Many investors begin their property search with the same question: Is it possible to purchase a rental property with less than 20% down?
The answer depends on the loan program, property, purchase price, value, borrower, and investment strategy. Twenty percent is not a universal requirement, but investors should be cautious of claims that they can acquire property with “no money down.”
Even when financing covers most or all of an eligible purchase price, the investor may still need capital for closing costs, lender fees, reserves, renovations, carrying expenses, and unexpected repairs.
A more useful goal is to structure the investment so it preserves sufficient capital without creating unsustainable leverage.
The amount an investor must contribute is affected by several underwriting measurements.
Loan-to-value ratio, or LTV, compares the loan amount with the property’s value.
LTV = Loan amount ÷ Property value
If a property is valued at $300,000 and the loan amount is $240,000, the LTV is 80%.
Loan-to-cost ratio, or LTC, compares the loan amount with the eligible project cost.
LTC = Loan amount ÷ Eligible project cost
Depending on the program, project cost may include the purchase price and certain renovation expenses.
LTV and LTC are not interchangeable. A lender may apply both limits and base the loan amount on whichever produces the lower proceeds.
The equity contribution is not necessarily the same as the total cash required at closing.
An investor may also need funds for:
A highly leveraged loan does not automatically mean a cash-free transaction.
Potentially. Some business-purpose investment-property programs provide leverage above 80% of cost.
Eligibility depends on factors such as:
Higher leverage preserves more of the investor’s cash, but it also increases debt and reduces the equity cushion if the property declines in value or the business plan underperforms.
Private, business-purpose lenders may offer programs designed for property acquisition, renovation, construction, or long-term rental ownership.
These programs can provide more leverage than some conventional investment-property loans, but they still involve underwriting, borrower equity, fees, reserves, and collateral requirements.
Investors should compare:
The program with the highest leverage is not automatically the best option.
Seller financing occurs when the property owner finances part or all of the purchase price rather than receiving the entire amount at closing.
Potential structures include:
Seller financing does not automatically eliminate the down payment. The seller may require a substantial initial payment, interest, collateral, a personal guaranty, or a balloon payment.
If another lender is involved, the seller-financing structure must be disclosed and permitted by that lender. Existing liens, due-on-sale provisions, title issues, and applicable lending laws must also be evaluated.
Both parties should use qualified legal and tax professionals to document the agreement.
An investor may work with another person or entity that contributes some or all of the required equity.
In exchange, the capital partner may receive:
Equity is not free capital. Although it does not create the same repayment obligation as a loan, it can reduce the sponsor’s ownership, control, and share of future profits.
The operating agreement should address contributions, distributions, responsibilities, voting rights, additional capital, guarantees, dispute resolution, and exit provisions.
An investor may refinance an existing rental property and use eligible cash-out proceeds toward another acquisition.
This strategy can preserve ownership of the original property, but it increases that property’s debt. The investor should confirm that its rental income can support the new payment and that the intended use of proceeds is permitted.
Cash-out proceeds may be limited by:
A refinance does not create free equity. It converts part of the owner’s equity into debt.
Experienced investors with recurring acquisition or renovation needs may qualify for a business-purpose line of credit.
Unlike a personal credit card or HELOC, a real estate investment line of credit may be structured as a facility secured by qualifying investment properties. It can provide repeatable access to capital for approved transactions.
Each asset may still require appraisal, title review, insurance, and underwriting. A credit facility should be evaluated based on its total cost, term, collateral requirements, eligible uses, and repayment provisions.
A property purchased below its supported market value may allow the loan-to-cost limit to provide greater purchase-price coverage while remaining within the lender’s loan-to-value limit.
For example, a loan program might permit financing up to 100% of eligible cost but no more than 75% of property value. The transaction would need sufficient value relative to cost to satisfy both limits.
This does not guarantee that the borrower will have no cash requirement. Closing costs, fees, reserves, renovation expenses, and other items may remain the investor’s responsibility.
The lender—not the purchase contract—determines the value used for underwriting.
An investor may combine personal capital, partner equity, seller financing, or other approved sources.
All sources of funds and subordinate financing should be disclosed to the primary lender. Undisclosed borrowing can violate loan requirements and distort the project’s true leverage.
An owner may decide to move out of a primary residence and retain it as a rental. This can add a property to the investor’s portfolio, but it does not by itself generate funds for another down payment.
Before converting a residence, review:
If the owner wants to access the residence’s equity, that generally requires a separate financing transaction, such as a cash-out refinance or HELOC. Approval and available proceeds are not guaranteed.
An investor should not misrepresent an intended rental property as a primary residence to obtain consumer financing.
A home equity line of credit allows a homeowner to borrow, repay, and borrow again during the applicable draw period, using the home as collateral. A home equity loan generally provides a lump sum secured by the residence.
These products may provide capital for an investment-property purchase, subject to the lender’s permitted-use provisions. However, they place the residence at risk if the borrower cannot repay the debt.
Potential concerns include:
CoreVest does not provide consumer HELOCs or home equity loans. Its financing is for commercial, business-purpose investment activities involving non-owner-occupied properties.
A cash-out refinance replaces an existing property loan with a larger loan and returns eligible net proceeds to the borrower after paying the existing debt, closing costs, and other required amounts.
Investors may refinance an existing rental property to fund another acquisition. Before proceeding, evaluate:
The expected return from the new acquisition should be evaluated against the cost and risk of the additional debt.
Personal loans, credit cards, and cash advances may appear to offer quick access to down-payment funds, but they can carry significant rates and fees.
They may also:
The source of the down payment must generally be disclosed and documented. Investors should not assume borrowed funds will be accepted as equity.
Mortgage insurance should not be treated as a universal way to reduce the down payment on a rental property.
Consumer mortgage-insurance programs and owner-occupied loan products have their own occupancy, property, borrower, and transaction requirements. Their availability for a primary residence does not mean they can be used to acquire a dedicated non-owner-occupied rental.
CoreVest provides business-purpose investor financing rather than consumer mortgage-insurance programs.
FHA, VA, and USDA home-loan programs generally involve primary-residence requirements. They should not be represented as low- or zero-down financing for a property acquired solely as a non-owner-occupied rental.
Owner-occupied properties with additional units may be treated differently under certain consumer programs, but the borrower must genuinely satisfy all occupancy and program requirements.
CoreVest offers several business-purpose products that may help qualified investors balance leverage and liquidity.
CoreVest’s Fix-and-Flip Loan can finance eligible acquisition and renovation costs.
Current program features include:
Eligible renovation expenses are reimbursed after completed work is documented and inspected.
CoreVest’s [Single-Asset Bridge Loan](https://www.corevestfinance.com/loan-types
