The rules are different when you don't live there
Investment property financing is priced for risk: larger down payments, higher rates, and stricter reserves. Conventional lending on a 1-unit investment property generally requires at least 15% down; 2–4 unit properties generally require 25%. Expect rates roughly a half to three-quarters of a point above owner-occupied pricing, and plan on six months of reserves in the bank.
House-hacking: the underrated first investment
If you plan to live in one unit of a 2–4 unit property, you can often finance it with owner-occupied terms — FHA's 3.5% down in some cases, conventional 5% down in others — while collecting rent from the other unit(s). Richfield and south Minneapolis have deep duplex inventory, and it's one of the most reliable paths for a younger buyer to build equity and cash flow at the same time. The catch: owner-occupancy requirements are real, and FHA generally expects you to live there for at least a year.
Qualifying with rental income
Underwriters want documentation, not projections. For conventional loans, an existing lease plus payment history (or a market rent analysis from the appraiser for vacant units) is used to count a percentage of the gross rent against your qualification. If you're self-employed or your personal income doesn't carry the loan, a DSCR loan qualifies on the property's income instead — the rent coverage ratio, not your tax returns. DSCR pricing is higher and down payments larger (typically 20–25%), but for the right investor it unlocks deals a conventional loan can't.
What underwriters will scrutinize
- Condition and rentability. The appraisal addresses whether the property is marketable; deferred maintenance on a rental is a real obstacle.
- Your other properties. Expect documentation of existing leases and payments on properties you already own.
- Reserves. Six months of payments on the new property is the standard expectation, more if you have several mortgages.
- The math itself. Brian will build a simple pro forma — rent, vacancy, taxes, insurance, payment — so you're buying on numbers, not enthusiasm.
Where the Twin Cities investor market is
Bloomington's 1–4 unit stock near the 494 and 35W corridors, Richfield's duplexes, and outer-ring cities with growing rents all reward patient underwriting. The strongest investors Brian works with buy boring buildings in good locations and hold them. If your long game includes keeping rental property into retirement, it's worth understanding early how a reverse mortgage can — and cannot — work on non-owner-occupied property, so you structure ownership accordingly.