CFACommercial Funding Advisory

Real Estate & Property

Business Funding for Real Estate Investors

Real estate investors need capital to acquire, renovate, and hold properties. Traditional bank financing moves too slowly for competitive acquisitions, and conventional mortgages do not work for properties that need significant rehabilitation. The gap between buying a distressed property and refinancing it into a permanent loan is where most investors need financing. Speed of capital is often more important than the cost of capital because missing a deal has a higher price than paying a few points more.

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Common Uses

What Real Estate Investors Use Funding For

  • Acquire distressed residential or commercial properties at auction or off-market
  • Fund renovation and rehabilitation costs to bring properties up to market value
  • Bridge the gap between acquisition and permanent financing or sale (the BRRRR strategy)
  • Cover down payments and closing costs on multiple simultaneous acquisitions

Funding Options

Best Funding Types for Real Estate Investors

Hard Money Loans

Short-term loans (6 to 18 months) secured by the property. Hard money lenders can close in 7 to 14 days and lend based on the property's after-repair value (ARV) rather than your income. Rates are higher (8 to 15 percent), but speed and flexibility make them the standard tool for fix-and-flip investors.

DSCR Loans

Debt service coverage ratio loans qualify you based on the property's rental income rather than your personal income. DSCR loans are the go-to for buy-and-hold investors who want 30-year fixed financing on rental properties without providing tax returns or W-2s.

Portfolio Line of Credit

A revolving facility secured by your existing rental properties that lets you draw funds for new acquisitions. As you refinance or sell properties, the line replenishes. This gives active investors the flexibility to move quickly on deals.

What Lenders Look For

Qualification Notes for Real Estate Investors

Hard money lenders primarily evaluate the deal itself, specifically the purchase price, rehab budget, and ARV, rather than your personal financials
DSCR lenders typically require a minimum 1.2x ratio, meaning the property's rent must exceed the mortgage payment by at least 20 percent
Investors with a track record of completed projects get better terms because experience reduces lender risk

Related Industries

Related Real Estate & Property Funding

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