Investment Property Loan

Conventional investment property loans follow Fannie Mae and Freddie Mac guidelines, which cap the number of financed properties at 10 and require at least 20% down (25% for 2–4 units). Rates on conventional investment property loans typically run 0.5%–0.75% above comparable owner-occupied rates, reflecting the higher default risk when borrowers have financial stress — investors default on rentals before they default on their primary homes. A direct lender pricing a $400,000 investment property loan might quote 7.25% when the equivalent primary residence rate is 6.75%.

For investors who need to scale beyond 10 properties, hold properties in an LLC, or who are self-employed, direct lenders offering DSCR loans and portfolio products are the primary source of capital. DSCR direct lenders qualify the property on its own income rather than the borrower's personal financials, making it possible to build a portfolio of 20, 30, or 50 properties without hitting conventional limits. Rates for DSCR and non-QM investment products start around 7.5%–10% depending on loan size, LTV, and credit.

Hard money direct lenders serve the acquisition and rehab portion of the investment cycle, providing short-term bridge capital that a conventional direct lender won't touch for distressed properties. Once stabilized, the investor can refinance into a DSCR loan or conventional investment property loan from a long-term direct lender. Understanding which type of direct lender to use at each stage of an investment — acquisition, value-add, and stabilized hold — is fundamental to managing financing costs as an active real estate investor.