What does "Investment Property" mean?

A minimum of 20% down payment is typically required for an investment property. This amount helps lenders mitigate risk, as investment properties are considered higher risk compared to primary residences.

It is generally more difficult to get a mortgage for an investment property compared to a primary residence. Lenders often require a higher down payment, usually around 20% to 25%, and a stronger credit score, often above 620. Additionally, they may look for a lower debt-to-income ratio, typically below 36%.

Lenders typically require a gross annual income of at least $100,000 to qualify for a $500,000 mortgage. This assumes a 20% down payment and a debt-to-income ratio of around 36%. Your exact income requirement may vary based on your specific financial situation, including other debts and interest rates.

The 50% rule in rental property states that investors should expect to spend about 50% of the rental income on operating expenses, excluding mortgage payments. This rule helps estimate the property's potential profitability by providing a quick way to assess cash flow. For example, if a property generates $2,000 in monthly rent, approximately $1,000 would be allocated for expenses.