Investing in real estate can be one of the most effective ways to build wealth, generate passive income, and secure long-term financial freedom. But for many aspiring investors, the process of financing investment real estate can feel overwhelming—especially in a fast-moving and competitive market like North Texas.
Whether you’re looking to buy your first rental property or expand an existing portfolio, understanding the financing process is critical. From selecting the right loan to calculating cash flow, every financial decision you make can impact the success of your investment.
At Lonestar Partners, we help everyday investors navigate the North Texas market, identify lucrative properties, and secure financing options tailored to their unique goals. Below, we’ll explore eight key things you need to know about financing investment real estate—and how our team at Lonestar Partners can help you every step of the way.
1. Understand Your Financing Options
The first step in financing an investment property is understanding the range of loan products available. Here are the most common options:
- Traditional Mortgages – These are conventional loans offered by banks and mortgage lenders. They generally offer lower interest rates and longer repayment terms but come with stricter qualification standards.
- Hard Money Loans – These short-term loans are funded by private investors and based more on the property value than the borrower’s credit. They’re popular for fix-and-flip projects and provide fast access to capital.
- Private Money Loans – Often sourced from individuals rather than institutions, these loans offer flexible terms and can be based on personal relationships or a track record of success.
- Portfolio Loans – Offered by small banks or credit unions, these loans are not sold on the secondary market, allowing lenders more flexibility in approving unconventional borrowers.
Understanding which type of financing fits your strategy is essential. At Lonestar Partners, we work closely with investors to evaluate loan products based on their goals, timelines, and risk tolerance.
2. Consider Your Investment Strategy
Your financing should align with your investment strategy. Are you flipping properties for short-term gains? Holding rentals for long-term cash flow? Building equity through appreciation?
For instance:
- Flippers may prefer hard money loans with quick approval and short repayment periods.
- Buy-and-hold investors might opt for 30-year fixed-rate mortgages with steady monthly payments.
- BRRRR investors (Buy, Rehab, Rent, Refinance, Repeat) often start with hard money, then refinance into traditional loans after stabilizing the property.
The team at Lonestar Partners will help you define your investment strategy and identify the financing structure that supports it—maximizing your returns while managing risk.
3. Know Your Credit Score—and Improve It
Credit score plays a major role in qualifying for investment property loans, especially with traditional financing. Generally, a score of 700+ is ideal, but some lenders will work with scores in the mid-600s if you have strong financials or a solid down payment.
To improve your credit score:
- Pay down outstanding debts
- Avoid opening new credit accounts before applying
- Check your credit report for errors and dispute inaccuracies
If you’re not quite where you need to be, don’t worry. Lonestar Partners has relationships with lenders who understand real estate investors and can often recommend alternative financing solutions if your credit is less than perfect.
4. Determine Your Down Payment Requirements
Unlike owner-occupied homes, investment properties typically require larger down payments. Most lenders expect:
- 20% to 25% down for traditional investment loans
- 10% to 15% down for some portfolio or private money loans (with trade-offs in interest rates)
Be prepared to bring more capital to the table and factor in additional costs like closing fees, inspections, and initial repairs. We advise all our investors to budget conservatively.
One of the benefits of working with Lonestar Partners is our ability to source below-market deals that create equity right from the start—helping offset some of your upfront investment.
5. Get Pre-Approved for Better Leverage
Getting pre-approved for financing is not just smart—it’s strategic. Pre-approval gives you:
- A clear understanding of your budget
- Greater negotiating power with sellers
- The ability to act quickly in a competitive market
Pre-approval also shows agents and sellers that you’re a serious buyer with funding lined up. It can often be the deciding factor in a multi-offer situation.
At Lonestar Partners, we can connect you with investor-friendly lenders and help you prepare your financial documentation for a smooth approval process.
6. Calculate Your Cash Flow and ROI
One of the biggest mistakes new investors make is underestimating expenses. Before purchasing any property, you need to calculate your cash flow—the money left over after paying for:
- Principal and interest
- Taxes and insurance
- Property management (if applicable)
- Maintenance and repairs
- Vacancy allowance
A good rule of thumb is the 1% rule—aim for monthly rent to be at least 1% of the purchase price. You’ll also want to calculate your return on investment (ROI) based on both income and potential appreciation.
We help our clients run detailed financial projections so they fully understand the numbers before they commit.
7. Plan for the Unexpected with a Contingency Fund
Even the best investment property can throw you a curveball—HVAC failure, plumbing issues, sudden vacancies. That’s why every smart investor needs a contingency fund.
We recommend setting aside at least 3 to 6 months of expenses in reserve. This can make the difference between a temporary setback and a financial emergency.
At Lonestar Partners, we help you build your budget with worst-case scenarios in mind—so you’re never caught off guard.
8. Partner with Professionals Who Know the North Texas Market
Financing investment real estate is only one piece of the puzzle. To succeed, you need a local team who understands:
- Which neighborhoods are appreciating fastest
- What properties are undervalued
- Which renovations add the most value
- How to spot hidden red flags during due diligence
That’s where we come in.
At Lonestar Partners, we specialize in sourcing off-market deals, distressed properties, and high-upside rentals throughout North Texas. We don’t just hand you a property—we help you create a strategy, structure your financing, and support your success long after closing.
Whether you’re just starting out or scaling your portfolio, our team is here to guide you every step of the way.
Final Thoughts
Financing investment real estate in North Texas doesn’t have to be intimidating. By understanding your financing options, aligning your loan to your strategy, and working with the right partners, you can unlock opportunities that build long-term wealth and financial freedom.
Ready to get started?
Lonestar Partners is here to help you:
- Find undervalued properties
- Analyze your deals
- Connect with investor-friendly lenders
- Structure your financing for maximum ROI
Give us a call today to learn how we can help you achieve your investment goals in the dynamic North Texas market.
📞 469-689-4663
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