What Type Of Loan Is Best For Investment Property
Table of Contents
- Short Answer For Busy Investors
- How To Choose The Best Loan
- DSCR Loans Property Income First
- Bank Statement Loans For Self Employed
- Conventional Loans When Paperwork Fits
- Bridge Loans For Speed And Rehab
- Portfolio And Private Lenders
- Mixed Use And Small Commercial
- Using Existing Equity Cash Out And HELOC
- Quick Selection Matrix
- Frequently Asked Questions
- Get Pre Approved Today
Short Answer For Busy Investors
There is no single best loan for every investment property. The best choice depends on your strategy and documentation profile. In most cases:
- DSCR loan is best for long term rentals when you want income based qualification
- Bank statement loan is best if you are self employed and do not want to use tax returns
- Bridge loan is best when you must close quickly or finance rehab before refinancing
- Conventional loan is best when you have strong W2s tax returns and want lowest rates
If your property is mixed use or small commercial, a portfolio or commercial lender is often the right path.
How To Choose The Best Loan
Choose using four filters
- Strategy and timeline
Buy and hold flip BRRRR short term rental or mixed use - Documentation type
Traditional W2 and tax returns or alternative such as DSCR or bank statements - Property and condition
Turnkey stabilized or value add that needs rehab - Ownership structure
Personal name or LLC trust portfolio entity
Your best fit emerges where these four intersect.
DSCR Loans Property Income First
What it is
A DSCR loan qualifies primarily on the property’s cash flow. Lenders look at the debt service coverage ratio which compares net rent to the payment including principal interest taxes insurance and any association dues.
Why investors choose it
- No tax returns or W2 income required
- Works well for LLC purchases and portfolios
- Long term financing with 30 year options
- Often accepts short term rental projections with proper support
Where it shines
- Single family rentals small multifamily two to four units
- Turnkey or stabilized assets
- Investors who want to scale without personal income documentation
Considerations
- Minimum DSCR threshold commonly one point zero to one point two five
- Pricing improves with higher DSCR stronger credit and more reserves
Bank Statement Loans For Self Employed
What it is
Qualifies your income using 12 to 24 months of bank deposits instead of tax returns. Available to many self employed borrowers and LLC owners.
Why investors choose it
- Avoids issues from tax write offs reducing taxable income
- Works for consultants founders and gig economy earners
- Can be used across various property types
Where it shines
- Self employed buyers with strong deposit history
- Purchases where conventional underwriting falls short
Considerations
- Lenders analyze deposit trends and business stability
- Scores around six hundred sixty or higher are common targets
Conventional Loans When Paperwork Fits
What it is
Traditional underwriting using W2s tax returns and standard ratios. Usually best pricing among permanent loans when you qualify.
Why investors choose it
- Competitive rates and fees
- Familiar documentation and process
- Good for investors with strong personal income and limited write offs
Where it shines
- Turnkey single family or two to four unit rentals
- Borrowers with clean credit strong income and documented reserves
Considerations
- May limit number of financed properties
- Documentation rigidity can slow approvals for entrepreneurs
Bridge Loans For Speed And Rehab
What it is
Short term interest only financing to acquire quickly and improve the property before refinancing or selling.
Why investors choose it
- Fast closings in seven to fourteen business days common
- Funds purchase and sometimes rehab
- Flexible on property condition and documentation
Where it shines
- Flips BRRRR auctions and distressed assets
- Time sensitive deals where a permanent loan cannot meet the deadline
Considerations
- Higher rates and fees than permanent loans
- Requires a clear exit plan to refinance or sell
Portfolio And Private Lenders
What it is
Lenders or funds that hold loans on their own balance sheet. Terms can be flexible and tailored to investors with many doors or unique properties.
Why investors choose it
- Flexible underwriting property types and ownership structures
- Can accommodate larger portfolios and cross collateralization
Where it shines
- Experienced investors needing scale
- Non standard assets or documentation
Considerations
- Pricing varies by relationship and risk
- May have prepayment considerations and bespoke covenants
Mixed Use And Small Commercial
What it is
Financing for properties combining residential and commercial uses such as storefront with apartments above or small offices with units.
Why investors choose it
-
Unlocks multi stream income in urban and transitional corridors
-
Often available through commercial DSCR or bank portfolio programs
Where it shines
- Zones and corridors under redevelopment
- Investors comfortable with commercial leases and underwriting
Considerations
- Higher down payments twenty five to thirty percent are common
- Additional documentation such as rent rolls estoppels and environmental screening
Using Existing Equity Cash Out And HELOC
What it is
Tap equity in another property through a cash out refinance or home equity line then use proceeds as down payment on an investment.
Why investors choose it
- Reduces need for new high leverage debt
- Strengthens offers with larger down payment
- Can improve DSCR on the new loan
Considerations
- Changes leverage on the source property
- Run the numbers to ensure the blended cost supports returns
Quick Selection Matrix
| Scenario | Likely Best Loan Type | Why |
|---|---|---|
| Turnkey rental no desire to use personal income | DSCR | Income based qualification and LLC friendly |
| Self employed strong deposits low taxable income | Bank statement | Uses deposits instead of tax returns |
| Flip auction or property needs rehab | Bridge | Speed and renovation friendly funding |
| W2 income excellent credit turnkey property | Conventional | Lowest pricing when you qualify |
| Mixed use main street building | Commercial or portfolio | Supports hybrid income and leases |
| Scaling to many doors with varied assets | Portfolio or DSCR blanket options | Flexibility and potential cross collateralization |
Frequently Asked Questions
Which loan closes the fastest
Bridge loans are usually fastest followed by DSCR. Bank statement and conventional tend to take longer due to deeper documentation reviews.
Which loan needs the least documentation
DSCR generally needs the least personal income paperwork because it is property income first. Bridge can also be light but expects a clear exit plan.
What down payment should I expect
Plan for twenty to twenty five percent on most investor programs. Mixed use or heavier value add may require twenty five to thirty percent.
Can I buy in an LLC
Yes. DSCR bank statement bridge portfolio and many commercial programs allow entity purchases. Provide operating agreement EIN and banking details.
Do lenders accept short term rental income
Many DSCR and portfolio lenders accept short term rental projections or appraisals with proof of local compliance and appropriate insurance.
What credit score is required
Common floors are around six hundred twenty for DSCR and six hundred sixty for bank statement and many bridge programs. Higher scores and stronger DSCR improve pricing.
Get Pre Approved Today
The fastest way to identify the best loan for your investment property is a brief pre approval that matches your strategy documentation and timeline. Our team compares DSCR bank statement bridge conventional and portfolio options side by side so you can choose with confidence.
Start here
https://investmentpropertyloanexchange.com/financing
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