November 13, 2026

How to Fund Your First Rental Property: 3 Options for New Investors

Key Takeaways

You don't need to pay cash for your first rental. Three common routes: an owner-occupied mortgage, an asset-based loan (DSCR or hard money), or other people's money.
FHA loans need as little as 3.5% down, but you have to live in the home. Buying a duplex, triplex, or fourplex and living in one unit (house hacking) lets rent from the other units help pay the mortgage.
Conventional loans on an investment property usually need about 15% to 25% down.
DSCR loans qualify you on the property's rent instead of your personal income; hard money is short-term and expensive but fast.
Private loans from people you know should always be in writing. If the money comes from someone's IRA, the IRS's prohibited-transaction rules apply.

Getting started in real estate is often less about finding the house than finding the money. You might be able to buy a $150,000 to $200,000 rental with cash, but do you want to tie up that much capital in one property? Our CEO, Brian Mullins, walked through three funding routes for a first deal in a recent video. Here they are, with a few lender details added.

Loan programs change and every lender is different, so treat this as a starting point for a conversation with a lender, not a quote.

1. Owner-Occupied Mortgages (FHA and Conventional)

Most people buy their own home with an FHA or conventional loan, and both can start you in rentals.

FHA: as little as 3.5% down, but the home must be your primary residence. Lenders generally expect you to live there at least a year. After that, you can move to your next home and keep the first one as a rental.
Conventional, owner-occupied: some programs allow as little as 3% to 5% down.
Conventional, investment property: expect to put down roughly 15% to 25%, depending on the number of units and the lender.

House hacking combines the two: buy a duplex, triplex, or fourplex with an owner-occupied loan, live in one unit, and rent the others. You need a place to live anyway, and the rent from the other units helps cover the mortgage. FHA allows up to four units under the same low-down-payment terms.

One tip from Brian: if you house hack, treat it like a business from day one. Sharing a wall with your resident is a lot easier when a property manager handles the leasing and is their point of contact, so you're a neighbor, not the person they call about a leaky faucet.

These loans are a great way to start. They're usually not how you'll finance your fifth or tenth property, but they get you the first one.

2. Asset-Based Loans: DSCR and Hard Money

Some lenders care more about the property than about you.

DSCR loans (debt service coverage ratio) qualify you based on the property's rent, not your paycheck. That helps if you're self-employed or investing full time. The lender compares the rent to the full monthly payment, including principal, interest, taxes, and insurance; many want rent of at least 1.1 to 1.25 times that payment. Rates usually run higher than conventional loans.
Hard money loans come from private lenders, often local, who lend on the deal itself. They're fast and flexible but carry high rates and fees and short terms, so they're mostly used to buy and fix a property, then refinance into long-term financing.

In Brian's experience, lenders are more comfortable, and sometimes offer better terms, when a property will be professionally managed, since that protects the asset securing their loan.

3. Other People's Money

Borrowing from someone you know (a relative, a friend, a business contact) skips much of a bank's paperwork. It can be as informal as a family loan or as formal as a promissory note secured by a recorded mortgage on the property. Either way, put the terms in writing: amount, interest, payment schedule, and what happens if you sell. It protects the relationship as much as the money.

Some lenders use a self-directed IRA, which can hold mortgage notes as well as stocks. The IRS's prohibited-transaction rules apply: an IRA generally can't lend to its owner or to "disqualified persons," which include the owner's spouse, parents, grandparents, children, and grandchildren. So a grandparent's IRA generally can't lend to a grandchild, though a grandparent could lend personal savings. Have the IRA custodian and a tax professional review the arrangement first.

Private money also helps you build a track record of cash flow, which makes it easier to qualify for other financing later.

Funding Is Step One

Once the money is lined up, you still have to buy the right property, and a deal bought wrong takes years to fix. We work with partner agents to help investors find properties, check the numbers before an offer, and set the rental up to perform from day one. Our guides on buying investment property in Oklahoma City and the 2% rule walk through the math.

Ready to buy your first rental in the Oklahoma City metro? Book a free consultation and we'll help you plan it.

Frequently Asked Questions

Can I use an FHA loan to buy a rental property?

Not directly. FHA loans require you to live in the home. But you can buy a 2- to 4-unit property, live in one unit, and rent the others, or live in a home for at least a year and then keep it as a rental when you move.

How much down payment do I need for an investment property?

For a conventional loan on a property you won't live in, plan on about 15% to 25% down, depending on the number of units and the lender. Owner-occupied loans can require far less.

What is a DSCR loan?

A DSCR (debt service coverage ratio) loan qualifies you based on the property's rental income compared to its monthly payment, rather than your personal income. Many lenders want rent of at least 1.1 to 1.25 times the payment.

Can a family member's IRA lend me money for a rental?

Generally not if they're a disqualified person under IRS rules, which includes spouses, parents, grandparents, children, and grandchildren. Unrelated private lenders can lend from a self-directed IRA. Have a tax professional review any IRA loan.