What's the minimum down payment for investment property?

Whether your goal is generating rental income, building long-term wealth, or diversifying your portfolio, real estate can be an impactful investment. There are many ways to secure a rental property and start earning, but it pays to approach investing with a solid strategy.

In this post, we’ll explore the minimum down payment for investment property loans, eligibility requirements, and ways to cover the costs.

What is the minimum down payment for investment property?

If you plan to buy an investment property with a conventional mortgage loan, be prepared to make a 15% down payment for a single-unit home. You’ll need a 25% down payment for an investment property with two to four units.‍

While those ranges are a good rule of thumb, other financial health factors, like your credit score or debt-to-income ratio, can impact how much the actual down payment amount will be.

Additional loan requirements to consider

When applying to buy a home, including investment property, you must undergo the underwriting process. Essentially, a lender evaluates your financial situation to determine your risk as a borrower.

Although specific requirements vary from lender to lender, you'll have to meet criteria around the following:

• Credit score: Most lenders require a credit score of 700 or higher for real estate investing. However, some may offer less competitive rates to borrowers with a score as low as 620.
• Debt-to-income ratio: DTI represents the percentage of your monthly income that goes toward debt. You should aim to have a DTI of 43% or less.
• Cash reserves: A lender will want to verify you can cover your mortgage even if your rental property is unoccupied. Consequently, you'll likely need at least three to six months of mortgage payments in your savings.

How to finance an investment property: 5 strategies

House hacking

House hacking is an excellent way for beginners to step into homeownership, generate rental income, and start building their real estate portfolio — without the hassle of applying for investment property loans.

Traditional house hacking involves purchasing a multifamily property, such as a duplex or triplex, and living in one unit while renting out the others. However, you can always rent a finished basement or accessory dwelling unit (ADU). Of course, to offset your living expenses, you'll need a good space that can generate solid rental income.

The main advantage of house hacking is that you can use a government-backed mortgage loan. This can considerably reduce — or eliminate altogether — the amount you’ll need to save.  

• FHA loan for investment property (up to 4 units): A first-time homebuyer loan program that requires a 3.5% minimum downpayment.
• VA loan for investment property (up to 4 units): A government loan backed by the U.S. Department of Veteran Affairs that offers financing to veterans with a 0% minimum downpayment.

Group investing

Find strength in numbers with group investing. Also known as syndication or real estate crowdfunding, you can pool your resources with various partners to buy property — especially high-value homes that may be out of your individual reach.

By joining forces with others, you can access larger deals and spread the investment risk. Not to mention, there's an opportunity to learn from more seasoned professionals or even find a mentor. You can leverage online platforms or attend networking events to find interested real estate investors or groups.

Home equity financing

One popular way to cover the cost of an investment property down payment is to tap into the equity in your primary residence. If you're a homeowner with at least 20% equity in your property, you can score more favorable rates and terms using your home as collateral. You may even be able to draw enough for a larger down payment — or to cover the cost completely.

Here are three equity financing tools that won't change the terms of your current mortgage:

• Home equity loan for investment property: A home equity loan will give you a lump sum of cash in exchange for fixed monthly payments over 5-30 years. You'll need good credit to qualify.
• Home equity line of credit for investment property: A HELOC is a flexible revolving line of credit that you can draw from over a 10-year term. Once the repayment period begins, you'll be on the hook for monthly payments with a variable rate. You'll need good to excellent credit to qualify.
• Home equity investment (HEI) for investment property: A home equity investment provides a lump sum of cash in exchange for a share of your home's future appreciation. There are no monthly payments. Instead, you pay back your HEI anytime during a flexible 30-year term. You'll need a credit score above 500 to qualify.
• Cash-out refinance: A cash-out refinance lets you replace your existing mortgage with a new, larger loan and take the difference in cash. To qualify, lenders usually require at least 20% equity in your home, a solid credit score, and proof of stable income.

Bridge loans

Are you looking for your next investment while selling a property? Bridge loans are short-term financing solutions that bridge the gap between purchasing a new property and selling an existing one.

A major benefit is that you can access fast funding, which is critical if you have a time-sensitive investment opportunity. However, bridge loans typically have higher interest rates and shorter repayment periods. To be eligible, you'll need at least 20% equity in your current house.

Seller financing

If traditional lenders are not an option, consider seller refinancing, also called owner financing. The arrangement works similarly to any other financing transaction, except you'll have more leeway in negotiating loan terms. Essentially, the property owner will act as your lender, allowing you to buy and repay the property over time.

You'll work with the seller to determine how much interest you'll pay and your repayment term. As a result, you could potentially score more favorable terms. It's important to note that should you default, the seller has a legal right to foreclose on the property. You’ll also need to find a seller willing to work with you and assume the risk of this arrangement.

Frequently asked questions

What’s the true cost of buying an investment property?

Beyond the down payment, be ready for other upfront costs like closing fees (credit reports, title insurance, appraisals, attorney and escrow fees, and loan origination charges) and inspections. Altogether, these can add up to several thousand dollars, so it’s important to budget accordingly to avoid any surprises.

Can I put less than 20% down on an investment property?

Yes, it’s possible to put less than 20% down on an investment property—but it can be a bit tricky. Most lenders prefer a 20–25% down payment for investment properties because they’re considered higher risk than primary residences. That said, some programs or creative financing options—like house hacking, partner arrangements, or certain small multifamily loans—may allow for lower down payments. Just keep in mind that putting less down might mean higher interest rates, private mortgage insurance (PMI), or stricter loan terms. It’s all about finding the right balance for your financial situation and goals.

Can I get a loan based on rental income?

When reviewing your loan application, lenders usually include 75% of what you expect to earn from tenants in your gross monthly income. They do this by checking out the property's rental history or looking at market rents in your area to come up with a fair estimate of rental income.

What is the 2% rule for investment property?

The 2% rule is a quick way real estate investors size up whether a rental property might be a good deal. The idea is simple: if the monthly rent is about 2% of the purchase price, the property has a good chance of generating positive cash flow.

So, for a $150,000 home, you’d be looking for around $3,000 a month in rent. It’s not a hard-and-fast rule, though—just a rough benchmark. Things like location, maintenance costs, and vacancy rates all play a big role, so it’s smart to dig a little deeper before making any decisions.

Final thoughts

Understanding the minimum down payment requirements for investment property is essential for aspiring real estate investors — but it's just one part of the bigger picture. In addition to the down payment, having enough saved for other homebuying costs and keeping your financial health in order is critical. Be sure to shop around, prequalify, and secure the best terms and rates for your venture.