Purchase long term with conventional 20% or less down

[Nick Cooper]

I’m looking to purchase my second long term rental and I’m wanting to know if 20% down would be possible with an investment property as I’ve been told 25% is minimum. 

[Jaycee Greene]

Hey @Nick Cooper! If you're ARV is high enough (relative to your purchase price), you can get away with 20% or less down. Most HMLs I work with for my CFO clients require $10k equity or (10% of the purchase price) as minimum equity while limiting the loan to 70%-75% of the ARV. depending on the lender. Most of them will also finance up to 100% of your rehab costs.

[John Morgan]

@Nick Cooper

I’ve bought 17 or 18 rental houses with 20% down. I’ve bought a few with 25-30% down as well. But those didn’t cash flow as good so I threw more $ down or my lender gave me a much better interest rate with a bigger down payment.

[Patrick Drury]

@Nick Cooper
Anything sub 25% down for 2-4 units that are non-owner occupied will be DSCR/ a portfolio product. Last I checked 25% down is still the minimum for a 2-4 unit non-owner occupied conventional loan. You could get a DSCR loan for 20% down non-owner occupied, but the rate will be higher. I have one lender though in Columbus that does 15% down on investment properties non-owner occupied. It's a portfolio product

[Jimmy Lieu]

Quote from @Nick Cooper:

I’m looking to purchase my second long term rental and I’m wanting to know if 20% down would be possible with an investment property as I’ve been told 25% is minimum. 

Hi Nick, the 25% down payment is typically standard for investment properties. You might be able to secure a loan with 20% down in some cases. A lot depends on your credit score, income, and the specific lender. Some banks and credit unions are more flexible, especially if you have a strong financial profile. Have you talked to lenders yet? Happy to make an intro to some of my referrals.

[Raymond J. Rodrigues]

@Nick Cooper you can buy with as little as 15% down on a single unit property with conventional financing. Anything 2-4 units will require 25% down. 

Non-conforming/portfolio loans, which aren’t conventional loans, will allow as little as 20% down. 

[Bryan Stengel]

Hi Nick, as mentioned before if you put a greater deposit down, you could get a better rate as a result.  I believe up to close to 40% down with a 720 or greater credit score on a conventional loan product could give you the best interest rate.  I would definitely consult with a lender first since I am not completely sure.  It depends on the market and whether you'd like to hold onto more liquid cash to put toward the next deal.  I am not too familiar with the Columbus market.  I think these type of properties do cash flow well from my understanding.  However, what I would suggest based on your expertise as a contractor is going into a semi-fixer upper and make minor repairs to boost equity as well as savings.  You could always later cash-out refinance for your next deal too.