Financing your first rental property
The options, the cash you need, and the order to do things in.
Biscayne Lending 3 blog.minRead
You have decided to buy something that rents. Here is how the financing actually works, what it costs to get to the closing table, and the order that saves you time.
Your three realistic routes
| Conventional investment loan | DSCR loan | Local bank / portfolio | |
|---|---|---|---|
| Qualifies on | Your income and debt ratios | The property's rent | Relationship and the property |
| Paperwork | Heavy — returns, W-2s, ratios | Light — the lease or market rent | Varies |
| Down payment | Usually 20–25% | Usually 20–25% | Often 25%+ |
| Rate | Lowest of the three | Slightly higher | Varies |
| Suits | Salaried buyers, first property | Self-employed, LLC buyers, repeat investors | Unusual properties |
Typical ranges across the market, not an offer.
For a first rental with clean W-2 income, conventional is usually cheapest. If you are self-employed, write off heavily, or want to buy in an LLC, a DSCR loan will often be simpler and faster even at a slightly higher rate.
The cash, in full
On a $300,000 rental at 25% down, plan for roughly:
| Item | Typical | On $300,000 |
|---|---|---|
| Down payment | 20–25% | $75,000 |
| Closing costs | 2–4% | $6,000–$12,000 |
| Reserves after closing | 3–6 months of payments | $7,500–$15,000 |
| Make-ready and first vacancy | varies | $3,000–$8,000 |
Two things people forget: reserves are on top, not part of the down payment — the lender wants to see them still there after you close. And the property will not rent the day you own it.
Does the deal actually work?
Before the financing question, answer the property question. Rent, minus taxes, insurance, management, maintenance, an allowance for vacancy — and then the loan payment. If that is negative, no loan structure fixes it; you are choosing how fast to lose money.
The order that saves you time
- Work out your cash ceiling. Down payment plus closing plus reserves. That sets your price range, not the other way round.
- Get pre-qualified. Knowing your route before you offer makes your offer credible.
- Find the property, and run the real numbers — actual taxes, a real insurance quote, honest rent comparables.
- Get it under contract with enough days for the loan you are using.
- Send everything at once. A complete file is the difference between three weeks and six.
What to have ready
- Two months of bank statements showing the down payment and reserves
- A rough credit score
- The address, price, and expected rent
- Whether you are buying personally or in an LLC — decide before you write the offer, because changing it later restarts the loan
Start with the numbers
Run the rental calculator on the property you are considering. If it works, tell us about it and a broker will come back with the routes that fit and what each would cost.
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