Investment Property Loans | Options & Requirements 2026

If the road to real estate riches were an easy one, everyone would be a millionaire landlord or house-flipper. This guide explains the investment property loans available to small investors and the requirements that come with each.

Investment property is real estate purchased to earn rental income or a profit from reselling it. Making big money from it is rarely as simple as “buy low, sell high.” It requires careful research, planning, hard work, and a dollop of good luck.

But as long as you make real estate investment decisions with your eyes wide open, the financial rewards could surprise and delight you.

Check your eligibility to purchase investment property. Start here (Nov 4th, 2026)

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In this article:

• Pros and cons of buying an investment property
• Should you flip or rent your investment property?
• Hard money loans
• Conventional mortgage loans
• FHA mortgage loans
• VA mortgage loans
• Home equity lines of credit (HELOCs)
• Apply for an investment loan

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What is an investment property?

An investment property is a real estate asset you purchase with the express intent of earning a profit by flipping it or renting it out.

Generating income with investment properties

ATTOM reported a typical profit margin of 21.5% on home flips in Q2 2026 (typical gross profit $60,526). House flipping means purchasing, renovating, and quickly reselling homes.

In other words, the typical house-flipper earned about $21,500 for every $100,000 invested.

Rental properties earn money in a different way: through monthly rent, plus any rise in the property’s value over time. Returns vary widely by market, as the rental yields later in this guide show.

The numbers make it easy to see why so many investors are drawn to the world of real estate.

What is the difference between an investment property and a second home?

You buy an investment property with the primary goal of making a profit. Typically, you rent out the space for most of the year or flip the home. A second home is one that you intend to visit on a regular basis.

This distinction matters when you buy property because mortgage lenders treat investment properties and second homes differently. Second homes are subject to lower interest rates and easier requirements, but you must prove you plan to live there at least part of the year. By contrast, investment properties (which you plan to sell or rent out full-time) have slightly higher interest rates and stricter mortgage guidelines.

What to consider before buying an investment property

The excitement of purchasing your first investment property is compelling. But before you jump into the process, there are a few important points to consider.

Housing market trends

Like other types of investments, the value of home prices rises and falls based on broad economic trends. It’s not unusual for the housing market in an area to go through boom and bust cycles.

As you consider areas to invest in, look for indicators of the long-term housing market trends. If an area is growing, that might be a more prudent investment than a dying small town.

Buying with a partner

If you buy with a partner, make sure you are both on the same page about investment goals and risk tolerance. Before finalizing any property purchase, get legal paperwork in order to indicate your separate ownership percentages.

Property taxes and insurance

As a property owner, you’ll face property taxes. Take a look at this expense before moving forward with a property. You don’t want to get stuck in a place with sky-high property tax obligations.

Investment properties also require homeowners insurance. You may need to purchase additional coverage if you plan to rent the home out. Get quotes from homeowners insurance companies before buying, so you can factor this ongoing cost into your investment property expenses.

Property management companies

A property management company can take some of the hassle out of being a landlord. But it’s critical to find the right property management company, otherwise, your potential headaches will multiply. Explore the options in your area and the cost before moving forward with a particular deal.

Check your eligibility to purchase investment property. Start here (Nov 4th, 2026)

Pros & cons of buying an investment property

For small-scale investors, the most common real estate strategies come in two flavors:

1. Rental property
2. House flipping

Here are the biggest benefits and drawbacks of each.

House flipping pros & cons

Pros	Cons
Handsome profits are delivered in lump sums	High rewards come with high risks
Potential for quick and large returns	Big returns can be deceptive due to the high cost of acquiring and renovating the property
Can be creatively satisfying	Your profits will be subject to capital gains taxes

Rental property pros & cons

Pros	Cons
Create a passive income stream	Maintaining a property is expensive
Tax advantages	Property management services can be expensive
Tenants are helping to pay your mortgage and build your equity	Unforeseen tenant issues

Should you flip or rent?

Should you flip houses or purchase rental properties?

It all depends on your goals, and to what degree you can leverage your skills, expertise (construction skills are very helpful), and your current financial situation.

In general, house flipping is usually the bigger gamble because these deals hinge on whether property values will rise in the near future. Price depreciation is never a good thing for property owners. Still, stable or falling prices hurt less when your main source of income comes from rents rather than a fast resale.

For rental properties, ATTOM found the highest potential gross rental yields in 2026 in Saint Clair County, IL (14.5 percent) and Mobile County, AL (13.6 percent). Next came Peoria County, IL (12.5 percent); Saint Louis County, MN (11.6 percent); and Trumbull County, OH (11.5 percent). The lowest yields were in pricey counties such as Santa Clara County, CA (3.1 percent) and San Mateo County, CA (3.7 percent), where real estate prices have long been sky-high.

But local markets are always changing. Like any other type of investment, real estate carries both risks and rewards. You can reduce the risks by thoroughly researching markets and your financing options, but you can never entirely eliminate them.

Check your mortgage rates. Start here (Nov 4th, 2026)

Step-by-step guide to buying an investment property

If you’re interested in purchasing an investment property, here is the process for purchasing it.

• Determine your preferred strategy: Before you start shopping for a home, decide if you want to flip or rent the property.
• Research the market: Scope out where you want to buy a property. Run the numbers for a few properties in the area to make sure the venture would be profitable.
• Make your offer: When you find a deal that suits your needs, submit an offer to the seller.
• Inspect the property: Unless you are prepared for a higher level of risk, don’t waive the right to inspect the home. If you find a big problem, reevaluate the deal.
• Finalize your financing: The lender will ask for all sorts of documents about your finances during the underwriting process. Be prepared to send along everything they need for a quick closing.

Investment property loan requirements 2026

The requirements for investment property loans vary based on the type of loan you pursue. But in general, here’s what lenders may require:

• A credit score that meets your lender’s rules. There is no single rule: Fannie Mae removed its 620 minimum for loans run through Desktop Underwriter on November 16, 2025 (manually underwritten loans still need 620), but lenders apply their own overlays. Scores below about 700-740 cost more through higher rates, fees and lower maximum LTVs on investment properties.
• Conventional investment-property purchases need at least 15% down for a one-unit property and 25% down for a 2-4 unit property (Fannie Mae and Freddie Mac). Lenders often ask for 20-25% and charge less with more down.
• A carefully thought-out plan for the property

You’ll need to prove to the lender that your finances are strong enough to handle this new debt.

How to get a loan for an investment property

The best loans for your investment property will depend on your particular financial situation. That said, these simple tips should help you finance more property for less money.

Shop around for the best rates

Contact multiple lenders, starting with the bank that issued your first mortgage. Compare their interest rates and terms on investment property loans, as well as the closing costs and other fees.

Check the fine print

Always read the “fine print” to uncover any large fees and extra costs. Look especially for extra costs tied to the number of existing loans/mortgages you already have.

Opt for a larger down payment where possible

Whenever possible, reduce the interest rate in exchange for a larger down payment. In some cases, it might also make sense to pay upfront fees (“points”) to lower the rate. Say you apply for a big loan and plan to hold the property for a long time. In that case, paying upfront fees and/or a higher down payment could trim thousands of dollars from your repayment total.

Build your credit score

In the months before you launch your property search, check your credit report to learn which types of loans you qualify for. If your score is a bit anemic, take steps to improve it before buying. For example, pay down (or pay off) as much debt as possible.

Have cash on hand

Be sure you have ample reserves of cash or other liquid assets. Lenders usually require six months’ cash reserves to qualify for investment property loans.

Focus on long-term goals

Consider your long-term goals to determine which type of loan would work best in your current, and possible future, situation. For example, what would you do if your company made you relocate while you were in the middle of a fix-and-flip venture? Did you borrow enough to hire contractors to finish the job? (If so, by how much would that reduce your profits and your ability to repay the loan?)

Stick to a budget

Determine how much property you can afford, and stick to your budget. First-time real estate investors frequently underestimate their costs. If you purchase only those properties you can afford, cost overruns may result in annoyance and a minor reduction of your profit margins. If you fall in love with a property and exceed your price caps, any additional expense may spell catastrophe.

Types of investment property loans

Loans for an investment property are harder to get than loans for an owner-occupied home, and they usually cost more.

Many lenders want to see higher credit scores, better debt-to-income ratios, and rock-solid documentation. That means W2s, pay stubs, and tax returns proving you’ve held the same job for two years. (This last requirement can make things difficult for retirees and the self-employed.)

Additionally, most will ask for a down payment of 20% to 25%. Many also want you to have six months of cash reserves or easily-liquidated assets available.

Things can be harder when you have several outstanding home loans already. Fannie Mae and Freddie Mac allow up to 10 financed properties, but higher reserves and stricter credit apply as the number grows. Some lenders stop earlier.

Some lenders won’t even care about your credit or employment history, as long as they see lots of potential profits in the investment property you’re considering.

Hard money loans

House flippers and professional real estate investors use these loans most. They are short-term, asset-based loans from private lenders, sometimes called “fix and flip” loans, and they have three main advantages:

1. Faster approval and funding. In some cases, lenders approve loans on the same day you apply, and funding can follow quickly. Thanks to this speed, hard money loans are ideal for investors who want to buy a property fast, before the competition can scoop it up.
2. Easier to qualify. Suppose you make a down payment of 25% to 30% and have sufficient cash reserves and a good track record as a real estate investor. Many lenders will then overlook a subpar credit score. And they may not care that you already have 4+ mortgages
3. Short-term loans. Most hard money loans have terms of 1-2 years or 3-5 years. For someone buying a rental property, this would be a deal killer. Few rental property buyers want to pay back the loan within a year or two. But for house flippers, these terms are perfect, which is fortunate, because there’s no such thing as a 12-month mortgage. Even if banks wrote short-term mortgages, most would never loan money for a property that needed significant repairs (one that might not qualify as inhabitable).

Other than the 25% to 30% equity requirement, the biggest downside of a hard money loan is the cost. Interest rates vary by lender and are usually higher than on a standard mortgage. Many also carry upfront fees (in the form of “points”) of 2% to 4% of the total loan. Compare quotes from several lenders.

Conventional mortgages

Compared to hard money loans, conventional mortgages are relatively cheap. However, they are more expensive than loans for owner-occupied properties. Fannie Mae charges an extra loan-level price adjustment (LLPA) on investment property loans. On a purchase, it runs from 1.125% to 4.125% of the loan amount, depending on your loan-to-value ratio, according to Fannie Mae’s LLPA matrix. Lenders pass that cost on through a higher rate or upfront points.

For some future real estate moguls, however, getting approved is a bigger issue than the cost of conventional mortgages.

Assuming you will not occupy a unit in the building, most banks will want to see the following to approve a mortgage for a rental property:

• A down payment of at least 15% for a one-unit property or 25% for a 2-4 unit property (the Fannie Mae and Freddie Mac minimums). Lenders often ask for 20% to 25%. If you’d like a lower rate, make a 25%+ down payment. (On the plus side, there is no mortgage insurance when you put down 20% or more.)
• A strong credit score. Lenders set their own minimums. Scores below about 700-740 will trigger higher interest rates, higher fees, and lower LTVs. Still, they won’t necessarily doom your application.
• Six months of “liquid reserves” (cash or assets that can be easily converted to cash).

Fannie Mae and Freddie Mac each allow a borrower to have up to 10 financed 1-4 unit properties when buying a second home or investment property. For both, the count includes the primary residence if it is financed. Higher reserves and stricter credit apply as the number grows, and some lenders stop earlier.

Check your conventional mortgage eligibility (Nov 4th, 2026)

FHA mortgages

To finance a rental property, an FHA mortgage may be the perfect “starter kit” for first-time investors.

But there’s a catch. To qualify for the generous rates and terms of an FHA mortgage, you must buy a multifamily property of 2-4 units. You must also occupy a unit in the building. Then the property qualifies as “owner-occupied.”

A government agency does not issue FHA mortgages directly. Instead, private lenders make the loans, and the FHA insures those lenders against losses. This gives banks more incentive to lend to borrowers who might otherwise be seen as too risky.

Down payment and credit rules for FHA loans

Thanks to government backing, FHA mortgage lenders are lenient with regard to minimum credit scores, down payment sizes, and the borrower’s previous real estate experience.

The down payment requirement for FHA mortgages is just 3.5% for buildings with one to four units. (But remember you have to buy a 2-4 unit property to use FHA for investment properties). By contrast, a conventional loan on an owner-occupied 2-4 unit home needs at least 5% down when approved through Fannie Mae’s or Freddie Mac’s automated underwriting.

The FHA allows cash gifts for down payments and the use of down payment grants from a municipality. That means it’s even possible to get an FHA-financed home with no money of your own.

Just as important, the agency states that it will insure loans to borrowers with credit scores as low as 500. By comparison, VA sets no minimum credit score, and Fannie Mae no longer has one for loans run through Desktop Underwriter, so lenders set their own minimums for those loans.

The FHA also makes allowances for home buyers who have experienced a recent foreclosure, short sale, or bankruptcy because of “extenuating circumstances,” such as illness or loss of employment.

A score of 580 or higher qualifies for FHA’s maximum financing, while scores from 500 to 579 limit the loan to 90% of the home’s value. A lender can set a higher minimum score than FHA’s, so ask about it if you plan to rent out units in a 2-4 unit property.

Check your FHA eligibility. Start here (Nov 4th, 2026)

VA mortgages

Many active-duty service members end up owning investment properties.

There are two reasons for this:

1. Military orders frequently force active-duty personnel to move. Because of this, they are often unable to sell their current homes at a price that would let them recoup their investment. So instead of selling the houses, they become absentee landlords.
2. VA mortgages allow veterans, active-duty service members, and their surviving spouses to buy a home with up to four units with no money down and low mortgage rates. VA loans only finance owner-occupied homes. As with FHA loans, the borrower must certify that they intend to live in one of the building’s units, generally moving in within 60 days of closing. Later, they can rent out the entire building and live somewhere else.

Rental properties can have as many as four units or can be a duplex or triplex. The property can even be a home in which a room is rented or a home with a separate apartment on the property.

Borrowers can even buy one property, live there and then repeat the process with multiple buildings. They can continue until they reach a financing maximum known as the entitlement limit.

Another advantage of VA mortgages: borrowers can use the rents from other units in the building to qualify for the loan by including that rent as income. Typically, they can count 75% of the rent shown on the lease. To use it, they need cash reserves of at least six months of mortgage payments and a reasonable likelihood of success as a landlord.

On the downside, the rental property must be in move-in condition and receive approval from a VA home appraiser before the lender can approve the loan.

Click here to check your VA home loan eligibility. Start here (Nov 4th, 2026)

Home equity lines of credit (HELOCs)

Home equity lines of credit (HELOCs) are revolving credit lines that usually come with variable rates. Your monthly payment depends on the current rate and loan balance.

HELOCs are similar to credit cards. You can withdraw any amount, any time, up to your limit. You’re allowed to pay the loan down or off at will.

HELOCs have two phases. During the draw period, you use the line of credit all you want, and your minimum payment may cover just the interest due. But eventually (usually after 10 years), the HELOC draw period ends, and your loan enters the repayment phase. At this point, you can no longer draw funds and the loan becomes fully amortized for its remaining years.

Compared with conventional mortgages, HELOCs offer more flexibility and lower monthly payments during the draw period. You can borrow as much or as little as you need, when you need it.

The potential drawbacks are the variable interest rates (which rise with the prime rate, a rate banks set partly based on the Federal Reserve’s federal funds rate target). Another is the possibility that the monthly payments could skyrocket once the repayment phase begins.

Using a HELOC to finance an investment property

In some house-flipping situations, a HELOC could be a lower-cost alternative to a hard money loan.

But unlike a hard money loan, a HELOC could have more risk attached. If you don’t already own an investment property, you’ll secure the HELOC with your primary residence. Should you default on the loan, the lender will foreclose on your home, not the investment property.

If you already own an investment property, you can overcome this problem by applying for a HELOC on one or more of those properties. The only trick is finding a lender.

Many real estate investors defaulted during the 2008 housing bust. As a result, a lot of banks won’t approve home equity lines of credit secured by investment properties. The few banks that do offer these HELOCs make it much harder to qualify for them than they once did.

Lenders will want to see lower debt-to-income ratios than they require from someone borrowing against a primary residence. And they will also charge higher interest rates or require you to pay “points” upfront.

However, you can take a HELOC out on your primary residence at much better terms. Then, use the proceeds to make a down payment on an investment property.

If you have equity built in a primary residence or another investment property, you can also consider home equity loans or a cash-out refinance.

Seller financing

In rare circumstances, you might be able to obtain seller financing for an investment property. Also known as owner financing, a land contract, or a contract for deed, this is an arrangement in which the seller acts as the bank. The seller provides you with a private mortgage.

Instead of getting a traditional loan through a mortgage company or bank, you finance the purchase with the existing owner of the home.

Seller financing isn’t easy to come by. The vast majority of sellers want to be paid in full at the closing in order to pay off their own mortgages.

Also, seller financing is simplest when the home is owned free and clear. Many owners still have a mortgage, and a mortgage with a due-on-sale clause lets the lender demand full payment if the home is sold.

Owner-financed land contracts are often structured on a 5-year balloon mortgage. This means they are due in full after just five years, no matter how much or how little the buyer has paid off.

Some come with a 10-year amortization, meaning a schedule of payments that completely pay off the loan in 10 years. This option results in very high mortgage payments.

In some instances, seller financing might make sense for a house flipper. But in most cases, this type of loan is neither possible nor desirable.

DSCR loans

A DSCR loan (debt service coverage ratio loan) qualifies you mainly on the rent a property earns compared with its mortgage payment, rather than on your personal income. That makes it a common choice for rental investors who do not want to document their income.

Apply for an investment loan

Ready to start investing? See which investment property loans are available to you, and find out what rates are available. In just minutes you’ll be narrowing the search for your own investment property.

Investment property FAQs

Is it harder to get a mortgage for an investment property?

In general, loans for an investment property are more challenging to get than loans for an owner-occupied property. That’s because lenders often require a higher down payment and more financial stability than they do for a primary home purchase.

What credit score is needed for an investment property?

There is no single rule. Fannie Mae removed its 620 minimum for loans run through Desktop Underwriter on November 16, 2025, but lenders apply their own overlays. Scores below about 700-740 cost more through higher rates, fees and lower maximum LTVs on investment properties. You might be able to get away with a lower credit score if you are planning to make a down payment of 25% or more.

What type of loan should you get for an investment property?

Which investment property loans make sense depends on your goals for the property. For example, a conventional bank loan might make the most sense for a buy-and-hold plan. But a hard money loan could be more appropriate for a flip. Ultimately, you’ll have to decide which lending option works best for your situation.

Can you deduct mortgage interest on an investment property?

Unlike mortgage interest paid for your primary residence, the mortgage interest tax deduction doesn’t apply to an investment property. However, the mortgage interest you pay on loans for an investment property counts as a business expense, which you can deduct to lower your taxable income.

Can you get a 30-year mortgage for an investment property?

Yes, it’s possible to get a 30-year mortgage for an investment property. You’ll likely find investment property loans with terms ranging from 10 to 30 years. The right loan term will vary based on your goals and your budget.

Are investment property mortgage rates higher?

Mortgage rates for investment properties are higher than for a primary residence because lenders see more risk. Fannie Mae, for example, adds a loan-level price adjustment of 1.125% to 4.125% of the loan amount to an investment property purchase loan, and lenders pass that cost on through the rate or points.

What is the best down payment for an investment property?

The best down payment for an investment property varies based on your situation. Usually, a down payment between 20% to 25% is ideal. However, the right down payment will depend on your investment goals and budget.

What type of mortgage can be used for investment properties?

When seeking a loan for an investment property, you can pursue conventional mortgages, hard money loans, and private money loans. If you are willing to live in a part of your investment property, you could also pursue an FHA loan or VA loan.

Do you need to put 20 percent down on an investment property loan?

Not always. Fannie Mae and Freddie Mac allow as little as 15% down on a one-unit investment property and 25% down on a 2-4 unit property. Even so, lenders often ask for 20% to 25%. The exact requirements vary based on your lender.

How much can I borrow for an investment property?

The dollar amount you can borrow varies based on the home and your budget. With a conventional loan, Fannie Mae and Freddie Mac allow up to 85% of the home’s value on a one-unit investment property and 75% on a 2-4 unit property.

Check your investment property loan eligibility. Start here (Nov 4th, 2026)