Investment Property Down Payment: How Much Do You Really Need?

The down payment is often the biggest barrier to buying investment property. While 20-25% is standard, there are several ways to reduce—or eliminate—the cash you need upfront.

Standard Down Payment Requirements

Conventional Investment Loans

• Single-family: 15-20% minimum
• 2-4 units: 20-25% minimum
• Rate adjustment: +0.5-0.75% vs primary residence rates

For a $300,000 property, you'd need $45,000-$75,000 down.

Portfolio/DSCR Loans

• Typical requirement: 20-25%
• Benefit: Qualify based on property income, not personal
• Trade-off: Higher rates (often 1-2% above conventional)

FHA (Owner-Occupied Only)

• Down payment: 3.5% with 580+ credit
• Catch: Must live in property for 1 year
• Strategy: Buy 2-4 unit, live in one, rent others

Creative Ways to Fund Your Down Payment

1. HELOC on Primary Residence

If you have equity in your home, a HELOC can provide your entire down payment.

Example:

• Home value: $500,000
• Mortgage balance: $300,000
• Available equity (80% LTV): $100,000
• HELOC at 8% for $75,000 down payment

This lets you buy investment property with zero cash out of pocket.

Learn more about HELOCs for investment properties →

2. Cash-Out Refinance

Replace your current mortgage with a larger one and pocket the difference.

Pros: Single payment, potentially lower rate than HELOC Cons: Closing costs, resets mortgage term

3. Seller Financing

Some sellers will carry part or all of the financing.

Typical terms:

• 10-20% down to seller
• 5-10 year balloon
• Rates vary (often 6-9%)

4. Partnership/Syndication

Partner with someone who has cash but not time/expertise.

Common splits:

• Money partner: 50-70% of profits
• Managing partner: 30-50% of profits

5. House Hacking

Buy a 2-4 unit with owner-occupied financing (3.5-5% down), live in one unit.

Example:

• 4-unit building: $400,000
• FHA down payment: $14,000
• Rent 3 units: $3,600/month
• Your unit: Live free or nearly free

After 1 year, move out and rent all units.

Down Payment by Property Type

Calculating Your True Cash Need

Down payment isn't your only upfront cost:

For a $300,000 property:

• Down payment (20%): $60,000
• Closing costs (3%): $9,000
• Inspections/appraisal: $900
• Reserves: $6,000
• Total needed: $75,900

The HELOC Strategy in Detail

Many investors use their primary residence equity to fund investments:

Step 1: Get HELOC on primary residence Step 2: Use HELOC for investment property down payment Step 3: Rental income covers investment mortgage AND HELOC payment Step 4: Property appreciates, building more equity Step 5: Repeat

This "velocity of money" strategy lets you scale faster than saving each down payment.

Sample Numbers

The rental property pays for itself AND the HELOC payment used to buy it.

Risk Considerations

Using leverage amplifies both gains and losses:

Risks:

• Vacancy can strain cash flow
• Interest rate increases affect HELOC payments
• Property values can decline
• You're using home as collateral

Mitigations:

• Keep reserves (6+ months)
• Buy below market value
• Ensure strong cash flow
• Don't over-leverage (stay under 75% LTV total)

Which Strategy Is Right for You?

Save Cash If:

• You're risk-averse
• Interest rates are high
• You have time
• You want to avoid debt on primary home

Use HELOC/Leverage If:

• You want to move faster
• Rental cash flow covers payments
• You have stable primary income
• You understand the risks

Action Steps

1. Calculate available equity in your primary residence
2. Research rental markets for cash-flowing properties
3. Get pre-approved for investment financing
4. Run the numbers on specific properties
5. Build reserves before purchasing

Ready to Explore Your Options?

Your home equity could be the key to building a rental portfolio. See how a HELOC works for investment properties or check your pre-qualification options.