How to Finance a Multi-Family Investment Property in Minnesota

One of the biggest reasons people do not pull the trigger on a multi-family property is financing. They assume they need 20% or 25% down. They assume they need perfect credit. They assume it is complicated.

It does not have to be. Here are the actual loan options available to you in Minnesota right now.

Option 1: FHA Loan (Best for First-Time Buyers Who Will Live There)

An FHA loan, otherwise known as a Federal Housing Administration loan, is the most accessible entry point for most first-time buyers. Here is what you need to know.

You can put as little as 3.5% down. You can buy a property with up to four units. You must live in one of the units as your primary residence for at least one year. Your credit score needs to be at least 580 for the 3.5% down option.

The big advantage of an FHA loan for multi-family is that lenders can count 75% of the projected rental income from the other units toward your qualifying income. That means you can often borrow more than you could on a single-family home. Your tenant helps you qualify.

On a $400,000 duplex, your down payment is $14,000. That is a real number for most people.

Option 2: Conventional Loan (5% Down if You Live There)

Fannie Mae reduced the down payment requirement for owner-occupied multi-family properties up to four units to 5%. Previously it was 15% to 25%. That change opened up a lot of deals that did not make sense before.

Conventional loans have fewer restrictions than FHA. No mortgage insurance once you hit 20% equity. More flexibility on the property condition. If your credit is strong and you have a slightly larger down payment, conventional can be the better long-term play.

Option 3: Conventional Investment Loan (If You Are Not Living There)

If you already own a home and you are buying a rental property you will not live in, you are looking at a conventional investment loan. These typically require 20% to 25% down and carry a slightly higher interest rate than owner-occupied loans. The tradeoff is you do not have to move.

This is the path most of my clients take on their second property. You use the equity from your first home — sometimes through a HELOC, otherwise known as a home equity line of credit — to cover the down payment on the next one.

Option 4: HELOC (Using Your Existing Equity)

A HELOC lets you tap the equity in a property you already own to fund the down payment on your next one. Unlike a refinance, a HELOC does not restart your amortization or change your existing mortgage. It is a line of credit secured by your equity.

For example, if you bought your first duplex a few years ago and it has appreciated, you may have $60,000 or $80,000 in equity sitting there doing nothing. A HELOC lets you put that equity to work as a down payment on property number two.

This is exactly how most investors grow their portfolios without coming out of pocket every time.

Option 5: VA Loan (For Veterans)

If you are a veteran or active duty service member, a VA loan allows you to buy a multi-family property up to four units with zero down payment, as long as you live in one unit. No PMI. Competitive interest rates. This is one of the most powerful wealth-building tools available and it is underused.

What About Interest Rates Right Now?

As of 2025, HUD multifamily loan rates start around 5.64%, with FHA multifamily around 5.94%, according to current market data. Conventional rates for investment properties are running higher. The market has adjusted to this reality. As JPMorgan's Minneapolis lending team noted, buyers are accepting a new normal for interest rates rather than waiting for a return to 4%.

At the end of the day, the rate matters less than the deal. A good property at a higher rate still builds wealth. A mediocre property at a low rate does not.

I can connect you with the lender I work with. They specialize in multi-family financing and they know how to structure these deals correctly. Contact the Duplex Dan team to get started.