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Investment property loans help people buy properties beyond their primary residence to rent, flip, and sell. A recent examination of rental housing conducted by the National Association of Home Builders (NAHB), using U.S. Census data, found that 86% of rental properties in the U.S. are single-family residences, with the next most common type of rental property being two- to four-unit residences.
We evaluated over a dozen investment property loan providers for these common rental property types using factors including rates, funding speed, and customer reviews to identify the best ones. All of the best investment property loan providers offer competitive rates, and many can get you funded in mere days or weeks.
Best Overall : Quicken Loans
Quicken Loans is one of many subsidiaries of the Rock Holdings, Inc., family of companies. Headquartered in Detroit, Michigan, the company has been in business for more than 30 years. Quicken Loans offers a full suite of mortgage products nationally, including residential investment property loans, and you can complete the application entirely online. We chose Quicken Loans as offering the best overall investment property loan based on its reputation, simple application process, and competitive rates.
The rate you’ll pay with Rocket Mortgage by Quicken Loans will depend on factors like the loan term, financial condition, and property characteristics. Rates with Rocket Mortgage by Quicken Loans were among the best of the companies we reviewed, with stated APRs on their most popular mortgages starting at 4.75%.
Although Quicken doesn’t state how long it’ll take to process your application and get approved, it’s reasonable to expect it to take around 30-45 days. Customers are generally satisfied with Quicken Loans.
Runner-Up, Best Overall : PennyMac Loan Services
PennyMac Loan Services, LLC, offers investment property loans and other mortgage products throughout the United States. Headquartered in Moorpark, California, has been in business since 2008. In addition to financing for residential investment properties, you can also get financing for your primary residence and vacation properties. We chose PennyMacy Loan Services as the runner-up to the best overall based on its competitive rates, good customer reviews, and simple online application process.
You’ll pay a competitive rate, with APRs on PennyMac’s top mortgage products tend to be on the low end of the market. Your rate will depend on factors, including your creditworthiness, the terms you choose, and the property itself. Although the funding speed isn’t disclosed, conventional investment property loans typically fund in about 30 days. You can speed up the process with any lender by submitting all the required documents when applying.
Best for Quick Approval : Patch of Land
Patch of Land is an alternative, peer-to-peer lender offering short-term loans for rental properties via crowdfunding. Patch of Land has been in business since 2013 and is headquartered in Shermans Oaks, California.
If you need money fast, Patch of Land can get you approved in about 24 hours and funded in as quickly as seven days. Although funding typically takes about 10 business days, on average, this is still much quicker than the 30 days you can expect from most lenders. For this reason, we chose Patch of Land as the investment property lender best for quick approval.
A drawback to the quick approval process is you’ll likely pay more than you would with a conventional lender. The rates Patch of Land charges for its short-term investment property loans for rental properties start at 7.50%. You also may need to put some significant cash into the deal, as Patch of Land typically expects the “after renovation value” (a measure of the loan-to-value ratio) less than 65%.
Best Value : Kiavi
Kiavi, formerly known as LendingHome, is a hard money lender offering investment property loans for fix-and-flip properties and one- to four-unit residential rental properties. Kiavi is headquartered in San Francisco, California, and has been operating since 2013.
If you’re looking for an alternative investment property loan that offers a good value, Kiavi is a great place to start. This is because it offers interest rates that start as low as 6.5% for fix-and-flip properties and 6.25% for rental properties, which, although expensive compared to conventional loans, are competitive rates for non-conventional loans. This is why we chose Kiavi as the investment property loan offering the best value.
As with the other lenders we reviewed, the actual rate you’ll end up paying depends on things like the loan term you choose (e.g., fixed-rate or adjustable rate), your qualifications and experience, and the property itself (e.g., property type and location). You can also get funded fast, sometimes as quickly as five days for bridge loans for experienced investors. Plus, you can apply and track your application progress online.
Although Kiavi isn’t available in every state, it currently offers financing nationwide in more than 29 states.
Best for Easy Administration : Lima One Capital
Lima One Capital offers investment property loans for fix-and-flips, single-family rentals, multi-family rentals, and new construction. The company is headquartered in Greenville, South Carolina, and has been in business since 2010.
You can apply for financing and manage your loans online, and you even may be able to get non-recourse loans for portfolios of five or more investment properties, potentially reducing some of the application and loan management burdens. This is why we chose Lima One Capital as the investment property lender best for easy administration.
Most of the company’s loan products require quotes, but rates are very competitive for a hard money lender. A national lender, Lima One Capital offers financing in 45 states, and funding normally takes around the standard 30 days.
Best Conventional Financing : Wells Fargo Bank
Headquartered in San Francisco, California, with locations throughout the U.S., Wells Fargo Bank has been in business since 1852 and is a well-known national bank that offers a full suite of banking products, including investment property loans.
We chose Wells Fargo for best conventional financing because you’ll pay a competitive rate, with the APRs on Wells Fargo’s top mortgage loan products ranging from just 4% to 5.1% as of this writing, and you can evaluate its lending terms online without providing personal information. Note that what you’ll pay will depend on various factors, such as your creditworthiness, loan terms, property type, location, etc.
If you choose Wells Fargo, be aware that it has a long history of poor customer satisfaction. However, the bank has been in business for a long time.
What Is an Investment Property Loan?
Investment property loans are commonly used by real estate investors to purchase residential rental properties on a long-term basis or improve properties so they can be sold on a short-term basis. Although this type of loan is typically not intended for people who plan to live in the property, some lenders might make an exception if you’re planning to lease out the majority of the space.
If you want to purchase non-residential property for investment purposes, you’ll need to get a commercial real estate loan.
How Do Investment Property Loans Work?
For investors with only a few residential rental properties vested in their own names, the application process is similar to a personal mortgage. If the investor has many properties or vesting is in a business name (often required for a large portfolio of properties), the application process will likely be heavily focused on the properties and underlying lease agreements. This is particularly true in the case of non-recourse investment property loans.
While you can often get a 30-year fixed-rate mortgage for residential rental properties, some lenders instead offer a fixed-rate loan with a balloon payment due in five years or less.
Fix-and-flip investment property loans are a bit different, as these are loans you can use to make improvements to a home you intend to sell. These loans are short-term in nature, typically less than a year, and the funds will often be released to you incrementally rather than in a lump sum. Plus, instead of fixed interest rates with principal and interest payments, fix-and-flip loans often have variable interest rates with interest-only payments.
Who Can Use Investment Property Loans?
Residential real estate investors typically use investment property loans. You can often get these loans in either your name or a business's name (e.g., LLC or LLP). Interestingly, an examination of U.S. Census data on rental properties by the NAHB found that individual investors rather than business entities own a large majority (72%) of the more than 19 million rental properties in the U.S.
How Much Do Investment Property Loans Cost?
If you get a conventional investment property loan for a long-term rental property, the costs will often be slightly higher than primary residence mortgage rates. This is because there is more risk associated with rental properties since the loan repayment is based on the income generated from the property rather than your personal income. In addition to an APR, you might also pay an origination fee and be required to pay a prepayment penalty.
Investment property loans cost even more if you use a hard money lender since loan repayment is heavily dependent on the property. In the current low-interest-rate environment, starting rates above 4% to 5% for a 30-year conventional loan and 7% to 8% for a hard money loan are starting to get expensive. The Federal Reserve Bank of St. Louis keeps track of the average 30-year fixed-rate mortgage cost, which is a great place to go to see if your rate is competitive. Remember, the rate will depend on your qualifications and the property’s characteristics. This means borrowers with the best qualifications and most desirable properties will pay the lowest rates.
How We Chose the Best Investment Property Loans
We reviewed over a dozen investment property loan providers to understand their rates, funding speed, customer reviews, and more before making our decisions. The best investment property loan providers offer competitive pricing and can get you funded in a month or less, sometimes just a matter of days, have good reputations, and a simple application process.