As with anything, the more you do it, the better at it you get. It can be anything from playing the piano to a game of golf, the more the better. You get familiar with the pattern and don’t make the mistakes you first made—it all becomes much easier asfinancing investment properties time progresses. And that couldn’t be more accurate as it relates to financing investment properties.

 When financing real estate investments today and you intend to hold the property for appreciation and cash flow, your best source for financing is from a traditional lender offering conventional financing. The first approval process may seem a bit tedious but the second and third time around, you know what to expect and prepare ahead of time. But the main reason financing is easier the second time around is how lenders view your income.

When financing your first property, lenders will evaluate your application based upon your cash available for the transaction, your credit and your income. The lender looks for at least 20 percent as a down payment, good credit and enough monthly income to pay for your current as well as future monthly obligations. Including the new rental.

Even if the unit pays a substantial rent each month and has done so for years, a lender will not use that rental income to help qualify a first time investor. The bank wants to see some landlord experience on your behalf evidenced with copies of your signed federal income tax returns, specifically schedule E which shows all revenue and expenses associated with your investments.

But after you have the first rental closed successfully, conventional lenders will allow the current rent to be applied toward the new mortgage. The rent should cover the new mortgage payment, insurance and property taxes. All you need to have is your down payment and good credit. Your tenants from now on will help you qualify. But only after the first one.