How much down payment do you need for an investment property? (2026)

The short answer

If you are buying a property you will not live in, a conventional loan requires 15% down on a single-family rental and 25% down on a 2–4 unit building. Those are Fannie Mae and Freddie Mac floors, and they don't move with your credit score — a 780 FICO still puts 25% down on a fourplex.

If you will live in the property — even just one unit of a duplex, triplex, or fourplex for a year — the whole table changes. Owner-occupied financing opens up: FHA at 3.5% down on a 1–4 unit, a VA loan at 0% down for eligible veterans, or conventional owner-occupied as low as 5%. That single distinction — investor vs. owner-occupant — is the biggest lever on your cash-to-close, often a 7x difference on the same building.

The full down-payment menu (2026)

Here's the practical range by loan type. "Owner-occupied" means you live in the property as your primary residence; lenders typically require you to move in within 60 days and stay at least 12 months.

• FHA, owner-occupied (1–4 units): 3.5% down with a 580+ score. The low-down workhorse for house hackers.
• VA, owner-occupied (1–4 units): 0% down for eligible veterans and service members. No PMI, but a one-time funding fee applies.
• Conventional, owner-occupied 1-unit: 3–5% down. Under 20% you pay PMI until you reach 20% equity.
• Conventional, owner-occupied 2-unit: as little as 5% down; 3–4 units run higher (commonly 15%+).
• Conventional, investment single-family (1-unit): 15% down minimum (85% LTV).
• Conventional, investment 2–4 units: 25% down minimum (75% LTV).
• Second home (not a rental): 10% down — but you can't rent it full-time and call it a second home.
• DSCR loan (investment): typically 20–25% down (75–80% LTV), qualified on the property's rent rather than your income.

Notice what's missing from the investment rows: there's no "3% down with PMI" option. That brings us to the most misunderstood part of the whole topic.

Why there's no PMI on a rental

On an owner-occupied loan, private mortgage insurance lets you put down less than 20% — the insurer covers the lender's risk in exchange for a monthly premium. That product simply doesn't exist for investment properties. Lenders price the higher default risk of a non-owner-occupied loan directly into the down payment instead, which is why 15% (single-family) and 25% (multi) are hard floors rather than negotiable starting points.

The flip side: if you house-hack with less than 20% down, you dopay mortgage insurance. FHA charges an annual MIP around 0.55% of the loan — on a $241,250 FHA balance that's roughly $1,327 a year, about $110 a month — and it sticks for the life of the loan on most FHA loans. Conventional PMI at 5% down is similar in size but drops off automatically at 20% equity. Either way, that premium is a real operating cost you have to fold into your underwriting, not a footnote.

Worked example: a $250k single-family at 15% vs. 20% vs. 25% down

Let's make this concrete. A $250,000 single-family rental, 30-year fixed at 7.25% (a realistic investment rate in June 2026), renting for $2,500/month — right at the 1% rule line. After honest operating expenses (5% vacancy, 8% management, 5% maintenance, 5% capex reserves, $3,000 taxes, $1,450 insurance), the property throws off about $18,650 of net operating income — a 7.46% cap rate. Now watch what the down payment does:

• 15% down — $37,500: $212,500 loan, $1,450/mo P&I. Cash flow ≈ +$105/mo ($1,255/yr). With ~$9,000 closing costs, cash in is $46,500 → cash-on-cash 2.7%, DSCR 1.07.
• 20% down — $50,000: $200,000 loan, $1,364/mo P&I. Cash flow ≈ +$190/mo ($2,278/yr). Cash in $59,000 → cash-on-cash 3.9%, DSCR 1.14.
• 25% down — $62,500: $187,500 loan, $1,279/mo P&I. Cash flow ≈ +$275/mo ($3,301/yr). Cash in $71,500 → cash-on-cash 4.6%, DSCR 1.22.

Reproduce any row in seconds with the mortgage payment calculator and the cash-on-cash calculator. The pattern is the surprising part.

The counterintuitive part: more down, higher return

For a decade of cheap money, the gospel was "put as little down as possible and let leverage juice your return." Look at the table again: cash-on-cashrises from 2.7% to 4.6% as the down payment goes up. That's not a typo — it's what happens when borrowing costs climb above the property's yield.

The mechanism is the loan constant: annual debt service divided by the loan balance. At 7.25% on a 30-year note, the constant is about 8.2%($15,349 ÷ $187,500). Compare that to the property's 7.46% cap rate. When the loan constant is higher than the cap rate, you have negative leverage — every borrowed dollar earns 7.46% on the asset but costs 8.2% to service, so it bleeds the difference. Borrowing more (less down) amplifies that drag; borrowing less (more down) reduces it.

This reverses the moment the cap rate clears the loan constant — a higher-yield market, a value-add that lifts NOI, or a lower rate all flip leverage back to positive, and suddenly the 15%-down row wins on cash-on-cash. The takeaway isn't "always put 25% down." It's that the right down payment is a math question, not a rule of thumb, and the answer changes with rates. Compare your deal's cap rate to its loan constant before you assume minimum-down is optimal — the cash-on-cash guide walks the full formula.

The house-hack shortcut

If the 25%-down wall on a multifamily feels impossible, owner-occupancy is the door around it. Take the same $250,000 duplex three ways:

• FHA, owner-occupied, 3.5% down: $8,750 down, $241,250 loan at ~6.5%, ~$1,525/mo P&I (plus ~$110/mo MIP).
• Conventional, owner-occupied, 5% down: $12,500 down, $237,500 loan at ~6.5%, ~$1,501/mo P&I (plus PMI).
• Conventional, investment, 25% down: $62,500 down, $187,500 loan at ~7.25%, ~$1,279/mo P&I.

The owner-occupied routes get you into the building for $8,750 instead of $62,500— roughly one-seventh the cash — and at a lower interest rate, because owner-occupied loans price better than investor loans. The trade is that you live there for at least a year, carry a bigger loan balance, and pay mortgage insurance. For most first-timers it's the single fastest way into rental real estate. The full playbook is in house hacking explained.

The cash the down payment hides: closing costs and reserves

Your down payment is not your cash-to-close. Two more piles sit on top of it, and skipping them is how new investors end up short at the table:

Closing costs.Budget 2–5% of the price for a financed deal — roughly $5,000–$12,500 on our $250k rental — covering lender fees, title, transfer taxes, and prepaids. They're sunk the day you sign, so they belong in your return math up front. The full line-by-line breakdown is in closing costs on an investment property, and you can estimate yours with the closing cost calculator.

Reserves. Conventional investment loans require you to have about six months of PITI (principal, interest, taxes, insurance) in the bank after closing — money you don't spend but must prove. On the 25%-down case that's roughly $1,650/mo PITI × 6 ≈ $9,900 sitting in reserve. Add it up: $62,500 down + $9,000 closing + $9,900 reserves means the deal really needs about $81,400 of liquidity, not the $62,500 the down-payment line implies.

So how much should you put down?

There's no universal answer, but there is a decision order. First, the floor is set for you — 15% or 25% conventional investment, 3.5% FHA owner-occupied — so start from what you actually qualify for. Then weigh four things:

• Leverage sign. If your cap rate beats the loan constant, less down lifts your cash-on-cash. If it doesn't (the common case at 2026 rates), more down does. Check it deal by deal.
• DSCR headroom. Lenders and your own safety both want DSCR comfortably above 1.0 — 1.20+ is a healthy buffer. More down raises DSCR; if a deal only clears 1.0 at 25% down, that's the market telling you it's thin.
• Opportunity cost. $125,000 buys one fourplex at 25% down — or two single-families at 15%. Spreading capital across more doors can beat concentrating it, if you can manage the extra properties.
• Reserves after closing. Never put down so much that you close with an empty bank account. A vacancy and a furnace in the same quarter is a normal year, not a black swan.

Run your actual deal

The cleanest habit is to stop guessing at "20%" and model the specific property at two or three down-payment levels before you write an offer. Drop the price, rent, expenses, and each financing scenario into TrueCap and you'll see cash flow, cap rate, cash-on-cash, and DSCR side by side in about 60 seconds — including the all-in cash the deal really needs. For the rest of the underwrite, see how to underwrite a rental in 60 seconds.

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