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How Much Do I Need for a Down Payment on an Investment Property in Utah?

Today, an increasing number of people are interested in real estate investing in Salt Lake City, Utah as a long-term means of generating extra income and growing net worth. However, it's essential to know what you're required to give as a down payment for an investment property before investing in real estate.

The biggest obstacle to purchasing for the majority of Utah real estate investors is finding the next down payment for a rental property. The adage "It takes money to make money" has never been more true than in the world of real estate investing!

This article will cover all you need to know about a down payment for a Utah investment property as well as alternative ways that many buyers overlook for raising money for a down payment.

How much is the down payment on an investment property?

Traditionally, a rental property will need a down payment of 15 and 25% of the total purchase price. However, the sum will vary depending on the kind of financing chosen for the investment.

Many real estate investors in Salt Lake City and elsewhere in the US believe they need to put down 20% when using traditional financing; however, this requirement is for homebuyers who want to dodge private mortgage insurance. The expected down payment will depend on a number of financial factors if investors decide to use traditional lenders to finance their rental property.

Conversely, investors that deal with a private money lender or alternative form of financing would have more flexible loan terms. The loan terms will be determined by these lenders with the borrower (and rental property) in mind, possibly allowing for lower down payment requirements. Real estate investors in Utah should therefore investigate financing options to determine the minimal down payment they will require and start there.

Generally speaking, a minimum of 15 percent down payment is required for investment properties in Salt Lake City, Utah, and other parts of the country. However, a number of variables, including debt-to-income (DTI) ratio, your credit score, loan program, and property type, affect the down payment you're needed to make.

Below are the minimum down payments for an investment property

Loan Type

Minimum down payment

Conventional (single family)


Conventional (multifamily)






What are the Factors that Affect the Down Payment Amount?

The amount of the down payment needed for a rental property in Salt Lake City will vary depending on a number of factors related to the investor's financial situation. The majority of lenders use an investor's credit score and debt-to-income ratio when determining the amount of the down payment required.

For instance, investors with credit scores higher than 700 might be able to put down as little as 15%. On the other hand, investors with credit scores under 640 should be ready to put down about 25% of the purchase price.

One other factor that can impact how much of a down payment is needed when purchasing an investment property in Utah is whether or not the investor intends to live in the property. A smaller down payment might be required from investors who buy a duplex or multifamily building and reside in one of the units.

Furthermore, investors can put as little as 3.5 percent down on a primary residence with up to four units - thanks to financing options like an FHA loan.

In general, the amount of the down payment will depend on the investor's financial history, the requirements of the lender, and the type of investment being made.

Why do some investors make more than the minimum down payment

The degree of risk a borrower and lender are willing to take on plays a significant role in determining the down payment amount for an investment property. In an effort to increase the cash-on-cash return, a borrower can, for instance, put down less money - with a higher loan-to-value (LTV) ratio.

Nevertheless, from the perspective of a lender, the lower the down payment on an investment property, the higher the likelihood that a borrower may return the keys and vacate the home if the investment doesn't turn out as expected.

Even if a lender permits a smaller down payment, a buy-and-hold investor looking for a well-balanced mix of risk and potential gain may put down between 20 percent and 25percent.

Thus, if a single-family rental (SFR) home costs $250,000 to buy, a 25% down payment equals $62,500.

Furthermore, putting a larger down payment on a rental property in Salt Lake City, Utah, and elsewhere in the US could result in a lower interest rate on the mortgage and a smaller amount of lender loan fees, in addition to a lower monthly mortgage payment.

Alternative ways you can raise a down payment for a rental property

Some Utah real estate investors may find it difficult to generate the down payment necessary to finance an investment property, particularly with the continued rise in housing costs in many of the best real estate markets.

The following are some of the alternative ways real estate investors can raise money for an investment property down payment:

Private lender

Like a credit union or bank, some people make real estate investments by providing private loans to other investors. A private lender takes a second-position loan for the right to receive monthly interest and principal payments from borrowers until the down payment loan is repaid. This happens when one investor lends another investor money for a down payment.

A private loan is an option for generating a down payment that an investor would find worthwhile to consider, even though it might have a higher interest rate and a shorter loan period.

Home equity line of credit(HELOC)

HELOC is another option to finance the down payment for investment property in Salt Lake City by utilizing the equity in an existing rental property or a primary residence. 

The typical repayment period for a HELOC is between 10 to 20 years, and the loan fees and interest rates are affordable. However, generally speaking, lenders only permit about 80% to 85% of a home's equity to be borrowed, based on an individual's credit score and income level.

House hacking

House hacking is the practice of renting out a part of a primary home to raise a rental income. The money generated is used to save for a down payment or to speed up the repayment of the current mortgage until there is sufficient equity to be eligible for a cash-out refinance.

A few examples of house hacking include living in one of a 4-unit multifamily property while renting out the others, renting out an extra bedroom, or using a garage as a storage rental.

Group investing

Another approach to raising the down payment for an investment property is through family, friends, and other investors. Creating a limited liability corporation is a common group real estate investing strategy. The LLC owns the investment property, and each investor holds shares in the LLC rather than individual ownership of a rental property.

Individual Directed IRA creation

You can make a down payment for investment property by using the money in your retirement accounts (IRA) or 401(k) and converting them into a self-directed IRA (SD-IRA).

Final thoughts

Even though housing costs are at record highs in many areas, there are still places where it is affordable to purchase a single-family rental property, including Salt Lake City, Utah. The money utilized for a down payment can be put to much better use without incurring the risk of employing excessive borrowing.

Now that you have learned many things about the down payment for an investment property, you can start investing immediately! Starting now will enable you to reap the benefits of your investments sooner.

And for investors looking to profit from their real estate without being as actively involved, Wolfnest can help.

At Wolfnest, our competent property managers want to help you take care of your investment. Reach out to us so that we can begin collaborating right away!

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