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An investment property loan finances the purchase of an investment property, which is essentially a piece of real estate that you purchase with the intention of making a return on your investment. The investment property loan can be from a private lender, an online marketplace, a bank, or a hard money lender. There are different types of loans for different types of investment properties. For example, a loan for a single-family home that you plan to rent out won’t look the same as a loan for a property that you will fix and flip.
In general, investment property loans tend to have higher interest rates and more stringent terms than loans for your primary residence. Banks consider these loans to be riskier than primary residence mortgages because if you suffer a financial hardship, it's likely you will pay your home loan before the one for your investment property. Keep reading to find the best investment property loan that is right for you.
Best Overall: Quicken Loans
Why We Chose It: Quicken Loans offers a variety of loan types and lends nationwide. It also offers competitive rates and an easy online application process.
More than one type of loan
Easy application process
Live agents to answer questions
No physical branches
No short-term loans
Quicken Loans was originally founded as Rock Financial in 1985 and had brick-and-mortar locations. It’s now an online-only lender based in Detroit, Michigan with high customer satisfaction ratings from J.D. Power and is one of the nation’s largest lenders. Quicken Loans offers government-backed loans such as FHA and VA loans with low down payment requirements for qualifying borrowers.
You can apply for a loan online but can get your questions answered with live agents. The company offers a portfolio of investment property loans with eight-, 15-, and 30-year terms and will finance up to $3 million. You can choose between fixed and adjustable rates starting around 2.5 percent as of December 2020, and down payments are as low as 3 percent on some products. Loans typically close within 30 days and the company services 99 percent of its loans, meaning you will continue dealing with Quicken during the life of the loan.
A nice feature is the company's ability to confirm more than 60 percent of working Americans' income and employment information through its loan processor Rocket Mortgage. This helps improve accuracy and close loans quicker.
Best for Rental Properties: Lima One Capital
Why We Chose It: Lima One Capital offers four different types of investment property loans specifically for rental properties.
Over 10 years in business
Specialize in rental property loans
Doesn’t finance large commercial projects
No brick-and-mortar locations
Lima One Capital was founded in 2010 in Greenville, South Carolina. The company focuses on the needs of real estate investors and offers a portfolio of loans specifically tailored toward rental property investors. Besides obtaining an investment property loan, you can also refinance or cash out one of your rental properties or your entire rental portfolio or even obtain construction financing.
The company's goal is to offer straightforward rates, terms, and fees with no hidden costs. It closes more than 1,000 loans per year and lends in 45 states. You can apply online and log in to the client portal to check the progress of your loan.
Loans are generally closed within 14 days. Rates start at 4.95 percent as of December 2020, and terms range from 13-month short-term loans to 30-year permanent loans. Down payments of 20 percent or more are generally required.
Best for Single-Family Homes: Citibank
Why We Chose It: Citibank offers a portfolio of loans aimed at single-family home investors and is a reputable company in the industry. It also offers a low down payment program.
Low down payment program
Recognizable company name
Must speak with a mortgage loan officer to complete your application
Charges a mortgage application fee
Citibank is one of the most recognizable names on our list and although it’s known for its credit cards, the company also has a large mortgage and loan department. Citibank was founded in 1812 in New York and its headquarters remain there. It’s a global financial institution that offers a range of financial services and products.
Citibank offers both fixed and adjustable-rate mortgages spanning from three to 30 years. It finances residential, commercial, and multi-family properties. Citibank offers conventional mortgages and typically finances properties from $50,000 to over $765,600. There are also jumbo loans for more expensive properties.
Loans can typically be funded within 60 days and rates range from around 2.625 percent to 3 percent as of December 2020. Existing Citibank customers benefit from relationship pricing, which is rate discounts and credits on closing costs if they set up automatic monthly mortgage payments from their Citibank account. The low down payment program requires as little as 3 percent from qualifying buyers.
Best for Fix and Flips: LendingHome
Why We Chose It: LendingHome offers bridge loans tailored to fix and flip investors of all experience levels. Its rates are competitive and it simplifies the loan process.
Loans for fix and flip and rental properties
Works with novice and experienced investors
No physical offices to visit
Newer company with less industry experience
LendingHome is a direct lender founded in 2013 by a serial entrepreneur who wanted to reimagine the lending process and make it much simpler.
The San Francisco-based company considers itself the nation’s largest hard money lender and has funded over $5 billion in loans and more than 23,000 real estate projects.
Rates for rental properties start at 4.95 percent and rates for fix and flips start at 6.5 percent as of December 2020. The minimum loan amount is $75,000 and the maximum is $2 million per property. This means that loan amounts may be larger for portfolio investors.
Bridge loans have closing costs as low as $999 with no application fees. These loans can close in as few as five days. You'll have online account access and work with a dedicated experience manager to seamlessly close your loan and answer any questions. Once you build a relationship with LendingHome, your rates and benefits improve. The company also maintains a real estate blog and education information on flipping houses.
Best for New Construction: Nationwide Home Loans Group
Why We Chose It: Nationwide Home Loans Group lends in all 50 states and allows borrowers to combine up to three loans into one closing, which reduces closing costs. It also requires no payments during the construction phase.
One closing for construction
Lower closing costs
Low down payment programs
Minimum credit score requirement is 620
Nationwide Home Loans Group was founded in Kentucky in 1919 as an independent community bank. It is now a division of Magnolia Bank and is a nationwide lender with a large variety of loans. It originates over $1 billion in home loans each year and specializes in close construction lones but also offers VA and USDA loans, as well as modular loans and land loans.
Down payment requirements vary depending on the type of loan. For example, some VA loans don’t require anything down and FHA loans require as little as 3.5 percent down. The minimum loan amount is typically $125,00 and the maximum is $765,600. One of the notable features that Nationwide Home Loans Group offers is no payments until the construction phase is finished.
Nationwide is also known for its one-time construction closings, meaning you can buy the land, build the house, and get a construction loan with only one closing. Your short-term construction loan will then convert to a permanent, long-term loan.
Best Loan Marketplace: Lendio
Why We Chose It: Lendio offers a convenient way for investors to be able to fill out one loan application and receive multiple loan offers. It also funds deals that other lenders turn down.
Lots of loan programs to choose from
Loan application only takes 15 minutes
Loan advisor is available to answer questions
Hard credit inquiry is done with the application
Some loans offer high rates
Lendio was founded in 2011 in Utah and is an online loan marketplace that offers residential, commercial, and business loans. After filling out an application, loan offers are sent to you within minutes, making it an efficient and convenient way to fund a project.
The company wants to encourage real estate investors and small business owners, so it tries to fund loans that other lenders won’t touch. It’s not a direct lender and instead has a network of more than 75 lenders to tap into. This makes it easy for borrowers to browse multiple loan products. It has funded over $10 billion and more than 216,000 loans.
Down payments vary with loan types but start at 3.5 percent for FHA loans and reach 20 to 30 percent for commercial loans. Commercial loan terms range from 20 to 25 years and rates start at 4.25 percent as of December 2020. Most loans take at least 45 days to fund. Loan amounts vary depending on the type of property, but commercial loan amounts are generally between $250,000 and $5 million.
Investment property loans are offered by multiple types of lenders and come with varying qualifying criteria, rates, fees, and terms. We included a mix of different types of loans that finance residential and commercial investment properties. After reviewing all of the best investment property loans, we chose Quicken Loans as our choice for best overall for its national footprint and competitive rates.
Frequently Asked Questions
What Is an Investment Property Loan?
Investment property loans are used to buy investment properties. This type of financing isn’t intended to be used on your primary residence, but instead on a property that you intend to rent or sell. Banks, credit unions, online lenders, hard money lenders, and online lending marketplaces offer these loans. Rates, terms, fees, and loan types vary based on the lender and the borrower’s qualifications.
Who Should Use an Investment Property Loan?
Consider using an investment property loan if you want to purchase an investment property and need to finance it. An investment property loan is a good fit for a fix-and-flip investor, a commercial real estate investor, and an investor who buys rental properties. Investment property loans can be used to finance single-family homes, commercial buildings, multi-family properties, and more.
How Much Does an Investment Property Loan Cost?
The costs of an investment property loan vary, but usually the largest cost is what you will pay in interest over the course of the loan. That’s why it’s important to shop around and compare rates so that you get the most competitive rate you qualify for. Additional costs include things such as an appraisal, loan origination fees, and closing costs.
Typically, investment property loan interest rates tend to be a bit higher than rates for your primary residence, ranging from 2.5 percent to more than 6.5 percent.
How We Chose the Best Investment Property Loans
We researched more than a dozen investment property loans before deciding on our list. We chose companies that are reputable, have years of industry experience, and offer multiple loan products. When reviewing investment property loans, we considered loan types, interest rates, loan terms, down payment amounts, and borrower qualifications. We also looked at the types of properties that the lender will finance and the regions where they finance properties, because not all lenders are nationwide.