The Ultimate Guide to Financing for Real Estate Investors

Look, I’m going to be straight with you. After 25+ years of working with real estate investors and having held several dozen properties myself at one point, I can tell you that financing is where most people get stuck. Not the property analysis. Not the market research. The financing.

And trust me when I say, I get it. I’ve been saying for years that the learning curve in real estate investing on its own is steep. When you start layering in new language and nuance around financing, the learning curve increases exponentially. For many investors I talk to, the financing side of investing feels the most overwhelming, often even a little intimidating.

But here’s the thing: it’s the use of “other people’s money”, the leverage, that will give us the greatest rates of return. Understanding at least a baseline of what’s happening under the hood of mortgage underwriting will enhance your returns and overall experience. Let’s demystify this together.

Let me answer this question with a question: Would you rather buy one property for cash or five properties with financing?

When you finance investment properties, you’re not just spreading your capital; you’re multiplying your returns through leverage. Let’s look at the actual numbers because, as I always say, DO THE MATH, as the math will not lie.

• You buy a $400,000 property with cash
• It appreciates 5% annually = $20,000 gain
• Your return on investment: 5%

• You buy four $400,000 properties with $100,000 down each
• Total investment: $400,000 (same as cash scenario)
• Each property appreciates 5% = $20,000 × 4 = $80,000 gain
• Your return on investment: 20%

Same capital deployed. Four times the appreciation. And we haven’t even talked about tax benefits, principal paydown (your tenants buying these properties for you), cash flow, or portfolio diversification.

The leverage is what makes real estate investing truly powerful. Period.

Let me break this down by investor stage, because what works for your first property probably won’t work for your tenth.

These are your best-in-market rates and terms. Period. As of the writing of this article, you’re looking at 30-year fixed rates in the mid to high 6s, with about two points on a single-family investment property with 25% down.

Now, I know what many of you are thinking, “Caeli, 6.625%? That’s higher than I wanted!” Let me put that in perspective for you. On a $100,000 loan, your principal and interest payment is $648 per month. If rates drop by half a point to 6.125%, your payment would be $615. That’s a $33 difference.

I’m constantly trying to get investors to do the math because, without actually doing it, there’s always an unchecked psychological bias about the rate itself. People play themselves out of very substantial investments just because they hear a number. Don’t be that person.

• Lowest rates available (typically)
• Up to 10 financed properties (per qualified individual)
• 30-year fixed terms
• Standard 20-25% down for investment properties *leverage as high as 85% here- SFR only and will have PMI- remember DO THE MATH
• Most straightforward qualification

You do not need to wait to use DSCR loans; if a property’s cash flow is this, this may be the best option for investors with hard-to-verify income.

DSCR loans qualify based solely on the property’s rent versus the mortgage payment. Your personal income? Doesn’t matter. Your DTI? Irrelevant.

Here’s how it works:

• Property rents for $2,000/month
• Mortgage payment (PITI) is $1,500/month
• DSCR = 2,000 ÷ 1,500 = 1.33

Generally, lenders want to see 1.0 or higher. A DSCR of 1.0 means the rent exactly covers the payment. Above 1.0? You’ve got positive cash flow built into the deal.

• No income documentation required
• No limit on the number of financed properties
• Qualification is simple and fast
• Great for high-net-worth investors who show low taxable income

Okay, this is where it gets really cool. The All-In-One (my personal favorite) is a first-lien HELOC that combines your mortgage and banking (think checking/savings). Instead of a traditional amortizing loan, you get a revolving line of credit secured by your property.

Let me walk you through a real example because this one requires seeing the numbers:

• Home value: $500,000
• Current mortgage balance: $325,000
• You refinance with an All-In-One at 80% LTV = $400,000 credit limit
• Available funds: $75,000 (immediately accessible)
• You only pay interest on funds actually used

Here’s the magic: every dollar of income or idle funds you deposit into this account immediately reduces your principal balance. Your paychecks, rental income, and business deposits all work to reduce the amount of interest you’ll pay. Every day, 365 days a year. Because it’s revolving, you can withdraw funds as needed without restriction.

Now, I want you to consider a 30-year fixed mortgage. More specifically, the first 10 years of any 30-year fixed mortgage. How much of your payment goes to principal? A very small amount. That’s because the interest is front-loaded. Because we know that, statistically, the overwhelming majority of us will refinance in 5-7 years, that clock keeps restarting.

The All-In-One flips this on its head. You control when and how your balance decreases (or increases- think investment opportunities).

Best for:

• Investors with significant monthly cash flow
• Those who understand debt optimization
• People who want to pay off mortgages faster
• Investors needing flexible access to capital

Want to go deeper into this very powerful financial tool? Check out our free Masterclass.

Let’s talk real numbers across different scenarios.

Example on a $400,000 property:

• 25% down payment: $100,000
• Closing costs: ~$6,000-$10,000
• Reserves: 6 months PITI (~$15,000)
• Total cash needed: ~$121,000-$125,000

But wait, there’s more to consider. Lenders also want to see that you can handle multiple properties, so they typically require additional reserves. Depending on how many financed properties you have, that could mean 2-6% of the UPB (unpaid principal balance) per property owned. But note that reserve requirements allow the use of retirement funds, such as 401(k) s.

Example on a $400,000 property:

• 20% down payment: $80,000
• Closing costs: ~$6,000-$10,000
• Reserves: 6-12 months PITI (~$18,000-$36,000)
• Total cash needed: ~$104,000-$126,000

The reserve requirements are often less restrictive and apply only to the subject property.

Every investor needs to understand the three things most heavily weighted in the underwriting of an investment property loan.

Conventional loans:

• Minimum: 650 (but 760+ gets you the best rates)
• Sweet spot: 760+
• Score can impact both rate and approval

DSCR loans:

• Minimum: 660-680 (lender-dependent)
• Similar impact (though less so) to rate. The lower the score, the higher the rate and vice versa.
• Score can impact leverage access more than approval, as long as you’re over the 660 mark.

Conventional loans:

• Maximum: typically 50% DTI
• Includes all monthly debt payments.
  • This is almost exclusively derived from the min payments on the credit report.
    • The almost there (not found on credit but needs to be included in the DTI calculation) would be rent payments for primary housing, HOA dues, and taxes/insurance not included with a mortgage payment.
• Critical: Schedule E treatment of rental income

Let’s talk Schedule E because this is where I see investors shoot themselves in the foot constantly.

If you are going to show a loss on Schedule E for tax purposes, that loss could work against you. I get it, we want to minimize taxes paid. But you need to balance tax benefits with lending qualifications. But more importantly, you need to understand how to maximize both while maintaining or even optimizing future qualifications. Ridge Lending Group can show you how. This is a one-on-one strategy conversation with Ridge Lending. Schedule time now with your 2025 draft tax returns to see how we can help you maximize your leverage.

DSCR loans: DTI is not a factor. This is the escape hatch when your Schedule E kills your conventional qualification.

Lenders want proof you can weather storms. Required reserves typically range from 6-12 months PITI per financed property (DSCR) or an aggregate of unpaid principal balances of the rentals times a percentage of 2, 4, or 6%.

What counts as reserves:

• Checking accounts
• Savings accounts
• Investment accounts
• Retirement accounts

What doesn’t count:

• Equity in properties *unless liquidated. Some products will also allow the use of HELOC funds as reserves.
• Future income
• Borrowed/gift funds

Don’t panic. You have options. This is actually where Ridge’s expertise really shines.

As we discussed earlier, DSCR loans are ideal when personal income is complex or when Schedule E losses negatively impact your debt-to-income ratio. These programs qualify the loan based solely on the property’s cash flow, not your personal income. I’ve worked with doctors, attorneys, and business owners who show minimal taxable income on paper but have significant assets and net worth. DSCR loans are often the perfect fit in those situations.

In addition to DSCR financing, we also have access to other investor-friendly options such as bank statement loans and asset depletion programs. Bank statement loans use a 12–24 month average of business or personal deposits to determine qualifying income, while asset depletion programs allow eligible assets to be converted into a calculated monthly income over a defined period (typically 36–120 months). These options provide flexibility when traditional income documentation doesn’t fully reflect the picture.

Sometimes you just need a few months to position yourself better. Ridge Lending Group has never been transactional. We take a holistic approach to lending because no two borrowers—and no two financial situations—are the same. There is no one-size-fits-all solution, and we don’t pretend there is. Our role is to understand the full picture: your goals, timeline, cash flow, and long-term strategy.

And, if the right loan solution doesn’t exist today, we don’t walk away. We help you understand why, and more importantly, what the path forward looks like. That may include credit improvement strategies, debt-to-income counseling, restructuring assets, or timing recommendations. Our job is not just to close loans, it’s to help you build a plan that actually works.

Credit score too low?

• Pay down credit cards below 30% utilization
• Become an authorized user on someone’s established card
• Dispute inaccuracies
• Wait for negative items to age off

DTI too high?

• Pay off small debts
• Increase income (easier said than done, I know)
• Adjust Schedule E strategy with RLG and your CPA
• Wait for automatic debt payoff (student loans, car notes)

Insufficient reserves?

• Build up bank accounts over 2-3 months
• Gift funds from family members (with proper documentation)
• Liquidate investments strategically

• Partner with someone who can qualify
• Use hard money for purchase, then refinance to permanent financing when qualified
• Buy in an entity with multiple members
• Portfolio loans (we have access to these)

The key is: don’t give up. There’s almost always a path forward. It might take 3-6 months of positioning, but we can map out a strategy together.

The old rule of thumb was “1% drop,” but that’s overly simplistic. Let me give you the framework I use.

On a $300,000 loan:

• Current: 7.5% = $2,098/month
• New: 6.5% = $1,896/month
• Monthly savings: $202
• Typical closing costs: $7,500
• Breakeven: $7,500 ÷ $202 = 37 months (just over 3 years)

Other factors that might make refinancing worthwhile even with smaller rate drops:

• Switching from ARM to fixed
• Maturity of the loan is coming due
• Buying out a partner or family member
• Paying off debt to reposition yourself
• Removing PMI
• Cash-out refinance to fund next purchase

Current market reality: As of today, conventional investment property rates are around 6.5-7.25%. If you’re sitting on a rate above 7.5% from last year, you should be running the numbers now.

Alright, you’ve made it this far. You’re ready to move forward. Here’s exactly what you need to do.

For Conventional Loans:

• Last 2 years tax returns (with all schedules)
• Last 2 months bank statements (all accounts)
• Last 2 pay stubs (if W-2 employed)
• 2 years W-2s (if applicable)
• Year-to-date profit and loss (if self-employed)
• Current mortgage statements (all properties)
• Current lease agreements (all rental properties)

For DSCR Loans:

• Bank statements showing reserves
• Current mortgage statements
• Lease agreements or market rent analysis
• Property insurance declarations

When you talk to us, as an investor-focused lender, be prepared to discuss:

• How many properties do you want to own?
• What’s your timeline?
• What’s your investment strategy (cash flow vs. appreciation, both)?
• What markets are you targeting?
• What’s your risk tolerance?

This isn’t just about getting you approved for one loan. This is about developing a long-term financing strategy as your portfolio grows.

We’ll analyze:

• Which loan products make sense for you now
• How to position yourself for future purchases
• Whether we need to adjust your tax strategy
• What your buying power actually is
• Where the potential pitfalls are

Maybe you can get approved for a Golden Ticket today. Great! But what happens when you want property #5? We need to plan for that now. Maybe we can structure things differently to preserve your conventional allocations for your best deals.

Or perhaps you can’t yet qualify under conventional criteria. That’s okay. We’ll map out what needs to happen over the next 3-6 months to get you there, or we can pivot to DSCR loans.

Look, here’s what sets us apart, and I’m going to be direct about this. We’ve earned a good reputation. We’re the preferred lender for many turnkey companies around the country. That’s not bragging, it’s evidence that we’re very good in our space.

But more importantly, and many of you know this, I’m a fellow real estate investor. I’ve held 42 properties at one time across the United States. I know what it’s like to get the 2 am call about a broken water heater. I understand the stress of vacancy. I’ve navigated refinances, 1031 exchanges, and portfolio growth.

I hope that unique perspective adds credibility to who we are and what we do. The point is, I can see both sides of the coin. And that, through my successes and failures (I have ample of both), I hope to share a bit of both so you can make the most informed decisions possible about your investment goals.

Our primary focus is education. We’re not here to push you into a loan. We’re here to help you understand your options, position yourself for long-term success, and build real wealth through real estate.

Because at the end of the day, it’s not just about getting you approved for one loan. It’s about being your partner as you grow from one property to ten, from ten to twenty-five, and beyond.

If you’re ready to have a real conversation about your real estate investing goals, reach out to us. We look forward to earning your business.

Ridge Lending Group

• Website: www.ridgelendinggroup.com
• Phone: 855-747-4343 (855-74-RIDGE)
• Email: info@ridgelendinggroup.com

We’re licensed in 49 states and ready to help you navigate this complex world of investment property financing. Because the financing shouldn’t be the thing that holds you back, it should be the thing that propels you forward.

Let’s map out your strategy together

Disclaimer: The rates, terms, and programs described in this article are subject to change and may vary based on individual circumstances, property type, credit profile, and market conditions. The examples provided are for illustrative purposes only. All financing is subject to credit approval. Geneva Financial LLC, DBA Ridge Lending Group, is an Equal Housing Lender. NMLS #1843.