What Type Of Loan Is Best For Investment Property The Practical Investor’s Guide

February 6, 2026

Short Answer For Quick Decisions

There is no single best loan for every investment property.

Choose DSCR if you want the property’s rental income to drive approval.
Choose Bank Statement if you are self employed and do not want to use tax returns.
Choose Bridge if you must close quickly or finance rehab before refinancing.
Choose Conventional if you have strong W2s tax returns and want the lowest pricing.
Choose Portfolio or Private if you have many doors, unique properties, or need flexible terms.

A Simple Framework To Pick The Right Loan

Make your selection using four filters:

Strategy
Buy and hold, short term rental, flip, BRRRR, small commercial, or mixed use.
Documentation
Traditional W2 and tax returns or alternative documentation such as DSCR or bank statements.
Property Condition
Turnkey stabilized cash flow versus value add or rehab heavy.
Ownership Structure
Personal name, LLC, trust, or portfolio entity.

Your best loan is the intersection of these four.

DSCR Loans When Property Income Leads

What it is
DSCR stands for Debt Service Coverage Ratio. Lenders compare net rent to the total payment including principal, interest, taxes, insurance, and association dues.

Why investors choose DSCR

Minimal personal income documentation
LLC friendly ownership
Scales well as you add doors
Works for long term and many short term rental markets with proper support

Best for
Turnkey single family rentals, two to four units, small multifamily, and stabilized assets.

Key considerations

Common minimum DSCR thresholds are around 1.00 to 1.25
Pricing improves with higher DSCR, stronger credit, and healthy reserves
Appraisal based rental analysis or rental appraisal may be required

Bank Statement Loans For Self Employed Investors

What it is
Qualifies income using 12 to 24 months of deposits from business or personal bank statements instead of tax returns.

Why investors choose it

Ideal when tax write offs lower taxable income
Straightforward for consultants, founders, agents, and gig workers
Useful across many property types

Best for
Self employed buyers with consistent deposits who want a permanent loan without conventional underwriting.

Key considerations

Lenders evaluate deposit trends and business health
Scores around the mid 600s or better are common targets
Keep accounts clean and separate to simplify sourcing of funds

Bridge Loans For Speed Renovation And Auctions

What it is
Short term interest only financing designed to acquire quickly, fund repairs, and exit via sale or refinance.

Why investors choose it

Fast closings compared to permanent loans
Friendly to properties that need work
Flexible documentation and underwriting

Best for
Flips, BRRRR, distressed assets, auctions, or when a seller requires a rapid close.

Key considerations

Higher rates and fees than permanent loans
You need a clear exit plan to DSCR or conventional
Budget and after repair value should be realistic and documented

Conventional Loans When You Qualify Comfortably

What it is
Traditional underwriting with W2s, tax returns, and standard ratios. Often the best pricing if you fit the box.

Why investors choose it

Lower rates and fees compared to many alternatives
Familiar documentation path
Good for turnkey rentals when personal income is strong

Best for
Borrowers with clean credit, documented income, and limited write offs purchasing stabilized assets.

Key considerations

May limit the number of financed properties
Documentation can be slow for entrepreneurs or complex financials

Portfolio And Private Lenders For Scale Or Edge Cases

What it is
Lenders who hold loans on their balance sheets or funds with bespoke terms.

Why investors choose it

Flexible structures, property types, and cross collateralization
Helpful for larger portfolios and non standard deals

Best for
Experienced operators seeking scale, blanket loans, or non conforming assets.

Key considerations

Pricing varies by relationship and risk
May include prepayment periods or custom covenants

Mixed Use And Small Commercial Lending

What it is
Financing for properties with both residential and commercial income streams.

Why investors choose it

Unlocks multi source cash flow from storefront plus apartments or office plus units
Often available via commercial DSCR, bank portfolio, or SBA variants depending on occupancy

Best for
Main street corridors, urban redevelopment zones, and stable neighborhood centers.

Key considerations

Expect 25 to 30 percent down and added documentation such as rent rolls, estoppels, and environmental screening
Underwriting focuses on tenant quality and lease terms

Using Equity Cash Out And HELOC To Strengthen Your Offer

What it is
Tap equity from an existing property via a cash out refinance or home equity line and use proceeds for your down payment.

Why investors choose it

Larger down payment improves DSCR and pricing on the new loan
Allows stronger offers with shorter financing contingencies

Key considerations

Monitor the blended cost of capital after tapping equity
Keep reserves intact to satisfy underwriting requirements

Quick Selection Matrix Scenarios And Best Fit

Scenario	Best Fit Loan	Why It Fits
Turnkey rental and you prefer property income qualification	DSCR	Income based approval, LLC friendly, scales easily
Self employed with strong deposits and low taxable income	Bank Statement	Uses deposits instead of tax returns
Flip or value add that needs fast closing and rehab funds	Bridge	Speed, renovation friendly, exit to DSCR later
W2 income, excellent credit, stabilized property	Conventional	Typically best pricing when you fit guidelines
Many doors or mixed collateral across markets	Portfolio or Private	Flexible terms, potential blanket structures
Storefront with apartments above	Commercial DSCR or Bank Portfolio	Underwrites hybrid income streams effectively

Common Mistakes And How To Avoid Them

Applying for the wrong product
If the asset needs rehab, start with bridge, not conventional.
Sending partial documents
Upload a complete set once to avoid condition loops.
Ignoring reserve requirements
Plan for three to six months of payments in liquid or semi liquid assets.
Underestimating timelines
Order appraisal and title on day one after intent to proceed.
Mixing funds
Keep business and personal banking separate to simplify sourcing.

Frequently Asked Questions

Which loan closes the fastest
Bridge typically closes the fastest, followed by DSCR. Bank statement and conventional take longer due to deeper reviews.

Which loan requires the least personal paperwork
DSCR usually needs the least personal income documentation because it relies on property cash flow.

What down payment should I expect
Most investor programs expect twenty to twenty five percent down. Mixed use and heavier value add can require twenty five to thirty percent.

Can I buy through an LLC
Yes. DSCR, bank statement, bridge, portfolio, and many commercial programs allow entity purchases. Provide your operating agreement, EIN, and banking details.

Can I qualify with short term rental projections
Many DSCR and portfolio lenders accept short term rental appraisals or recognized projections with proof of local compliance and appropriate insurance.

What credit score do I need
Thresholds vary, but DSCR commonly starts near six hundred twenty and bank statement or many bridge programs around six hundred sixty. Stronger credit and DSCR reduce pricing.

Get Pre Approved Today

The fastest way to know what type of loan is best for your investment property is a brief pre approval matched to your strategy, documentation, and timeline. We compare DSCR, bank statement, bridge, conventional, and portfolio options side by side so you can choose with confidence and close on schedule.

Start here
https://investmentpropertyloanexchange.com/finance/