Investment Properties: What’s the Minimum Down Payment?
6 minute read
January 20, 2024


Down payments are an important piece of the loan approval process for real estate investors.

The purpose of an investment property is to generate income or make a profit, whether it be through rental properties, fix-and-flip properties, or other types of investment projects.

Your down payment will reflect several aspects of your real estate investment and financial situation to your lender.

Let’s explore the minimum down payment requirements for investment properties.

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How down payments work with investment properties

The primary purpose of a down payment is to reduce the amount of money that needs to be borrowed. It serves as an initial investment or upfront payment from the investor.

The down payment amount is expressed as a percentage of the total purchase price. 

For example, a buyer might be required to make a 20% down payment on a property valued at $300,000, which would amount to $60,000.

From the lender’s perspective, a down payment mitigates risk. When buyers invest their own money upfront, they have a financial stake in the property—making them less likely to default on the loan.

Similarly to traditional lenders and loan types, an investment loan’s minimum down payment requirement depends on multiple factors.

Factors that influence the minimum down payment amount

Let’s look at the down payment factors for investment property loans.

Loan type and terms

Different loan types often have varying down payment requirements based on their purpose, structure, and associated risk factors.

Investment properties often are financed with hard money loans.

The major difference between traditional and hard money investment loans is that hard money is primarily based on the value of the property being used as collateral, rather than the borrower’s financial history.

Hard money investment loans serve specific investor needs, including:

  • Quick financing for a time-sensitive purchase
  • Funds to purchase and renovate a property
  • Financing for a ground-up construction project
  • Long-term financing for a rental property 

Depending on the type of investment loan you choose, you may be expected to put down around 20% to 30% of the purchase price.

Investment loans require a higher down payment amount than a traditional owner-occupied home purchase because there are greater risks associated with investment properties.

Credit score

While a borrower’s financial history is not as important to hard money lending as it is to traditional lending, your credit score is still a valuable indicator of your overall financial well-being and your ability to repay the loan.

As a result, investors with excellent credit scores generally qualify for more favorable terms—which may include lower down payments.

It all depends on your lender and what they are willing to accept based on your other contributing factors.

Lender policy

Hard money lenders have greater flexibility in establishing their loan terms than traditional lenders. An investor must choose a lender whose loan products and experience match their investment goals and needs.

Consider the following questions:

  • What is my interest rate for the loan?
  • What are the fees involved?
  • What is the loan-to-value (LTV) ratio?
  • What is the loan duration?
  • How quickly will I receive the funds?
  • What do I need to do to qualify?
  • What is the lender’s experience with similar investments?

LTV and down payment have an inverse relationship. For example, as the down payment increases, the loan amount decreases, resulting in a lower LTV.

Asking these questions can help you understand the full range of costs involved in addition to your down payment.

Investment loan options

Park Place Finance offers the following types of investment loans.

DSCR loans

With DSCR loans, your investment property’s potential cash flow is a primary consideration in the lending decision.

DSCR equals your total payment divided by your total rent. 

If this number is greater than 1.0, your rents are higher than your total payment. The higher your DSCR, the better your rate generally is.

DSCR loans typically do not exceed 80% LTV. That means that the borrower needs to bring about 20% down plus closing costs for the loan.

Fix-and-flip loans

Fix-and-flip loans cover the costs of purchasing a property and renovating it, with the intention that the investor will either sell the property after renovations are complete or refinance and hold onto it as a rental property.

Park Place Fiancne can generally loan up to 75% after-repair value (ARV) or 90% loan-to-cost (LTC).

Bridge loans

A bridge loan is a short-term loan that is used to provide temporary financing until a more permanent solution is secured.

Bridge loans are often secured by the property being financed, and are most commonly used by investors to bridge the gap between the purchase of a new property and the sale of an existing one.

Park Place Finance can loan up to 75% loan-to-purchase (LTP).

Construction loans

Construction loans can be used for ground-up construction projects, new construction, or to renovate a mid-construction project.

At Park Place Finance, we can finance up to 65% of the loan-to-land cost (AILTV), 85% LTC, or 70% ARV.

How to get approved for an investment loan

Investment loan approval hinges on various factors, including your down payment, credit score, investment plan, exit strategy, LTV, and previous experience.

The key to investment loan approval is to work closely with your lender and maintain open, transparent communication.

Your lender will explain the requirements for each type of loan, the minimum down payment based on your unique loan scenario, and the documentation you need to supply.

Hard money lenders like Park Place Finance operate with a level of flexibility that traditional lenders cannot do.

Talk to us about your questions and concerns, and we can work with you to find a solution that fits your goals and needs.

Get started with Park Place Finance

Park Place Finance is proud to offer financing solutions for investors of all experience levels.

We are a direct hard money lender with in-house capital and have funded over $1 billion in loans over 17 years of business.

When you choose to work with us, you can rest assured that a team of real people will be dedicated to funding your deal as quickly as possible.

Start the loan process online, or give us a call at (866) 407-1599 to speak to an account executive now.

We look forward to matching our creative solutions to your unique investment needs.


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