Three ways to finance a rental
Acquisition, restructure, or equity extraction. All three qualify the same way — on the property's coverage ratio — but they differ in seasoning rules, LTV ceilings, and how the appraisal is treated.
Program guidelines
The outer limits of what we can arrange. Where your particular file lands inside these ranges depends on the property and your profile, and we'll tell you early.
Read these as outer bounds, not as an offer. Maximum leverage, minimum coverage, and loan size interact — the file that reaches 85% LTV is usually not the same file that reaches $4M or sits at a 600 score. Every parameter here is set by third-party lenders, varies by property and transaction type, and changes without notice. Nothing on this page is a quote, a pre-approval, or a commitment to lend.
Purchase
Financing to acquire a rental property. The advantage over conventional investor financing isn't usually the rate — it's that the number of mortgages already in your name doesn't enter the calculation.
Investors who've hit the agency financed-property limit, or whose returns show heavy depreciation and paper losses, tend to find this is the only door that stays open as the portfolio grows.
Fits well when
- You've exhausted conventional financed-property slots
- Your tax returns understate your real cash flow
- You're buying in an LLC and want to keep it that way
- You need certainty of close more than the last eighth of a point
Rate & term refinance
Replacing existing debt on a property you already own, without taking cash out. The classic use is exiting short-term money: a hard-money purchase loan, a bridge facility, or a balloon coming due.
Because no proceeds come back to you, LTV limits are typically more generous here than on cash-out, and seasoning requirements are often lighter.
Fits well when
- A bridge or hard-money loan is approaching maturity
- You bought with expensive short-term debt to win a competitive deal
- You want to move from adjustable to fixed
- You're consolidating a seller-financed note into institutional debt
On the BRRRR timeline: if you've just finished a rehab, the gap between what you paid and what it's now worth is exactly what seasoning rules govern. Ask before the work is done, not after — the answer determines whether you refinance in three months or twelve.
Cash-out refinance
Pulling equity out of a property you own as tax-free loan proceeds, to use as down payment on the next acquisition, to fund a rehab, or to pay off higher-cost debt.
This is the compounding mechanism most of our clients run: appreciation and principal paydown in the existing portfolio become the equity for the next purchase, without selling and without a taxable event.
Fits well when
- A property has appreciated meaningfully since you bought it
- You finished a value-add rehab and want the new basis recognized
- You own free-and-clear property sitting idle as dead equity
- You're consolidating expensive short-term debt into a fixed structure
Cash-out raises your loan amount, which raises PITIA, which lowers your DSCR. The equity you can access is usually capped by coverage before it's capped by LTV. Run the calculator at your target loan amount to see where the ratio lands.
Property types we finance
All of these are financed as business-purpose, non-owner-occupied investment property. What changes between them is the size of the lender set and how the appraisal gets done.
- Single family residence (SFR)
- Townhome
- Warrantable condo
- Non-warrantable condo
- Condotel
- 2–4 unit properties
- Planned unit development (PUD)
- SFR — rural
- Short-term rental
| Property type | Income basis | What to watch |
|---|---|---|
| SFR, townhome, PUD | Lease, or appraiser's market rent | The cleanest files and the widest lender set |
| Warrantable condo | Lease, or appraiser's market rent | HOA dues land in PITIA and pull the coverage ratio down |
| Non-warrantable condo | Lease, or appraiser's market rent | Far fewer lenders; project review drives the outcome |
| Condotel | Short-term revenue or market rent | A specialist product — identify it before you're under contract |
| 2–4 units | Total rent roll across units | One vacancy doesn't zero your coverage; vacancy treatment varies |
| SFR rural | Lease, or appraiser's market rent | Comparable sales get thin; appraisals take longer |
| Short-term rental | STR revenue history or long-term market rent | Which figure the lender uses can swing coverage substantially |
Heavy deferred maintenance, unusual construction, and very small square footage all narrow the lender list further. Tell us early rather than at appraisal.
Who can qualify
Residency status is one of the first things that determines which lenders can look at a file — so it's worth raising in the first conversation rather than the third.
- U.S. citizens
- Permanent residents
- Non-permanent residents
- ITIN borrowers
- Foreign nationals
- First-time homebuyers
- First-time investors
ITIN and foreign national financing run on dedicated programs with their own overlays — typically tighter leverage, a higher minimum score, and lower maximum loan amounts than standard programs. The specifics are set by the lender and move over time, so we'll walk you through what currently applies to your scenario.
How you hold title
Closing in an entity is the norm on these programs rather than an exception that needs justifying.
- LLC
- Corporation
- Revocable trust
- Personal name
Lenders will want the formation documents — articles, operating agreement, EIN letter — and usually a personal guaranty from the members. Newly formed entities are generally fine; incomplete paperwork is what causes delays.
How you take title has legal and tax consequences beyond the financing. That's a conversation for your attorney and CPA, not for us.
Interest-only DSCR
Where offered, an interest-only period removes principal from the monthly payment. That does two things at once, and they're worth separating.
It raises your coverage ratio
DSCR is rent divided by PITIA. Strip principal out of the payment and PITIA falls, so the ratio rises — often materially. A property that couldn't reach a lender's minimum on a fully amortizing payment can sometimes clear it on interest-only.
That's the mechanical reason investors reach for it: more monthly cash flow, and access to files that would otherwise fall outside the box.
It changes the mix of your payment
On an amortizing loan every payment splits into two parts. The interest portion is generally treated as a deductible business expense on a rental property. The principal portion is not a deduction — it's repayment of what you borrowed, and it builds equity instead.
During an interest-only period there is no principal portion. The whole payment is interest, so a larger share of what leaves your account each month falls into the category that's generally deductible against rental income.
The trade you're actually making
Interest-only is not free cash flow. You are not paying down the balance, so you build no equity through amortization during the period — only through appreciation, if it comes. When the interest-only period ends, the payment steps up, and it steps up more than it would have if you'd been amortizing all along, because the same balance now amortizes over fewer remaining years.
It fits a defined plan — a hold-then-sell window, a bridge to a stabilized refinance, a rehab period before rents reach market — considerably better than it fits an indefinite hold with no exit in mind.
On the tax question — please read this. The description above is a general explanation of how interest and principal are categorised. It is not tax advice, and we are not accountants.
Whether a larger interest deduction actually benefits you depends on things specific to your return: passive activity loss rules, at-risk limitations, business interest limitations, whether you qualify as a real estate professional, your basis in the property, your other income, and how depreciation recapture will be treated when you sell. A deduction reduces taxable income — it is not a rebate, and its value depends entirely on your circumstances.
A structure that lowers this year's taxable income can also leave you with less equity and a higher payment later. Talk to your CPA before choosing a structure for tax reasons.
Not sure whether interest-only fits your plan?
It depends on how long you're holding and what you're doing next. Worth ten minutes before you commit.
The trade-offs worth thinking about
Points versus rate
Paying points reduces the rate, which lowers the payment, which raises the coverage ratio. Sometimes that isn't about monthly savings at all — it's what moves a marginal file over a lender's threshold. Whether it's worth it depends on your hold period.
Interest-only versus amortizing
Interest-only maximizes cash flow and coverage during the IO period, at the cost of building no equity through paydown. It fits a defined plan — a hold-then-sell window, or a bridge to a stabilized refinance — better than it fits an indefinite hold.
Prepayment penalty term
Accepting a longer prepayment period generally improves the terms available. If you intend to hold long term, that costs you little. If there's any real chance you sell or refinance inside the window, understand the buyout cost before you commit — it's often larger than people expect.
Maximum leverage versus better terms
Borrowing the maximum available is rarely the same as borrowing the smartest amount. Dropping a leverage band often improves the terms a lender will offer, enough to offset part of the extra cash you'd bring. Worth comparing both before you decide.
Not sure which program fits?
Describe the property and what you're trying to accomplish, and we'll tell you which structures are worth exploring.