Investing in real estate can be a lucrative way to build wealth, but securing the right financing is crucial to getting started. Whether you’re looking for a traditional loan or exploring creative funding strategies, here’s a breakdown of financing options to help you purchase your first investment property.
1. Conventional Loans
Offered by banks and mortgage lenders, these loans typically require:
20-25% Down Payment – Higher than primary residence loans.
Good Credit Score – Generally, a score of 620+ is required.
Stable Income & Low Debt-to-Income Ratio – Lenders will assess your ability to repay.
Pros: Competitive interest rates, long-term repayment.
Cons: Requires significant upfront capital and strong credit.
2. FHA Loans (For Owner-Occupied Investment Properties)
FHA loans allow for a low 3.5% down payment but require the buyer to live in the property for at least one year.
Ideal for house hacking, where you rent out part of the home while living in it.
Pros: Lower down payment, easier qualification.
Cons: Must be owner-occupied for a period before renting fully.
3. Hard Money Loans
Short-term, high-interest loans from private lenders based on the property’s value rather than the borrower’s credit.
Pros: Quick approval, useful for fix-and-flip investors.
Cons: High interest rates and short repayment terms (often 12-24 months).
4. Private Money & Partnerships
Borrowing from friends, family, or private investors in exchange for equity or repayment with interest.
Pros: Flexible terms, potential for no-credit-check loans.
Cons: Risk to personal relationships if the investment doesn’t go as planned.
5. Seller Financing
The seller acts as the lender, allowing the buyer to make direct payments over time.
Pros: Less stringent credit requirements, negotiable terms.
Cons: Not all sellers are open to this option.
6. HELOC or Cash-Out Refinance
Homeowners can use equity from their primary residence to fund an investment property purchase.
Pros: Lower interest rates compared to hard money loans.
Cons: Puts your primary home at risk if you default.
7. DSCR Loans (Debt-Service Coverage Ratio Loans)
Loan approval is based on the property’s rental income rather than personal income.
Pros: Easier qualification for investors with multiple properties.
Cons: May require a larger down payment or higher interest rates.
Final Thoughts
The best financing option depends on your financial situation, investment goals, and risk tolerance. Whether using traditional loans, private funding, or creative strategies, understanding your choices will help you make a smart investment decision. Consulting with a real estate or financial expert can provide additional insights to guide you toward the right financing solution.
Scott Sweeney
Your NorCal Realtor
M&M Real Estate
BRE Lic# 01938720
Cell: Call/Text 707-330-2324
About Scott Sweeney
SweeneySells
Full Time Realtor 13 Years +
Over 100 Families Served
Top 5% Producing Agent
Buying & Listing Specialist
Contract & Negotiation Ninja
CSUS Business & Marketing Graduate 2006
With quickly serving over a 100 families, Scott Sweeney has become a top 5% producing Realtor in the greater Sacramento area who has helped clients from the Bay Area to South Lake Tahoe. Scott has a Bachelor Of Science in Business Administration, with a concentration in Marketing from CSUS. His education, and extensive background in the hospitality, marketing, and real estate industries, have helped Scott to become one of the leading, and most sought after agents in the area.
Reach out to SweeneySells today, and take the first step towards your real estate goals!
📞707-330-2324
Top Producer 2016-2023
"I appreciate your business & referrals!"
Hours Mon-Fri 9am-6pm
Sat By Appointment
Sun Off
Schedule a call or zoom with us here! 👇
#SweeneySells #ListingSpecialist #sweeneyworldwide #mmrealestate #SellYourHomeForMore #expertanswers #stayinformed #staycurrent #powerfuldecisions #confidentdecisions
Comments