Investment Property Financing Options for Buying Properties in Detroit

The Metro Detroit real estate market continues to attract investors seeking strong returns, especially in neighborhoods undergoing revitalization. From single-family rentals to duplexes and full rehabs, Detroit offers affordable entry points and high demand for rental housing. If you’re interested in purchasing an investment property in Metro Detroit, you need to understand the available funding options.

In this article, we’ll walk you through the most common investment property financing options for an investment property in Metro Detroit, including traditional and creative lending solutions. We’ll also share practical tips to help you finance, not just your purchase, but also the repairs and improvements needed to get your property rent-ready.

1. Conventional Loans for Investment Properties

Conventional loans are among the most common ways to finance an investment property. These are issued by banks, credit unions, or mortgage lenders, and are ideal for investors with strong credit, stable income, and a low debt-to-income ratio.

Conventional loans offer competitive interest rates, fixed and variable rate options, and longer loan terms that can be paid off earlier if the borrower chooses to do so. However, a 20-25% down payment is typically required, the property must meet livability standards, and the underwriting process can take a bit longer.

Working with a local lender who understands Detroit’s local market can be a great asset. Some national banks may be unfamiliar with local property values and hesitate to approve loans in areas they perceive as “high risk.”

2. Hard Money Loans

Hard money lenders provide short-term loans primarily based on the property’s after-repair value (ARV) rather than your personal credit or income. This makes them a popular option for Detroit investors buying distressed or undervalued properties.

The approval and funding of hard money loans is often as quick as 7-10 days, and they are popular for house flippers and BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategies. However, these loans often have higher interest rates and shorter loan terms, which means the borrower should refinance or sell the home quickly.

Double check your numbers: Make sure to have a realistic repair estimate if you’re going to use this type of loan. If the cost ends up going over the loan amount, you would need to figure out a way to acquire additional funding. Accurate resale value estimates or a refinance plan are also key for success.

3. Construction Loans for Property Repairs and Rehab

A construction or rehab loan may be the best fit if your investment requires substantial repairs or renovations. While some construction loans are specific to construction costs only, there are loans that allow you to combine the purchase and renovation into a single conventional loan.

Here are Some Popular Options:

Fannie Mae Homestyle Loan – Combines purchase and renovation into a single conventional loan.
FHA 203(k) Loan – Government-backed option with lower down payment requirements, ideal for owner-occupants or investors planning to live in one unit of a multi-family property.
Local bank rehab programs – Some Detroit-based lenders offer flexible rehab loan options tailored to local properties.

These loans are great for investors looking to purchase a home in disrepair and build equity through renovations. Many homes in Detroit are aging and fall under this category. One drawback is that the lender may require more paperwork, such as detailed reports on renovations and recording of the license of contractors and inspectors. There’s also usually a draw schedule for releasing the renovation funds.

Partnering with a contractor who understands the process of working with rehab lenders is beneficial. Creating a detailed scope of work and timeline to submit with the paperwork will make approval smoother and help avoid delays.

4. Portfolio Loans from Local Banks and Credit Unions

Portfolio lenders keep loans in-house rather than selling them on the secondary market. This gives them more flexibility with the underwriting criteria and terms, making them a strong option for investors purchasing homes in Detroit.

One major benefit of portfolio loans is that the flexible credit and property requirements can remove barriers to entry. They can also finance multiple properties at once, making it easier to build your portfolio (hence the name). Since the loans are kept locally, your relationship with the lender can turn into better terms over time. It’s important to note that portfolio loans may have higher interest rates than conventional and are limited to properties within the lender’s geographic area.

Many seasoned investors benefit from building relationships with Detroit-based lenders who offer portfolio loans. If you’re an out-of-state investor, your local property manager can help create these relationships.

5. Seller Financing

In seller financing (also known as owner financing), the seller acts as the bank, and you make payments directly to them. Some investment companies may be willing to offer owner financing on their properties.

The most important thing for an investor to ensure is that the property is owned free and clear. Seller financing can mean flexible payment terms, down payments, and less paperwork, but may also have higher interest rates and balloon payments.

Bonus Tips for Financing Investment Properties in Detroit

1. Know your numbers:
Before applying for financing, create a full investment plan that includes acquisition cost, rehab budget, carrying costs, projected rent, and exit strategy. Lenders want to see that you’ve done your homework.

2. Consider the BRRRR strategy:
Many Detroit investors use BRRRR—buying low, rehabbing, renting out, then refinancing—to recycle their capital into new deals. Make sure your financing aligns with this strategy from the start.

3. Work with a local property manager:
Lenders are more confident lending to out-of-state investors when they’re working with a professional property manager on the ground. Rondo Investment offers full-service property management to protect your assets and maximize your investment.

4. Don’t underestimate rehab costs:
Many properties in Detroit require significant upgrades to meet rental code standards. Partner with contractors experienced in Detroit rehab projects and budget extra for surprises. Rondo Investment can handle all aspects of the rehab process for you. We have a network of contractors to offer quality work, reliability, and cost savings.

Partner with Rondo Investment

At Rondo Investment, we’ve helped thousands of investors, from first-time buyers to seasoned landlords, navigate Detroit’s property market. Whether you’re looking for turnkey rentals or value-add opportunities, we’ll assist you in purchasing, financing, renovating, and managing your properties.

From connecting you with trusted lenders to coordinating licensed contractors and managing your property long-term, we’re your partner in Metro Detroit. Contact us today at www.rondoinvestment.com or call us to learn more about investment property financing options in Detroit.