Lending options for investing with lower down payment
Lynn JoachimPro Member
Member since 2024 · 6 posts · 1 voteLending options for investing with lower down payment
10 Replies
- 2wMichael K GallagherBusiness MemberReal Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
lowest barrier to entry is to house hack and buy the multi family on an owner occupied loan, that will be the lowest downpayment possible, generally speaking. will also potentially qualify for grants and other incentives based on your market and lender.
- 2wG. Brian DavisPro MemberInvestor · Hatboro, PA · Member since 2016 · 2k+ posts · 842 votes
Keeping reserves intact is the right call, especially on a value add deal where you'll want cash for the rehab. Start by talking to local community banks and credit unions that hold multifamily loans in portfolio, many go to 15% down or even less on properties with strong in place cash flow. Seller financing or a blended rate second are worth asking about too if the seller is motivated. Coming from a lending background, the biggest lever is usually the lender's comfort with the property's cash flow, not just your down payment size.
- 2wNicholas FloydBusiness MemberNY · Member since 2026 · 166 posts · 56 votes
One thing I’d look at beyond just lowering the down payment is how you preserve liquidity after the purchase. I help real estate investors access business capital, and that can be extremely useful when you don’t want all of your cash tied up in one property.
Depending on the borrower and business profile, options like business lines of credit, 0% APR business credit cards, and other business funding can potentially help cover eligible rehab, materials, carrying costs, reserves, and unexpected expenses while you keep more cash available.
I wouldn’t automatically use business funding for the actual down payment because the mortgage lender’s rules on borrowed funds matter, but strategically separating the property financing from the capital used to operate and improve the asset can put you in a much stronger position.
For investors, the goal isn’t just getting the deal closed, it’s closing without draining the liquidity you may need after you own it.
- 2wAaron ZimmermanBusiness MemberAccountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
Hard money loan and then would need to force enough value to refi to a long term loan product.
Brick House CPAs53 Reviews - Member since 2026 · 16 posts · 8 votes2w
There are potentially quite a few options, but before anyone can really answer the question, I'd want to clarify two things.
First, when you say "multifamily," what do you mean?
Are we talking about:
A duplex?
A 3- or 4-unit property?
A 5- to 8-unit building?
A 28-unit apartment building?
A 200-unit apartment complex?Those are very different financing worlds.
A 2- to 4-unit property is still considered residential real estate for mortgage-financing purposes.
Once you get to 5 or more units, you're generally entering commercial/multifamily financing, where the property is analyzed much more like a business—net operating income, debt-service coverage, cap rate, property condition, borrower experience, liquidity, etc.
Second question: Will you live in one of the units?
Because if you're talking about a 2- to 4-unit property and you're willing to make one of the units your primary residence, that opens an entirely different financing toolbox.
For example, FHA allows the purchase of an owner-occupied 2- to 4-unit property with as little as 3.5% down, assuming you otherwise qualify.
So if you're buying a duplex, you could potentially:
Buy the entire duplex with FHA financing.
Live in one unit as your primary residence.
Rent the other unit.
And a portion of the qualifying rental income from the other unit can potentially be included in your income for mortgage-qualification purposes.
That's the classic house-hacking strategy.
Three- and four-unit FHA properties have some additional underwriting requirements, so it's important not to assume every property will qualify simply because the borrower qualifies.
But compare that with putting 20% or 25% down and depleting the reserves you specifically said you want to protect.
You may potentially be able to acquire the property with considerably less cash, preserve substantial liquidity, have your tenants help support the mortgage payment, and still participate in the value-add opportunity.
If you won't occupy the property, then we move into a different conversation.
For a 2- to 4-unit pure investment property, I'd look at conventional investor financing as well as DSCR/non-QM financing and compare the leverage, rate, points, cash flow and reserve requirements.
If you're talking about 5+ units, I'd approach it as commercial multifamily financing and start with the property's NOI, DSCR, cap rate, value-add plan and required equity.
So before I'd tell you whether 20% down is necessary, I'd want to know:
How many units are we talking about?
Are you willing to occupy one of them?
What's the purchase price?
What are the current and projected rents?
And what does the value-add component consist of?
Give me those numbers and the financing possibilities become much easier to narrow down.
And I agree with your instinct about reserves.
Particularly on a value-add investment, I don't like putting every available dollar into the down payment just to get the deal closed.
The financing should support the investment strategy—not leave you owning a property with no liquidity to execute it.
- Banker · MA · Member since 2026 · 120 posts · 31 votes2w
For investment multifamily, DSCR loans are probably worth looking at closely here. Most conventional investment property loans do want 15% down (single family or condo), but some DSCR programs will go to 85% LTV on a 2-4 unit if the property's DSCR clears 1.25 or better, meaning the rental income covers the mortgage payment by at least 25%. A property with strong cash flow like you're describing might qualify on that basis alone, with no personal income verification required. The reserve requirement is worth knowing up front too: many DSCR lenders want 6 months of PITIA in reserves post-close, so the math on how much you keep liquid depends on both the down payment and that reserve floor.
James Driscoll
- Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes2w
A wee bit off subject, but timely. I just this morning posted a video short from a podcast I guested on. I was a commercial lender for many years and one of my old banking buddies was moderating a panel for our local CCIM chapter. They filled it with other banking buddies that finance "CRE"...which includes multi-family. I was a bit taken aback when they all, to a person, said that they were dialing back on the LTVs on multi-family. The reason they gave was that the management costs increasing faster than rents. That surprised me, but they had data to back it up. Their concern was that a multi-family deal might cash flow today, but at the pace costs were rising in relation to rents, they had concerns about them still cash flowing two or three years down the road. If reserves are your concern and you're planning to borrower at a higher LTV, that will put pressure on your cash flow if those experienced, seasoned lenders with strong data...all of whom I respect...are correct. I am a lender and we only get paid if you borrow from us. I am not saying it's a terrible idea to carry more debt on a multi-family in this day and age, but it might be a good idea to think about rents vs expenses on those types of properties. I hope your deal goes well. Good luck to you.
- Investor · Pacific Northwest · Member since 2026 · 511 posts · 290 votes2w
If this is 2–4 units and you’re willing to occupy one, owner-occupied financing is probably the cleanest path because it can materially reduce the down payment and preserve liquidity.
If it’s strictly an investment property, though, I wouldn’t make “less than 20% down” the goal by itself. The better question is: how do you control the property without stripping out the reserves that make the deal safe?
That could mean conventional or DSCR debt paired with seller financing, an assumption, a seller carry in second position, partner equity, or a value-add structure where you’re buying enough basis below stabilized value to recycle capital later.
I’d underwrite the property first and build the capital stack around the deal, rather than forcing the deal into one loan product.
Also, we’re connecting with Nicholas Floyd on this side of things. So if you want to connect with us around the deal, I’d connect with him here first. He can get into the lending side with you, and then he and I can catch up on our call this week and look at the structure together.
If you’ve got a specific multifamily in mind, send the numbers. That’s where we can really see what’s possible.
- 2wGregory AcsPro MemberLender · MD · Member since 2025 · 137 posts · 52 votes
There may be options, but it depends on how you plan to use the property. If you'll be living in one of the units, owner-occupied financing can allow for a much lower down payment than a traditional investment loan. If it's strictly an investment property, there are still other financing options worth exploring depending on the property and your overall financial picture. I'd also be careful not to reduce your reserves too much just to reach a certain down payment, because having a cash cushion is just as important as getting the deal closed.
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes6h
Quote from @Lynn Joachim:
Are there lending options that would allow us to buy an investment multi-family that has a strong cash flow and potential value add with less than 20% down?
We could pay the 20% down but doing so, at this time, would eat into our reserves, which I would rather not do. Any advice is appreciated.
There are alternatives. Taking over existing financing from the seller and Seller Finanincg are a couple. A good book on the subject along with understanding title and a few other specific saves a ton of money because it' a repeatable process. I never pay more than 10% down.
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