25% down on my first rental property

11 Replies

I am in the process of getting financing for my first rental property. The lender wants 25% down. Is this standard? Are other lenders more flexible?

Yes, that is definitely standard. What down payment would you expect?  Owner-occupied loans have lower down payment programs because they are less risky (you are more likely to pay your home mortgage than one for a rental property, if your finances go bad).  So for rental properties, "non-owner occupied" loans require a larger down payment.  Typically 20% down is the lowest you will find for a non-owner occupied loan from a "big box" lender.  25% is better because the terms will be better.  I have heard 15% down programs are available now but none of my clients get those, I imagine the terms (like interest rate) will be worse and therefore not worth it.

Max Gradowitz, Attorney

Are you also living in the property as your primary residence?  If not, 25% is not uncommon for an investment property, although some lenders may go lower.  If you are living in it as well, I'm sure you could shop around and find a lender with lower DP requirements.  Depends on the lender and how they see you as a borrower.

Hi Grant. Please let us know more about the type of property you are purchasing and the type of loan program. Is it a single family residence, duplex, triplex, apartment building, office building, retail space, or? A larger down payment is required for investment properties (generally speaking) when compared to owner occupied properties. Also, credit rating, documentation type, type of property, and more can affect down payment requirements. For instance, our programs require a 25% down payment on 1-4 unit residential investment properties and apartment buildings, however we do not require income documentation or have debt ratio requirements. In the conforming/conventional world, Fannie Mae requires a 15% down payment on single family residences and a 25% down payment on 2-4 unit properties that are investment properties. 

Originally posted by @Grant Amsberry :

I am in the process of getting financing for my first rental property. The lender wants 25% down. Is this standard? Are other lenders more flexible?

 Yes, it looks right. But try other lenders, you could find better  terms

In my area, I don't see much that I'd want to buy that cash flows decently ($150/door/month) financed over 20 years with less than 25% down. We sometimes put up equity in other property in lieu of 5% to get the downpayment down to 20% but that hurts cash flow. I really, really don't like deals that don't cash flow at least $125/door at purchase and even then it helps if there is good potential for value add and a rent increase.

I’ve seen 20 percent down payment options and 30 year amortized fixed products with (what I think) is competitive rates. Try US bank or guarantee rate

No i wouldn't be living in the property. I live in Denver and I wouldn't be able to afford to invest here. I have been looking at WY, OK and TX for duplexs or small multi family apartments 

I also wanted to thank everyone who replied. I'll have to get creative or put off buying for a while until I get more saved up.

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