Investment property loans usually require 15% to 25% down, a higher credit score and several months of reserves, and rates run higher than for a home you’ll live in. Start by finding where rents are high relative to prices, then run each property’s numbers, including vacancy, repairs and management, to see whether the rent covers the costs.
Financing options
| Option | Typical down payment | Qualifies on |
|---|---|---|
| Conventional investment loan | 15% (1 unit) to 25% (2 to 4 units) | Your income, plus part of the expected rent |
| DSCR loan | Often 20% to 25% | The property’s rent compared with its payment |
| Owner-occupied 2 to 4 units (FHA or conventional) | 3.5% FHA; 5% or more conventional | Your income plus rent, if you live in one unit |
Living in one unit of a two- to four-unit building, often called house hacking, lets you use owner-occupied financing with a much smaller down payment.
Where the numbers work
Try it: Rental yield finderFind ZIP codes where current rents are high compared with prices, with gross yield, price-to-rent and an estimated DSCR for each.Gross yield (a year’s rent ÷ price) is a quick filter. Many investors look for 8% or more gross in lower-cost areas; in expensive metros, 4% or less is common, and the bet is on appreciation rather than cash flow. See rents on the highest and lowest rent rankings.
Run a specific property
For a DSCR loan, the property’s rent divided by its full payment (principal, interest, taxes, insurance and HOA dues) should usually be at least 1.0, and 1.25 gets the best pricing. Check it with the DSCR calculator.
Then budget the costs gross yield ignores:
- Vacancy: often 5% to 10% of rent.
- Repairs and capital expenses: 5% to 15% of rent, more for older buildings.
- Property management: often 8% to 12% of rent.
- Landlord insurance, taxes, utilities you pay, licensing and legal costs.
Together these commonly take 35% to 50% of rent.
Know the local rules
Check rent control, registration and inspection requirements, short-term rental bans and eviction rules before you buy. They can change a property’s economics completely.
Taxes and structure
Rental income, depreciation, 1031 exchanges and whether to hold the property in an LLC all have tax and legal consequences. Talk to a tax professional and an attorney.
Compare with your other options
A rental ties up cash you could use elsewhere. Compare the expected return with paying down debt or investing. If you’re weighing buying a home to live in first, see renting vs. buying.
Common questions
How much do I need to put down on a rental property?
Usually 15% for a one-unit investment property and 25% for two to four units with a conventional loan; DSCR loans often need 20% to 25%.
What is a good rental yield?
Many investors look for 8% or more gross in lower-cost areas; after expenses that often works out to 4% to 6%.
What is house hacking?
Buying a two- to four-unit home and living in one unit, which lets you use owner-occupied financing with a smaller down payment.
Updated October 2026. Educational content. OfferBacked is not currently a lender and doesn’t issue pre-approvals or loans.