How Much Is the Down Payment for a Rental Property?
You can buy your primary home with little to no money down, but you’ll need at least a 15% down payment to purchase a rental property in many cases. And with the median cost of a house hovering around $416,900, that comes out to $62,535. This hefty chunk of change is a huge reason why it can be tougher to break into real estate investing than it is to buy a home you’ll live in.
But that doesn’t mean you don’t have options — we’ll cover strategies to save for a larger down payment and ways you can side-step that steep minimum requirement.
What’s the minimum down payment for a rental property?
| Occupancy type | Minimum down payment | Loan program type |
|---|---|---|
| Investment property | 15% | Conventional (single-family) |
| 25% | Conventional (multifamily) | |
| Owner-occupied (“House hacking”) | 3% | Conventional |
| 3.5% | FHA (up to 4 units) | |
| 0% | VA | |
| Hard money loan | 25%-35% | Non-QM A non-QM loan is a non-qualified mortgage that doesn’t meet the standards set by the Consumer Financial Protection Bureau (CFPB) for a qualified mortgage (QM). These loans offer more flexibility for borrowers who may not qualify for traditional, qualified mortgage. |
Quick guide: Your down payment options for a rental property
In most cases, 15% is the minimum down payment amount for a conventional investment property loan. However, several factors will determine your actual down payment requirement, including your credit score, debt-to-income (DTI) ratio, loan program and property type.
How to avoid a large down payment on a rental property
If you want to avoid the large down payment that comes with investment property loans, you could use a real estate investment strategy known as house hacking. This involves renting out part of a property you live in, which allows you to use a traditional, owner-occupied purchase mortgage.
House hacking is the most accessible way to buy a rental property, because you can use loans that only require a 0% to 3.5% down payment. You may choose to take on a roommate, rent out your basement or get tenants into an accessory dwelling unit (ADU) in your backyard. You can even buy a multifamily home, like a duplex or triplex, so you don’t have to cohabitate with your renters.
How to qualify for an investment property loan
Conventional loan requirements
To get approved for a conventional investment property loan, you’ll need to meet the following loan criteria:
- A minimum 15% down payment. However, if you’re buying a multifamily property as a primary residence and going the house-hacking route, your minimum required down payment could be 0% to 5%.
- A minimum 680 to 700 credit score. Unless you plan to make at least a 25% investment property down payment, you’ll need a minimum 700 credit score. To get quoted the best mortgage rates, though, you should improve your score to 780 or higher.
- A maximum 45% DTI ratio. The percentage of your gross monthly income that is used to pay your monthly debt can’t exceed 45%.
- A minimum of six months in reserves. You’ll likely need at least six months in cash reserves to buy an investment property. Your lender wants reassurance that you can continue to pay the mortgage when you’re in between tenants.
If you plan to buy a vacation home, in most cases, you’re required to make a minimum 10% down payment. Fortunately, you can also use the home as an investment property, but the income it generates won’t be included in your loan qualification calculations.
As long as you live in your second home for either 10% of the time it’s available for rent or more than 14 days — whichever is longer — IRS rules allow you to use the home as a rental property and deduct your rental expenses.
FHA loan requirements
You can use an FHA loan to buy an investment property (with up to four units) with as little as 3.5% down, provided you occupy one of the units as your primary residence. Here are the requirements in more detail:
- A minimum 3.5% down payment. Borrowers with good credit can qualify to put down as little as 3.5%, but you may have to put down at least 10% if your credit score isn’t high enough.
- A minimum 500 credit score. You can qualify with a 500 credit score, but you’ll be required to put down at least 10%. If your score is 580 or higher, you can put down as little as 3.5%.
- A maximum 43% DTI ratio. The percentage of your gross monthly income that is used to pay your monthly debt can’t exceed 43%.
VA loan requirements
If you’re eligible for a VA loan, you can purchase a one- to four-unit property with a 0% down payment. One of the units must be your primary residence. Here are the key VA loan requirements:
- No minimum down payment. As long as you have full VA loan entitlement, you’re not required to make a down payment.
- No minimum credit score. The VA doesn’t set a minimum credit score, but many VA-approved lenders require a 620 minimum. If your score is lower, you can shop around for a lender with less stringent credit requirements. Several of our picks for the best VA lenders of 2025 accept credit scores between 500 and 580.
- A maximum 41% DTI ratio. The percentage of your gross monthly income that is used to pay your monthly debt can’t exceed 41%.
Hard money loan requirements
Hard money loans don’t come with many hoops to jump through. Usually, you’re approved based on the value of your collateral, which means that your credit history and DTI ratio aren’t factors in your loan approval.
- A minimum 25% to 35% down payment. Hard money lenders usually won’t lend you more than 65% to 75% of the home’s value, so expect to make a hefty down payment.
- A short loan term. Hard money loans come with terms far shorter than a traditional mortgage: usually just six to 24 months. If you’re looking for a long-term solution, a hard money loan isn’t for you.
3 reasons to make a larger down payment when buying a rental property
- It can reduce borrowing costs. The lower your loan-to-value (LTV) ratio (i.e. your outstanding mortgage balance compared to your home’s value), the lower your interest rate and loan fees will likely be.
- You might save on insurance costs. If you don’t make at least a 20% down payment, you may have to pay costly mortgage insurance premiums. But if you can scrape together a bigger down payment, you stand to save thousands.
- You can reduce your monthly payment. A larger down payment ultimately means lower monthly payments for the same home.
Here’s an example: Let’s say you want to buy a $350,000 rental property using a 30-year fixed-rate conventional loan with a 7% mortgage rate. The table below shows how your down payment amount impacts your monthly payments and interest fees.
| Down payment percentage | Down payment amount | Monthly payment | Loan amount | LTV ratio | Total interest costs | Total mortgage insurance costs |
|---|---|---|---|---|---|---|
| 5% | $17,500 | $2,385.31* | $332,500 | 95% | $463,867.09 | $21,300 |
| 20% | $70,000 | $1,862.85 | $280,000 | 80% | $390,624.92 | $0 |
Use a mortgage payment calculator to estimate the monthly payment breakdown for your mortgage loan, taxes and insurance.
How much investment property can I afford?
Lenders compare your debt and income to determine how large a monthly payment you can afford. They’ll divide the total amount you pay toward debt each month, including the loan you’re applying for, by your gross monthly income to get your DTI ratio.
Different loan programs have different DTI ratio limits:
| Conventional | 45% |
| FHA | 43% |
| VA | 41% |
Use the slider in our home affordability calculator to see how much investment property you can afford at different DTI ratios.
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Can I get a loan based on rental income?
Yes, lenders typically count 75% of what you’re expecting to earn from tenants. The lender will add that amount to your gross monthly income when evaluating your loan application.
How do they know what you’re expecting to earn? They’ll either evaluate the property’s rental history or consider market rents in your area to come up with a reasonable estimation of your future rental income.
Don’t forget to factor in ongoing rental property expenses when determining how much you can afford. These may include, but aren’t limited to:
- Landlord insurance
- Property taxes
- Maintenance and repairs
- Property management fees
- Vacancies
- Utilities
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5 ways to save up for your investment property down payment
1. Tap your home equity
If you have at least 15% equity in your primary residence, you could use your home equity to buy an investment property. You’ll take out a home equity loan, home equity line of credit or use the proceeds from a cash-out refinance as a down payment for a rental property.
2. Try seller financing
Instead of going through a traditional mortgage lender, you could try to arrange a seller financing deal with the home seller. You’d make a repayment agreement directly with the seller and sign paperwork giving them the right to foreclose if you fail to repay the loan.
3. Create a self-directed IRA
If you convert an individual retirement account (IRA) or 401(k) into a self-directed IRA (SD-IRA), you can invest in real estate using your retirement funds.
4. Invest with a group
Real estate investing groups (REIGs) allow small groups of people to pool their money and invest together. REIG members typically share the labor of managing the properties they own and the income earned.
5. Save over time
This option can take the longest to achieve, but it’s tried and true — and doesn’t involve taking on additional debt.
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