The quick read: On a commercial investment property, your down payment is the purchase price minus the smaller of two loans: the loan the lender's loan-to-value (LTV) cap allows, and the loan your net operating income (NOI) can carry at the lender's minimum debt service coverage ratio (DSCR). Freddie Mac's April 2026 fixed-rate multifamily term sheet caps LTV at 80% for terms of seven years or more and 75% for five- to under-seven-year terms, at a 1.25x minimum amortizing DCR, so 20% to 25% down is the floor on agency-style debt. Thin NOI pushes it higher. In the illustrative $2.5 million example below, coverage, not LTV, sets the loan at about $1.846 million and the cash down at about $654,000, before closing costs. SBA 504 is off the table for a rental investment.
This page is the investor's version of the question. If you are buying a building your own business will occupy, the owner-occupied math, including SBA 504 and 7(a), is in how much down payment to buy a building for your business, and the line between the two is drawn in owner-occupied vs. investment property commercial loans.
How much do you need to put down on an investment property?
On an investment property you put down the purchase price minus the smaller of two loan amounts: the loan the lender's maximum loan-to-value allows, and the loan your net operating income can carry at the lender's minimum debt service coverage ratio. Agency caps of 75% to 80% mean 20% to 25% down before coverage.
The two tests run side by side, and the lower loan wins:
LTV test: maximum loan = value x the lender's maximum LTV
DSCR test: maximum loan = NOI / (minimum DSCR x the annual payment per dollar of loan)
Down payment: purchase price minus the lower of the two loans
Cash to close: down payment plus closing costs and any required reserves
The LTV benchmark comes from the agencies. Freddie Mac's Optigo fixed-rate term sheet, dated April 2026, sets these limits for amortizing and partial interest-only loans:
Term of 5 years to under 7 years (Freddie Mac, 4/26): 75% maximum LTV, 1.25x minimum amortizing DCR
Term of 7 years (Freddie Mac, 4/26): 80% maximum LTV, 1.25x minimum amortizing DCR
Term over 7 years (Freddie Mac, 4/26): 80% maximum LTV, 1.25x minimum amortizing DCR
Full-term interest-only (Freddie Mac, 4/26): 65% maximum LTV for terms up to 7 years, 70% over 7 years
That sheet carries a minimum $10 million loan amount, so on a smaller purchase treat its ratios as the benchmark for how agency-style lenders size a stabilized apartment loan. Banks and bridge lenders set their own leverage by policy, and a bank's policy sits below the supervisory ceiling covered further down.
Why can DSCR raise the down payment?
DSCR can raise the down payment because the lender sizes the loan so that NOI covers the annual mortgage payment by its minimum ratio, and when NOI is thin relative to price, the coverage test caps the loan below the LTV limit, leaving the buyer to fund the difference in cash.
This worked example is illustrative: the rate and NOI are assumptions, not a quote or a dated rate. It applies the 1.25x minimum amortizing DCR and 80% LTV from the Freddie Mac term sheet to a smaller purchase.
Purchase price: $2,500,000
Net operating income: $175,000 a year
Rate and amortization: 6.50%, 30-year amortizing
Annual payment per dollar of loan: about $0.0758
Loan at 80% LTV: $2,000,000
Annual debt service at 80% LTV: about $151,700
DSCR at 80% LTV: about 1.15x, which fails a 1.25x minimum
Largest loan at 1.25x: about $1,845,800, or 73.8% of the price
Cash down: about $654,200
Closing costs: a separate line on top of the down payment
The arithmetic is short. At 1.25x, NOI of $175,000 supports at most $140,000 a year of debt service. Divide $140,000 by the $0.0758 annual payment per dollar and the loan stops at about $1.846 million. The 80% LTV loan would need about $189,600 of NOI to clear 1.25x, so the buyer either brings about $154,200 more equity than the LTV cap implies or improves one of the inputs.
Four inputs move the coverage loan. Higher in-place NOI raises it directly. A lower rate or a longer amortization lowers the annual payment per dollar and raises it. Interest-only does not rescue coverage on agency debt: per the Freddie Mac sheet, the DCR for interest-only periods is calculated on an amortizing payment, and full-term interest-only cuts maximum LTV to 65% or 70%. Run your own numbers in the loan sizing calculator, which applies both tests.
How much down does each lender type require on a $2.5 million purchase?
Each lender type sizes a $2.5 million investment purchase with the same two tests, but each sets its own LTV cap and coverage minimum, so the cash down depends on which test binds; at the illustrative $175,000 of NOI, coverage binds on agency-style debt and the down payment lands near $654,000.
Table: Down payment on an illustrative $2.5 million investment purchase, by lender type (NOI $175,000; 6.50%, 30-year amortization; caps per Freddie Mac 4/26, 12 CFR part 34 and SBA)
| Lender type | Max LTV | Down at the LTV cap | Down after a 1.25x DSCR test | Binding test |
|---|---|---|---|---|
| Lender type Brokerage route (YieldStack) | Max LTV Each matched lender's own cap | Down at the LTV cap Compared across 5–8 matches | Down after a 1.25x DSCR test Compared across 5–8 matches | Binding test Whichever binds in each offer |
| Lender type Agency-style, 7-year term or longer | Max LTV 80% | Down at the LTV cap $500,000 | Down after a 1.25x DSCR test About $654,200 | Binding test DSCR |
| Lender type Agency-style, 5- to under-7-year term | Max LTV 75% | Down at the LTV cap $625,000 | Down after a 1.25x DSCR test About $654,200 | Binding test DSCR |
| Lender type Bank | Max LTV Set by bank policy, below the 85% supervisory ceiling | Down at the LTV cap Depends on the bank's policy | Down after a 1.25x DSCR test About $654,200 if the bank requires 1.25x at 6.50% | Binding test The lower of the two loans |
| Lender type Bridge or debt fund | Max LTV Set by lender policy | Down at the LTV cap Depends on the lender's terms | Down after a 1.25x DSCR test Depends on the lender's coverage terms | Binding test Lender's own sizing |
| Lender type SBA 504 | Max LTV Not available for rental investment | Down at the LTV cap Not applicable | Down after a 1.25x DSCR test Not applicable | Binding test Eligibility |
The bank row is the one borrowers misread. The supervisory LTV limit for improved property in the federal real estate lending guidelines, 12 CFR part 34, appendix A to subpart D, is 85%. That is a ceiling on bank policy, not a typical bank offer, and each bank writes its own investor leverage and coverage limits below it.
The brokerage row comes first because it is the only row that shows you every other row at once. A down payment set by one lender's policy is a single data point; the same file in front of several lenders shows which one sizes it highest at a coverage ratio your NOI can meet.
Does the purchase price or the appraisal set the down payment?
On a purchase the lender applies its LTV cap to the lower of the contract price and the appraised value, so an appraisal that comes in under the price shrinks the LTV loan and the buyer covers the gap in cash, while an appraisal above the price changes nothing.
For banks the rule is written down. The federal real estate lending guidelines define value, for a loan to purchase an existing property, as "the lesser of the actual acquisition cost or the estimate of value." A low appraisal matters only when LTV is the binding test.
Illustrative, using the same $2.5 million purchase and $175,000 of NOI:
Appraisal at $2,500,000: LTV loan $2,000,000 at 80%, coverage loan about $1,845,800, down about $654,200
Appraisal at $2,200,000: LTV loan $1,760,000 at 80%, coverage loan about $1,845,800, down $740,000
In the second case the appraisal, not coverage, binds, and the buyer adds about $85,800. The fix is a price renegotiation using the appraisal, which is why the appraisal contingency in the purchase contract matters as much as the loan terms.
Can investors use SBA 504?
Investors cannot use SBA 504 to buy a rental property, because the SBA bars 504 loans from speculation or investment in rental real estate and requires the borrower's business to occupy at least 51 percent of an existing building, so the low-down-payment owner-user route stays closed to a pure investor.
The SBA's 504 page lists "Speculation or investment in rental real estate" among the uses a 504 loan cannot fund. The occupancy rule in 13 CFR 120.131 lets the borrower lease out up to 49 percent of an existing building only "if the Borrower permanently occupies and uses no less than 51 percent" of it.
A mixed case, where your operating company occupies most of the building and leases the rest, is an owner-occupied deal, and its down payment math is in the business building guide. A pure rental investor is sizing against conventional investor terms: agency, bank, life company, DSCR or bridge.
How do you get lenders competing to lower your down payment?
You get lenders competing to lower your down payment by putting one complete file, with rent roll, trailing operating statements and purchase contract, in front of several lenders at once, because each lender's LTV cap, coverage minimum, rate and amortization produce a different loan on the same NOI.
There are two ways to run that comparison, and the brokerage route comes first because it does the comparing for you.
- Brokerage route. YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors. Its software matches the deal against 20,000+ loan programs and typically returns 5–8 matches, so the LTV and coverage tests run under several lenders' terms at once. Its brokers then structure the request, negotiate leverage, amortization and reserves on your side, and carry the deal toward closing. It is a 5-minute submit, with a median first offer in under an hour, from an institutional lender. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
- Direct route. Apply to one bank or lender yourself. You get that lender's leverage and coverage terms, and you repeat the file for every comparison you want.
Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
Submit your investment purchase for lender offers
Budget the cash to close separately from the down payment: lender, legal, title, appraisal and third-party report costs sit on top, and the commercial closing costs guide breaks them out.
The bottom line
The down payment on a commercial investment property is the price minus the smaller of the LTV loan and the coverage loan. Freddie Mac's fixed-rate term sheet caps LTV at 75% to 80% at a 1.25x minimum DCR, so plan on at least 20% to 25% down, and more when NOI is thin, the appraisal comes in low or the rate rises. Banks set their own limits below the 85% supervisory ceiling, and SBA 504 is closed to rental investors. Size the deal under both tests before you sign the contract, then make several lenders compete on the same file.