, but you only gave the option of a home equity loan. Are there other options? My wife and I have credit scores at 700 or higher and we have extremely low debt to income ratio (currently around 8%). But I don’t currently have a large lump sum in saving or available through a HELOC. What are some other options as we want to start developing a rental portfolio?

    1. Hi Matthew! I will share your question with our home loan experts to see if we can be of assistance. They’ll reach out to you soon.

  4. I’m interested in buying another investment property, and I’ve been told that down payment requirements have increased. I’d like to talk to someone to be sure.

  5. hello
    What if you do not have any money saved up, but wanted to purchase an investment property, is
    there another way of accomplishing that?

    1. Hi Julia, without some money saved up, it would be quite difficult, as you need a down payment for an investment property. If there is something specific you are looking for, please let us know. Thanks.

  6. A friend and I are looking at an investment rental for $250k. We have a downpayment in the range of 12-18%. Are there any options available to us?

  7. I have an opportunity to purchase a portfolio of commercial real estate. An 8 unit, a 5 unit, and 3 other commercial units that need work. They will currently cash flow 5,400 a month. the purchase price is 248,000. I need to put a deposit down of 48,000 and seller will finance the rest. Is there anything I can do? I do have property that is free and clear. please help?

    1. Hey T! At the moment, we do not do commercial real estate loans. We do, however, do private home loans. If this something that interests you feel free to reach out to us! Thanks for reading.

  8. My wife and I are looking to buy an investment property for my father in law to live in. Our purcahse price will be approx. 200k and we are planning on putting down 60k.
    My wife and I have a combined salary close to $175k/year. Our credit score has been in the low 600’s but may have dipped into the high 500. What are my options in getting a loan for the remainder. My father in law is going to rent from us.

    1. Hi Jim! We’ve forwarded your question to our Home Loan Experts who should be in touch with you soon. Thanks for reading!

  9. My wife and I have 750 credit rate

    We have an LLC for our one rental property which is currently rented for the last 5 years. We have shown a loss on it. But this is the 5th year and we will show a small gain.

    We have $20,000.00 equity in our home we live in.

    ? we found another rental property worth $70,000 asking price

    We don’t have a large down payment but reather we have a nest egg to survive for 3 months if needed.

    What to do ? I’m 41 and want to retire owning atleast 5 properties

    We are currently not swimming in debt and all three SUV’s are paid in full, Ski boat paid in full and a 30ft. camper newer paid in full. We also do not have excess credit card debt.

    I do have a home equity loan against my rental property, I do not want to tap into it any more just incase I lose everything and have to move into it.

    And yes I make $70,000.00 and my Wife cuts hair for only $11,000.00 per year

    Again What to do ?

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