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4 Tips for Financing an Investment Property

  • October 19, 2021

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Real Estate has consistently been one of the best ways to invest. An investment property intends to earn a return on the investment through rental income or future resale. It may take the form of residential, commercial, or mixed-use. There are very few ways to finance investment properties. Financing can be through the use of conventional bank loans, hard money loans, or home equity. The success of your investment will primarily depend on the form of financing you consider taking. Here are some financing investment tips you can consider for your property.

  1. Make a Sizable Down Payment

Whether you are starting as an investor or purchasing your next investment property, you will need a large down payment. It’s advisable to start saving by prioritizing your investment, working a side hustle, or cutting down your expenses early to meet the lender's requirements. A sizable down payment, especially if you consider conventional loans, will help you secure favorable interest rates and a good credit score. You can also consider buying an owner-occupant property which can help you secure a better loan.

  1. Consider Your Local Bank or Broker

If your down payment isn't sizable enough, you may consider financing from your local bank. They may be a bit flexible, as they have a deeper understanding of the local market. Improve your credit control as this will determine your borrowing capacity. It may help you secure a loan with a lower interest rate, making you act faster on a viable property. You might consider working with mortgage brokers from your locality. They have a wide range of loan products and know the available properties within your price range. Ensure you do due diligence before making your final decision.

  1. Consider Hard Money Loans

Hard money loans are faster to obtain compared to conventional bank loans. They usually are based on the equity of the property rather than the strength of the buyer. They are obtained from a professional private lender. Consider having a list of your local hand money lenders and consider the options that suit your investment plan as they tend to have a high-interest rate.

  1. Consider a Home Equity Loan or Home Equity Line of Credit

The most significant advantage of this mode of financing is low-interest rates compared to other financing options like credit cards. It involves borrowing against the value of your home, especially if you are purchasing the second investment. Always remember your home automatically becomes the security for the new loan, so remember to pay your payment.

The advantage of home equity is while you pay off your home, you build equity that you can use for home equity loans or home equity lines of credit. It is flexible and accessible, especially if you have good credit and equity at home.


Investment property is a long-term source of income. Be sure to learn about the available forms of financing that suit you best. More importantly, when considering a loan to finance the property, ensure that you can afford the payments.