7 Ways to Get a Loan for an Investment Property

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Over the past three years, home flipping has regained its popularity as real estate investors started dipping their toes into the market. It’s no surprise that home flipping was at an 11-year high in 2017, according to Attom Data Solutions, a property database curator. It said $16.1 billion went toward the purchase of homes for flipping that year.

As a real estate investor, knowing how to get a loan for an investment property can be a big deal. It can mean the difference between success and failure. If you’re interested in expanding your real estate empire — whether you’re flipping houses or using an investment property to generate regular cash flow as a landlord — it’s important to understand your options.

Here are seven options to consider for funding your investment property purchase or upgrade.

1. Home improvement loan

For the most part, getting a home improvement loan makes sense if you’re upgrading something you’ll keep for the long term.

“The only way I see it working is if this is your one project for the year,” said Sam Wilson, a real estate investor and co-owner of Southern Home Buyers.

Home improvement loans also can be useful for income-producing properties. If you rent out properties that you’ve had for a while, you might have enough equity to get a loan based on the rental property’s value. However, if you borrow too much or lose a tenant and can’t cover the payment, you could end up losing your property.

Wilson pointed out that a home improvement loan can come with perks, such as a lower interest rate, but the drawback is it takes time to get through the system.

“Do you have 30 days to wait around for the bank to underwrite you, appraise the property, and get it through their loan department?” he asked.

If you’re working within a short time frame, you might not have time to take advantage of a home improvement loan. You’ll need to find other solutions.

For those who can afford to wait for the process to play out, a home improvement loan can be helpful, Wilson thinks. It might not be the best option if you need to complete a project quickly so you can flip the house, or if you have a small window of time before a new tenant moves in.

2. Home equity line of credit

Rather than relying on getting a new home improvement loan, Wilson suggested people use an existing home equity line of credit.

“If you have a home equity line of credit on your primary residence, you could utilize it as soon as you need it,” Wilson said. “There are no completion hurdles to overcome for more funds, and no waiting around for projects to start.”

Having that capital available at a relatively low interest rate is a huge advantage. Because the line of credit is based on your primary residence, you don’t have to worry as much about the difficulties that come with trying to persuade a bank to fund an upgrade if you’ve invested in a fixer-upper.

As with a home improvement loan, it’s possible to get a line of credit based on your long-term investment property. If you have enough equity built up in an existing rental property, you can use it for collateral instead of relying on your primary residence.

“With a true investment project, like a home you’ve bought cheap but needs lots of work, it’s going to be in such a condition that most banks won’t lend on it beyond its current value anyway,” said Wilson. “That can make getting a home improvement loan impractical for any real estate investor.”

The downside to using a home equity line of credit from your primary residence or your rental property is that you are putting your investment at risk. If something goes wrong and you can’t make payments, you could lose your home or your income-generating property.

3. Cash-out refinance

Looking for a way to get more out of your existing equity? A cash-out refinance can be one way to get the money you need.

Refinancing your home or rental property could result in a lower interest rate and payment. Also, with a cash-out refinance, you can increase your cash flow, based on the equity you have.

The downside is that, as with a home improvement loan, you’ll have to wait for the appraisal and underwriting process to work itself out. You might not have the time for that. Also, if your investment property doesn’t have enough equity to provide the funds you need, you’ll have to use the home you live in as the source of equity.

Using your primary residence for a cash-out refinance if you’re buying a property to flip can be risky. You could end up losing your home while being stuck with a fixer-upper that isn’t habitable.

4. Hard money lending

Many people focus on traditional bank lending when trying to figure out how to get a loan for an investment property, according to Lucas Machado, a real estate investor and the president of house-flipping startup House Heroes.

Instead, he pointed out, many real estate investors turn to more creative home loan solutions such as hard money lending.

“This is used a lot by investors who flip homes,” said Machado. “The investor borrows from private individuals or businesses to fund their real estate investments.”

These nontraditional loans often are higher than the current value of the home, so there’s money left over to make upgrades that enable investors to sell the home quickly. The hope is that the home sells for much more than its purchase price after the improvements are made. The loan can be paid off and the investor has a little capital left over so they can move on to the next project.

With hard money lending, though, Machado explained that you usually need to bring some of your own capital, typically a 20% down payment. You probably will pay a higher interest rate because hard money lenders put their own finances on the line. Also, many of these alternative mortgage lenders have provisions that allow them to repossess the home if you don’t make payments on the loan.

5. Partnership

Do you know people who have a lot of capital available? If so, you could enter into a partnership with them to get the money you need.

“One common form of partnership for real estate investing is when one partner supplies the funding and the other brings the opportunities,” said Machado. “The partners then split the profit upon completion of the project.”

This option also might work if one partner has very good credit and can secure a loan, while the second partner manages other aspects of the investment. However, you need to come to an agreement with your partner to make this work. You both need to be happy with the distribution of profits in proportion to what you bring to the table.

6. Seller financing

If you’re buying a home, you might be able to convince the seller to finance the deal, Machado said.

“Even though the seller doesn’t make money at the time of the sale, they could receive the advantage of ongoing income while you pay off the loan,” he said. “However, you might have to pay a higher price for the home and pay a higher interest rate because they offer creative financing.”

When using seller financing, you run the risk of putting some money into the home to fix it up or bear some of the administrative costs that come with being a landlord. You could lose that money if you can’t make payments and the seller repossesses the home.

7. Personal loan

Is your home improvement project relatively small? You might benefit from an unsecured personal loan for home improvements. If you’re a real estate investor looking to make upgrades for tenants, you can get a personal loan fast and at a reasonable rate if you have good credit.

Personal loans don’t require an appraisal, and some lenders, such as Avant, can send the money to your account within a couple of business days. Borrow the amount you need to upgrade the home and move on to the next project.

Personal loans often are unsecured, so you don’t have to worry about losing the property. However, you might not qualify for a personal loan large enough to complete a total remodel, so the option might not make sense if you’re an investor trying to flip a fixer-upper.

How to get a loan for an investment property

No matter your situation, you need to present yourself as a good risk.

When getting a home improvement loan from a bank or an online personal lender, you need good credit to gain access to the best rates and terms.

As you approach hard money lenders or work with a partner or seller for financing, you need to show that you’re smart and hard-working. You can get a loan for your investment property without having good credit, but you have to prove you have a plan to be profitable so that nontraditional lenders can have confidence in you.

If you’re considering a loan based on equity instead of a personal loan, it’s important to ensure you have enough value in your home to qualify for your desired amount. As a result, you could end up taking out a home equity loan on your primary residence. As Wilson pointed out, this can be a good way to access ready money, but you have to be careful that you don’t lose your home.

There are options for real estate investors looking for a little leverage to help increase profitability. Whether you need a home improvement loan to upgrade a revenue-producing rental property or you hope to buy a home to flip it, research your options and decide which one works best for you.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 7.08% APR to 15.37% APR (with AutoPay). Variable rates from 5.81% APR to 14.11% APR (with AutoPay). SoFi rate ranges are current as of August 10, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.81% APR assumes current 1-month LIBOR rate of 2.07% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions ApplySOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS #1121636.
    (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
5.81% – 15.37%1$5,000 - $100,000Visit SoFi
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
5.49% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.