5 Best Investment Property Loans for Landlords

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Disclaimer: PropStream does not offer financial or legal advice. This article is for informational purposes only. We recommend conducting your own research or consulting financial and/or legal professionals before obtaining an investment property loan.

Key Takeaways:

The right loan type must match your property type and investment strategy. Single-family, multifamily, commercial, industrial, and ground-up construction loans each come with different terms, risk levels, and qualification requirements.
Positive leverage is the goal. Aim for a loan interest rate lower than your property’s projected cap rate, so financing boosts your ROI instead of eating into it.
New landlords should generally start with single-family or small multifamily loans. Riskier options like commercial, industrial, and ground-up construction loans typically require more experience, capital, and risk tolerance.

The right financing can make or break a real estate deal. To ensure you achieve your target return, you must choose the correct type of loan and carefully review its terms.

In this article, we’ll go over five investment property loan options and when to consider choosing each.

Why Choosing the Right Financing Matters

Why choosing the right financing matters in Real Estate

Financing a rental property can give you positive or negative leverage. Positive leverage increases your ROI, while negative leverage lowers it.

To achieve positive leverage, the interest rate on your loan must be lower than your projected annual return at a property level (aka cap rate).

Here’s an example:

Imagine you expect a rental property to generate a 10% annual return. For financing to increase your return, it must have an interest rate lower than 10% because it means the cost of financing will still be outweighed by the projected return.

Conversely, a loan interest rate higher than 10% would actually lower your returns because the cost of the loan starts eating into your profit margin. While the loan could still be worthwhile, the returns won’t be as strong as if you bought the property with cash.

Additionally, the type of loan you get must be suited to your intended rental investment. That’s why we’ve highlighted the pros, cons, ideal use cases, and qualification requirements for the five best rental loan types below.

1. Single-Family Residential Property Loans

Single family Property Loans

Single-family residential property loans are designed for the purchase of existing single-family homes. Conventional home loans, the most common type of mortgage, fall under this category.

Widely available
Long loan terms (typically 30 years)
Government-backed options with easier qualification requirements

Owner occupancy requirements for government-backed loans
May require private mortgage insurance (PMI)
The number of properties you can finance may be capped

Single-family residential property loans are ideal for landlords starting with their first rental or even house hacking. However, they aren’t suited for other, larger investment property types.

To qualify for a single-family home loan, you must typically have a credit score of at least 620, a debt-to-income ratio (DTI) of up to 36%, and a down payment of at least 3%.

2. Multifamily Property Loans

Multifamily property loans are designed for properties with 5 or more living units. Think apartment buildings and condos. Since they’re owned exclusively by investors (not homeowners), these loans fall under stricter commercial lending rules.

One loan can fund multiple income streams (from multiple tenants)
You can leverage the property’s projected income to qualify for the loan
Non-recourse loan options can help protect you from personal liability

Higher down payment requirements (20%+)
Shorter loan terms (typically 5-10 years) with balloon payments are common
Higher interest rates and closing costs

Multifamily property loans are ideal for investors scaling up from single-family to multifamily properties (5+ units).

To qualify for a multifamily property loan, you usually must make a down payment of at least 20% and show that the property’s debt service coverage ratio (DSCR) is 1.2 or higher.

3. Commercial Property Loans

Commercial property Loans

Commercial property loans are designed for non-residential, income-producing property, such as retail buildings, offices, and mixed-use properties.

Can finance a wide range of commercial property types
Loan terms can be structured around cash flow from business tenants
Higher return potential with larger, commercial properties

Shorter terms (typically 5-10 years) with balloon payments
Higher interest rates than residential property loans
Stricter qualification requirements

Commercial property loans are ideal for those who want to invest in commercial spaces, such as offices, retail centers, and mixed-use properties.

To qualify for a commercial property loan, you must demonstrate existing tenant cash flow or high demand from prospective tenants.

4. Industrial Property Loans

Industrial property loans are designed for warehouses, factories, and logistics hubs.

Often involve long-term leases with reliable tenants (less turnover)
Growing demand from e-commerce may boost property values
Industrial properties require less maintenance than residential properties

Smaller financing pool since fewer lenders specialize here
Larger loan amounts required
Environmental hazards and complex zoning may slow down loan approval

Industrial property loans are ideal for investors looking for lower-maintenance, long-lease-term assets or those wanting to capitalize on logistics/e-commerce growth trends.

To qualify for an industrial property loan, you must first make sure the property meets any environmental and zoning requirements.

5. Ground-Up Construction Loans

Ground-up construction loans

Ground-up construction loans provide short-term financing to build a property from scratch, usually converting to a permanent long-term loan afterward.

Allows you to build to market demand
Potential for higher returns through forced appreciation
More customization options to match current tenant preferences

Higher risk investment due to potential construction delays and cost overruns
Usually requires a staggered draw schedule
Strictest loan requirements, usually requiring past construction experience

Ground-up construction loans are ideal for experienced investors or those partnering with a builder, not first-time landlords.

To qualify for a ground-up construction loan, you must demonstrate past building experience or partner with a builder with a strong track record of successful builds.

Explore Your Financing Options with PropStream's LoanGeek Integration

No matter what type of loan you need, PropStream’s LoanGeek integration makes it easy to find the right financing.

LoanGeek is a third-party mortgage marketplace designed for small and large investors. It features loan products for residential, multifamily, commercial, industrial, fix-and-flip, and ground-up construction investments. By having these loan options available within a few clicks, you can streamline your real estate prospecting and funding workflow.

On any Property Details page, you can click on LoanGeek under the Tools dropdown menu. This will direct you to LoanGeek’s website, where you can get multiple competitive loan offers tailored to your project.

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Frequently-Asked Questions (FAQs)

What are the best investment property loans for new landlords?

The best investment property loans depend on your property type and experience level. For most new landlords, conventional single-family residential loans or DSCR loans offer the easiest qualification and lowest interest rates.

What’s the difference between investment property loans and traditional home loans?

Investment property loans (also called rental property financing or investor mortgage loans) typically carry higher interest rates, larger down payment requirements, and stricter qualification standards than owner-occupied home loans, since lenders view rental properties as higher risk.

How do I qualify for real estate investor loans?

Qualification requirements vary by loan type but generally include a minimum credit score, an acceptable debt-to-income ratio, cash reserves, and a down payment of 20% or more. Some financing options for investors, like DSCR loans, qualify you based on the property’s rental income instead of your personal income.

What real estate financing options are available for first-time investors?

First-time investors typically start with single-family residential loans or DSCR loans. As you build experience and capital, you can explore property investment financing for multifamily, commercial, or industrial assets.

Is rental property financing harder to get than a standard mortgage?

Yes, generally. Rental property financing usually requires a higher credit score, larger down payment, and stronger cash reserves than a primary residence mortgage, since lenders factor in the added risk of an income-producing property.

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