How Much Money Do You Need to Buy a Rental Property?
Last reviewed September 2026
The short answer: budget roughly 30–35% of the purchase price in total cash. On a $250,000 rental that is about $75,000–$85,000 — a $50,000 down payment plus $6,000–$10,000 of closing costs, $8,000–$12,000 of lender-required reserves, and whatever the property needs before a tenant moves in. The down payment is barely two thirds of it.
Almost everyone plans for the down payment and is caught out by the other three buckets. They are not optional extras — reserves are a condition of the loan, closing costs are due at the table, and a property with no make-ready budget does not produce rent on schedule.
The four buckets
| Bucket | Typical | Notes |
|---|---|---|
| Down payment | 20–25% of price | Investment property, not primary residence. There is no 3% option here, and no PMI route around it. |
| Closing costs | 2–5% of the loan | Origination, appraisal, title, lender fees, and prepaid taxes and insurance. |
| Cash reserves | 2–6 months of PITIA | Required by the lender and held after closing. Larger loans and weaker coverage ratios need more. |
| Day-one repairs | Highly variable | What the property needs before a tenant moves in. The bucket most often set to zero and most often wrong. |
Only the first is a choice. Closing costs and reserves are set by the lender, and repairs are set by the property.
A worked example
A $250,000 single-family rental, 20% down, financed conventionally. PITIA works out to about $1,750 a month.
- Down payment, 20%: $50,000
- Closing costs, ~3.5% of the $200,000 loan: $7,000
- Reserves, 4 months of PITIA: $7,000
- Make-ready and day-one repairs: $4,000
- One month of carrying cost before first rent: $1,750
Total: $69,750 — about 28% of the purchase price, against the $50,000 most people have in mind. Move to a DSCR loan at 25% down with 1–2% origination and six months of reserves and the same property needs closer to $90,000.
Run your own numbers on the cash-to-close calculator, which totals all of these including the reserve months.
Where budgets go wrong
Counting the same dollars twice
Budgeting your savings as both the down payment and the reserves. Reserves must survive closing — the lender verifies the balance after the wire goes out.
Assuming every account counts
Retirement funds are commonly discounted to 60–70% of balance or excluded entirely, and recent large deposits must be sourced and seasoned.
Forgetting the vacancy before the first rent
There is usually a gap between closing and the first rent cheque. A month or two of full PITIA with no income is normal, and it is not part of the lender's reserve requirement.
Budgeting nothing for turn work
Paint, locks, cleaning, an appliance, a make-ready. Even a well-kept property rarely costs zero to get rent-ready.
Ignoring the first insurance and tax prepay
Landlord policies are often paid a year in advance at closing, and tax escrows can be several months deep depending on the calendar.
The first is the one that actually kills deals. Reserves are verified after closing, so a buyer who has budgeted their entire savings as the down payment discovers late in underwriting that they no longer qualify — usually with the contract already signed.
Buying with less
House hacking is the one genuinely large reduction. Live in one unit of a two-to-four unit property and owner-occupied financing applies, which can take the down payment into low single digits. The trade is that you have to live there, usually for at least a year.
A lower price point is the most reliable lever, and the most overlooked. Every bucket scales with price, so a $150,000 property needs roughly 40% less cash than a $250,000 one — not just a smaller down payment.
Seller concessions can cover part of the closing costs where the market allows. Partnerships split the requirement but also the returns and the decisions. And a DSCR loan changes who qualifies, not how much cash is needed — usually it needs slightly more.
What does not work is treating the reserve requirement as negotiable. It is a condition of the loan, and the buyers who most want to skip it are the ones a vacancy would hurt most.
Frequently asked questions
How much money do you need to buy your first rental property?
On a $250,000 property with 20% down, plan on roughly $75,000–$85,000: $50,000 down payment, $6,000–$10,000 in closing costs, $8,000–$12,000 in reserves, and something for day-one repairs. The down payment is the number people quote; the other three buckets are what surprises them, and together they routinely add 50% to the requirement.
Can you buy a rental property with 10% down?
Rarely for a straightforward investment purchase — conventional and DSCR lenders generally want 20–25%. The main exception is house hacking: if you live in one unit of a two-to-four unit property, owner-occupied financing applies and the down payment can be far lower. That is a different loan product with an occupancy requirement, not a cheaper version of an investor loan.
Do you need 20% down for an investment property?
In most cases yes, and 25% is common where the coverage ratio is thin or credit is weaker. Unlike a primary residence, there is no mortgage-insurance route to a smaller down payment on an investment property — lenders price the higher default risk into the equity requirement instead. Some DSCR programs advertise 15% for very strong borrowers, but they are the exception rather than the plan.
What are cash reserves and why does the lender require them?
Reserves are liquid funds you must still hold after closing, measured in months of PITIA — principal, interest, taxes, insurance and HOA. Two months is a common baseline, rising to six or more on larger loans or weaker coverage ratios. They exist so a vacancy or a major repair does not immediately become a missed mortgage payment.
How much should I budget for repairs before the first tenant?
It depends entirely on condition, but budgeting zero is the mistake worth avoiding. Even a property in good shape usually needs cleaning, paint, locks changed and small fixes. A property that needs a system replaced is a different question — that belongs in your offer price, not your closing budget. Our inspection checklist is designed to surface those before you commit.
Is it cheaper to buy a rental with cash?
Cheaper in total interest, yes — but it ties up far more capital for a lower percentage return, because you lose the leverage that lifts cash-on-cash returns. Paying cash also removes coverage-ratio and reserve requirements entirely. Which is better depends on your capital, your risk tolerance and what else that money could do, so it is worth modelling both rather than assuming.
How much cash should I have left after closing?
More than the lender's minimum. The reserve requirement is what makes the loan fundable, not what makes the property survivable — it does not account for a long vacancy, a bad tenant, or an unplanned system replacement in the first year. Many investors target six months of PITIA plus a repair contingency regardless of what the lender asks for.
Related reading
How to analyze a rental property covers whether the deal works once you can afford it, rental property expenses covers the ongoing costs, and the inspection checklist helps you find the repair bill before you commit to it.
Total your actual cash requirement
Down payment, closing costs, points, repairs and reserve months — added up in one place, free.
Open the Cash to Close Calculator →Ranges reflect typical US investment-property purchases as of September 2026 and vary by lender, state and property. General information, not lending or investment advice — see our financial disclaimer.