A Beginner's Guide to Funding Your First Investment Property the Smart Way

At InvestInUtah.ai, we talk to a lot of people who are ready to grow as real estate investors—but the same question keeps coming up:

“How do I finance my first real deal?”

Some people are accidental landlords who kept their old house as a rental. Others are ready to buy a property specifically for investment. In both cases, getting the financing right is what turns a good idea into a solid deal.

This article breaks down the most common—and some not-so-common—ways to finance your first investment property. Whether you’re a W2 employee, a small business owner, or someone who doesn’t fit the traditional lending mold, there are more options available than you might think.

Step One: Understand the Difference

If you kept your old home as a rental, you probably didn’t have to “qualify” as an investor. You already owned it, and it simply became a rental when you moved out.

But when you’re buying intentionally, as an investor, lenders treat things differently. They look at different income requirements, down payments, and risk factors.

This is why understanding your financing options is so important before you make an offer.

Option 1: Conventional Loans

This is the most common option for first-time investors. You’ll typically need:

• 15–25% down

• Strong credit (usually 680+)

• Steady income (W2 or consistent self-employed income)

• Debt-to-income ratio under 45%

Conventional loans are straightforward, offer low interest rates, and can be used for single-family homes, duplexes, triplexes, or fourplexes.

Option 2: FHA Loans (House Hack Friendly)

If you’re willing to live in the property for at least one year, FHA loans allow you to:

• Buy up to 4 units with just 3.5% down

• Qualify with more flexible credit and income requirements

This is a great path for first-timers who want to start with a house hack—live in one unit, rent the others, and use rental income to offset your mortgage.

Option 3: DSCR Loans (For Cash-Flowing Properties)

DSCR (Debt Service Coverage Ratio) loans are designed specifically for rental properties. Instead of using your personal income to qualify, lenders look at:

• How much the property will bring in monthly

• Whether the rents cover the debt payment (typically 1.0x or more)

These loans are ideal for self-employed investors or anyone whose tax returns don’t reflect their actual financial picture. If the numbers on the property work, you can qualify—even with minimal personal income.

Option 4: Bank Statement Loans

If you’re self-employed or own a business, bank statement loans let you qualify using 12–24 months of business deposits instead of tax returns. This is a strong alternative if your adjusted gross income is low due to write-offs.

Option 5: Seller Financing

In some cases, the seller is willing to act as the lender. You negotiate terms directly—down payment, interest rate, and repayment timeline.

This strategy:

• Bypasses banks entirely

• Can be flexible if you’re short on credit or liquidity

• Is often negotiable based on the seller’s goals

It’s rare, but when available, seller financing can unlock great deals with little red tape.

Option 6: HELOCs and Cash-Out Refinances

If you already own a home with equity, consider:

• HELOC (Home Equity Line of Credit): borrow against your primary residence to fund the down payment on a rental

• Cash-out refinance: refinance your current property and pull cash to use toward your next investment

This is how many investors scale—by tapping into money they already have without having to sell.

Option 7: Partnerships

If you’re short on cash or credit but can bring the deal, management, or time, consider partnering with someone who brings the capital. You can structure it 50/50, equity split, or however makes sense for both sides.

Pro tip: Always use a written agreement, even with friends or family.

So Where Do You Start?

There’s no one-size-fits-all answer. The right financing method depends on:

• Your income type (W2 or 1099)

• Your credit and debt

• Your available cash or equity

• The type of property you want to buy

• Whether you plan to live in it or not