Prop Hound
Financing Options Rundown
Six ways to finance a rental property, and what each one actually trades off. Not a checklist so much as a reference, read it once before you shop lenders.
- Conventional loan. A bank loan based on your income and credit. Usually the cheapest rate, but the slowest approval and the most paperwork.
- FHA (or other low-down-payment) house hack. Buy a 2-4 unit property, live in one unit, rent the others. Qualifies for owner-occupied financing terms even though it's a rental, often the lowest barrier to entry for a first-time investor specifically.
- DSCR loan. Approved based on the property's rental income, not your personal income. Skips personal income verification. Often used by investors with several properties or hard-to-document income, usually at a higher rate than conventional.
- Seller financing. The seller acts as the bank. You pay them directly, on terms you agree to. Useful when a property won't qualify for a normal loan.
- Hard money loan. Short-term, high-interest loan from a private lender. Good for a fast close or a flip, not something to hold long term.
- Cash. No financing at all. Slower to save up front, but the strongest offer a seller can get, and no interest after.
How to use this checklist
Work through it top to bottom for the specific property or market you’re looking at, and don’t mark an item done until you’ve confirmed it yourself or heard it from someone you trust. If an item doesn’t apply, write down why, since the reason is often the thing you want to remember when you compare it against the next property. Keep your answers somewhere you can find them, such as a note per property. It is general information, not tax, legal or financial advice, so check anything high-stakes with a qualified professional. You can also print this page or get the PDF in the First-Time Investor Toolkit.
Longer read: DSCR loans explained for first-time investors.
More rental investing checklists
- The Market Selection Checklist
- Tenant-Friendly vs. Landlord-Friendly States
- The Out-of-State Investing Checklist
- Canadians Investing in US Property Checklist
- The Deal Analysis Checklist
- The Property Walkthrough Checklist
- The Offer Submission Checklist
- Working With an Inspector
- Buying an Occupied Rental Checklist
- Closing Day Checklist
This checklist covers one step. We check new listings every night.
Prop Hound screens new rental listings in your market against your own numbers, so you only see the ones worth running a checklist like this on.