Rental Property Financing for Investors

Buying your fifth rental is a different conversation than buying your first. Once you’re scaling a portfolio, the deal lives or dies on how a lender reads your rental income, your debt coverage, and how many doors you already carry. That’s where a broker with alternative and commercial lender access earns their keep.

Residential (1–4 units) vs. small commercial (5+)

The unit count is the line that changes everything. A building with one to four units is financed as residential real estate — familiar rates, straightforward amortization, and default-insured options on some owner-occupied setups. The moment you hit five units, the deal is underwritten as commercial: bigger down payment, the building’s own numbers matter more than your personal income, and you’ll usually see debt-service-coverage ratio (DSCR) requirements, appraisal costs, and environmental checks you don’t get with a duplex.

How lenders read rental income across your portfolio

No two lenders count rental income the same way, and that difference is often what makes or breaks your next purchase. Some use an add-back, adding a percentage of the rent (commonly 50–80%) to your income. Others use an offset, subtracting the property’s costs from the rent and applying the surplus or shortfall to your debt ratios. On commercial deals it shifts to DSCR — the building’s net operating income divided by its debt payments, where most lenders want 1.10 to 1.20 or better.

To confirm income on properties you already own, expect to provide complete T1 Generals with a Statement of Rental Income, plus current valid leases. A signed lease on the property you’re buying is often required too. Keep those documents clean and current — the faster you can prove the doors are performing, the more lenders will compete for the file.

Why banks tighten up as you add doors

Big banks love your first rental and get nervous around your fourth or fifth. Many cap the number of properties or total mortgage exposure they’ll carry for one borrower, and their rental-income formulas get stingier the more debt you’re carrying. Hit that ceiling and you don’t stop buying — you change lenders. Alternative and monoline lenders, credit unions, and commercial lenders each have their own appetite, and a portfolio that one bank declines is a routine approval somewhere else.

Portfolio and blanket mortgage options

Once you own several properties, structure matters as much as rate. A blanket mortgage puts multiple properties under one loan, which can simplify management and let you pull equity across the group. Some investors instead line up a portfolio facility with one lender who understands their whole holding and can grow with them. Both approaches have trade-offs around cross-collateralization and flexibility when you want to sell a single property, so they’re worth modelling before you commit.

Frequently asked questions

This article is general information, not financial, mortgage or legal advice. Rates, programs and rules change and depend on approval. Please speak with a licensed mortgage professional about your situation. Mortgages for Less with INDI Mortgage.