Lower Down Payments On Rentals

5 Replies

If I’m looking to buy a single family rental property, is 20% down required by most lenders? How do you qualify for a 5%-10% down payment? Could this be negotiated with a lender and would they be open to accepting a lower down payment? Thanks for the insight! :)

Unless you are living in one unit & going with a FHA loan, I don’t think you will be able to put down less than 20%.

Originally posted by @Devyn Grillo :
If I’m looking to buy a single family rental property, is 20% down required by most lenders? How do you qualify for a 5%-10% down payment? Could this be negotiated with a lender and would they be open to accepting a lower down payment?

Thanks for the insight! :)

For an investment property SFR, some lenders will allow 15%. You will not like the interest rate, however, as the investment property interest rate 'hit' is doubled compared to the standard 25% down. And of course there will be PMI.

If keeping that 5% in your pocket will allow you to fix the property up and achieve 25% equity, positioning you for an advantageous refinance, or if that 5% will let you fix it up so the bumped rent is greater than the bumped P&I payment (eg, 15% down costs $150/mo more, but the new kitchen it allowed you to put in lets you bump rent $250/mo), those are basically the top 2 times that 15% down makes sense. 

Here are the LTV hits for investment properties, and the letters "N/A" next to 10% down should let you know the odds of negotiating that:

The 'hits' above are in discount points, not rate. 0.125% to rate translates to 0.35 to 0.75 discount points typically.

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@Matthew Enos   do you mind sharing what lenders you are using in the area.  Also do you mind walking me through some of the bank finance and private money deals for the down payment?  Like what type of terms and percentages are you offering your private money lenders getting?  I know it negotiable but a scenario walk be great!

@Kevin White That is a great question. I use Ryan Antonucci and S&T bank for a bulk of my financing. I am opening a second relationship with NexTier bank right now based on recommendations from my closing attorney. I have been successful offering private financing at 6% interest only payments to borrow cash and use as down payments.  I have received owner financing from sellers around the 5% range (but less money down). My cash on cash return is above 50% so i wouldn’t mind paying 6 to 9 % to a private money lender. I stopped thinking of it as “what do i pay” and more of “does the person feel like he is getting a good return on his money”

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