How Much is the Down Payment on an Investment Property?
By Michelle Clardie on 04/20/2025.
Reviewed by Josefin Gatsby
Financing an investment property with traditional loans can be a little more complicated than getting a mortgage to purchase your own home. The mortgage underwriting process is often more strict because lenders view investment properties as higher risk due to the lack of owner occupancy, potential rental income instability, and greater likelihood of default.
To offset this increased risk, lenders may require higher credit scores, higher income levels, and higher down payments.
How Much is the Down Payment on an Investment Property?
The down payment on an investment property typically ranges between 10% and 40%, depending on several factors, including:
The property type. Residential investment properties with up to four units can qualify for residential mortgages, which come with lower down payments than the commercial financing needed for buildings with five or more units.
How the property will be used. Properties that are occupied part-time by the owners may come with lower down payments than properties that are exclusively rented.
Income qualifications. If you need the rental income from the property to qualify for the loan, you may need a higher deposit than if your personal income meets the loan requirements.
Your credit score. Lower scores may require higher down payments.
The loan amount. Higher loan amounts may require higher down payments.
The loan type. Different loan types require different down payment minimums.
Importantly, there are ways to put down even less. In certain situations, some investors can even qualify for a 0% down payment on their investment property!
This article will explore common investment scenarios and explain how much of a down payment is likely to be required in each case.
The property has more than four units and requires a commercial loan instead of a residential mortgage.
Your credit score and/or income levels are less than ideal.
How to Buy an Investment Property with as Little as 3% Down
If you want to buy a rental property, but don’t have 20-30% to put down, consider house hacking by purchasing a property with up to four units and living in one of them as your primary residence. This allows you to access favorable primary residence funding, which offers a down payment as low as 3% with a conventional loan or 3.5% with an FHA loan.
If you like the idea of passive rental income with primary residence funding, but don’t love the idea of sharing a wall with your tenants, consider buying a home with a detached ADU (accessory dwelling unit). ADUs are separate residences (like a guest house or casitas) located on the same plot of land as the main house. You get a single-family detached home with favorable financing and an investment property to generate income.
How to Buy an Investment Property with 0% Down
In special cases, qualified buyers can secure 0% down payment mortgages for investment properties. However, there are conditions.
Firstly, you would need to choose a property with two to four units (a duplex, triplex, four-plex, or single-family home with a detached ADU) and occupy one of the units as your primary residence.
Then you would need to qualify for one of the special residential loan types that offer 0% down options:
VA loans. VA loans are reserved for military service members, veterans, and their spouses. You would need a certificate of eligibility (COE), qualifying income, and a qualifying credit score. The property would also need to meet the VA’s minimum property requirements (MPRs), which set a standard for the condition of the property.
USDA loans. USDA loans offer favorable financing terms to qualified buyers who purchase properties in qualified low-population-density areas, which promotes rural growth. You would need to meet income and credit requirements, including a maximum income limit, as this program is aimed toward low-to-moderate income buyers. The property would also need to meet property requirements pertaining to the condition.
While 0% down payment investment properties are not a realistic option for every real estate investor, they can be a creative way to purchase rental properties with favorable financing terms, particularly for those who are just starting to invest in real estate.
Alternative Real Estate Investments that Don’t Require a Down Payment
The down payment and closing costs required to purchase an investment property prohibit many investors from buying real estate. But that should not prevent you from investing in real estate!
REITs. REITs (real estate investment trusts) are companies that invest in income-generating properties. You can buy shares in a REIT, which entitle you to a share of the profits in the form of dividends. While the REIT can buy and sell properties at its discretion, using investor contributions to fund deals, you, as an investor, are not directly responsible for the down payment on any acquisition.
Private equity. With private equity investing, a fund manager sources capital from a group of investors to fund professionally managed real estate portfolios. Private equity typically requires higher minimum investments than REITs and may be harder to access given their private nature, but they can give accredited investors a way to invest in large-scale real estate developments without worrying about the down payment, closing costs, or ongoing management.
Real estate crowdfunding and syndication. Crowdfunding and syndication are similar investment models in which multiple investors pool funds to finance a specific real estate project. With manageable investment minimums, crowdfunding and syndication open the door to passive real estate ownership without the need fordirect ownership, hands-on property management, or a traditional down payment.
Investment Property Down Payment FAQs
How Much is the Down Payment on Rental Property?
If the property is 100% tenant-occupied, you’ll typically need to put down at least 20-25%. If you purchase a duplex, tri-plex, or four-plex and occupy one of the units as the owner, you could qualify for as little as 3% down with conventional financing. 0% down options may also be available under VA loans (for qualified military service members and veterans) and USDA loans (for qualified buyers of qualified properties in low-population-density areas).
How Much is the Down Payment on a Multi-Family Property with 5+ Units?
To purchase a rental property with more than four units, you’ll need commercial financing rather than a residential mortgage. The minimum down payment on a commercial loan is typically 20-30%.
How Much is the Down Payment on a Vacation Property?
If the property will be primarily used as a vacation rental, and you plan to stay there fewer than 14 days per year, you’ll likely need investment property financing, which typically comes with down payment requirements of at least 20-25%. If you plan to occupy the property for part of the year (more than 14 days), you may qualify for vacation property financing with interest rates of 10-20%.
How Gatsby Helps You Invest in Real Estate Without a Down Payment
Gatsby Investment is a real estate syndication company that offers professionally managed, high-return-potential deals to investors.
We specialize in multi-family developments in the Los Angeles area, where new housing is in high demand and returns are strong. With our built-to-sell opportunities, you can get in and out of a deal quickly, investing in the equity-building development stage and receiving your proceeds from the sale in just 18-24 months. With our built-to-rent (BTR) opportunities, you can take advantage of the equity-building development stage and the rental phase, which can create passive rental income. All without worrying about a down payment, closing costs, ongoing maintenance, or resident management!
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