Kentucky is known for the Kentucky Derby, a famous horse race that draws viewers from around the world. This event isn’t the only thing to pay attention to, though. Investing in Kentucky real estate as a foreign investor offers exciting opportunities.
Navigating the buying process can sometimes feel daunting, especially if you haven’t bought property in the U.S. using financing before. While choosing the right financing may seem complex at first, there are plenty of options designed specifically for international buyers. This is especially true in Kentucky, a state that stands out for its affordable property prices, strong economy, and excellent cost of living. By carefully selecting the right property and lender, you’ll be setting yourself up with rental income streams.
In this guide, we’ll cover everything you need to know about investing in Kentucky real estate, including different types of properties and loan options for foreign buyers.
We are providing the following discussion to you for informational purposes only. All investments, including real estate, involve risk, and we encourage you to invest carefully. The information in this article is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice or service. You should consult with a professional in the respective legal, tax, accounting, real estate, or other professional area before making any decisions or entering into any contracts relating to a rental property.
Debt-service-coverage-ratio (DSCR) loans are a popular financing option for foreign nationals looking to invest in Kentucky real estate.
A DSCR loan allows investors to purchase rental properties in Kentucky without needing to reside in the U.S. Unlike conventional mortgages, these loans are approved based on the property's rental income rather than the borrower’s personal earnings.
With flexible qualification requirements, DSCR loans make it easier for foreign investors to enter the Kentucky real estate market compared to traditional home loans.
DSCR loans provide a straightforward way to invest in Kentucky real estate. Here’s why they stand out:
For foreign investors, DSCR loans eliminate common financing obstacles, making it easier to tap into Kentucky’s affordable and growing real estate sector.
Explore Waltz's DSCR loan options.
Lenders have different requirements for foreign investors, and some are more accommodating than others. Knowing what to expect can help you find the right financing option.1
Here’s how standard lender requirements compare to the more flexible options available with Waltz:
Most lenders: Typically require proof of U.S. income or extensive financial records from the borrower's home country, which may include tax documents, business earnings, and foreign bank statements. Sometimes you will need a U.S. bank account to complete this process.
Waltz: We consider both U.S. and international income, but focus primarily on the property's rental income rather than personal financial records.
Most lenders: Foreign investors usually need to provide a down payment of 30% to 50% of the property's price, plus reserve funds to cover unexpected costs.
Waltz: We offer lower down payment options, often around 30%, with some cases as low as 25%, and may not require reserves depending on the financial profile and property type.
Most lenders: Require proof of identity and may mandate that the property be purchased under a U.S.-based LLC.
Waltz: We accept passports from any country for identity verification and provide services to help set up an LLC, obtain an Employer Identification Number (EIN), and open a U.S. bank account.
Most lenders: A U.S. credit score of at least 640 is often required, making it difficult for international investors without U.S. credit history to qualify.
Waltz: When you work with Waltz, you do not need a U.S. credit score. Instead, we review international credit history or evaluate assets to determine eligibility. This makes sense for international investors, about half of whom pay in cash when purchasing U.S. real estate.
Picking the right type of property is an important step in real estate investing. Each option has different benefits, risks, and levels of demand. In Kentucky, especially in cities like Louisville and Lexington, as well as college towns like Bowling Green, there are many opportunities to earn rental income.
These property types are popular with Kentucky real estate investors:
Waltz makes it easy to invest in Kentucky real estate. Fill out our form to begin.
Kentucky offers several advantages for foreign investors looking to buy property in the U.S. Here are a few reasons to consider Kentucky:
Louisville, Kentucky’s largest city, has a strong rental market supported by major employers, universities, and a diverse economy. Hip neighborhoods like the Highlands and NuLu are popular with young professionals, and tourism also plays a major role, generating $4.2 billion in 2023. Attractions like the Kentucky Derby (a famous horse race) and the Louisville Slugger Museum (which houses the world’s largest baseball bat) draw visitors year-round. This high visitor traffic makes short-term rentals a lucrative option.
Home to the University of Kentucky, Lexington has a strong rental market, especially near campus. Its economy is supported by healthcare, manufacturing, and the equine industry, creating a steady demand for housing. In 2023, Site Selection Magazine ranked Lexington among the top 10 U.S. metro areas for economic development, and it was recently recognized as a top destination for Gen Z college graduates starting their careers.
Bowling Green is experiencing steady economic growth, largely due to Western Kentucky University (with its 16,000 students) and major employers like the General Motors Corvette plant, Union Underwear Company, and BG Metalforming. These industries contribute to a strong demand for both student and workforce housing, making the city a promising choice for investors.
Owensboro, Kentucky’s fourth-largest city, has a stable rental market supported by its healthcare, manufacturing, and education sectors. Recent downtown revitalization efforts have further increased interest in the city, making it an attractive option for investors looking for long-term growth.
Is Kentucky the right place for you to invest in real estate? While it’s true that there are many great aspects of investing in Kentucky, there are a few considerations to take into consideration before you make a final decision. These include:
Refinancing your Kentucky investment property involves replacing your existing mortgage with a new one that suits your current financial objectives. For foreign nationals, the steps typically include:
This option allows you to change your mortgage terms. For example, you might secure a lower interest rate or adjust the loan length. However, even if your new loan has a lower rate, the total borrowing cost over the life of the loan could still be higher.
Cash-out refinancing allows you to tap into your property's equity by replacing your current mortgage with a new one that has a larger loan amount.
For Kentucky real estate investors, the extra funds can be used for property improvements, paying off other debts, or making a down payment on another investment. This option offers increased financial flexibility and potential for more investment opportunities.
Interested in exploring your refinancing options? Learn more here.
Getting a DSCR mortgage in Kentucky as a foreign investor may feel complicated, but with the right guidance, it can be straightforward. Here's what you need to do:
1. Find a profitable investment
Start by researching Kentucky properties with strong rental income potential. Look for areas that fit your investment goals and make sense for your financial plans.
2. Gather essential documents
Get your paperwork together, including a valid passport, proof of income (such as foreign bank statements or business financials), and property details. Some lenders may also ask for proof of assets or a credit report from your home country.
3. Select a lender experienced with foreign nationals
As a foreign investor, it’s important that you find a lender who understands the challenges foreign investors face, like verifying foreign income and handling the lack of U.S. credit history. A lender experienced with DSCR loans for foreign nationals can help make the process easier.
4. Set up an LLC and U.S. bank account
Most lenders want foreign investors to set up a U.S.-based LLC to qualify for a DSCR loan. You’ll also need a U.S. bank account for transactions.2 Setting these up, including getting an Employer Identification Number (EIN), can take time, so plan ahead.
5. Submit your loan application
Before you apply for the loan, talk to a specialist who can guide you and make sure you have all the necessary documents, such as property details, financial records, and rental income estimates. Remember, having everything ready will speed up the approval process.
6. Perform due diligence
This includes property inspections, appraisals, and meeting any additional lender requirements to confirm the property’s value and condition. Be sure to review your terms carefully before proceeding.
7. Complete the purchase process
Once everything is in order and your loan is approved, it’s time to close. Sign the required documents (remote closing options may be available if you're outside the U.S.) and transfer the funds. Now, you own a rental property in Kentucky!
Take the first step toward owning an investment property in Kentucky. Apply for a DSCR loan.
