Builders are carrying more inventory and using concessions to move homes faster. In September 2026, 66% of builders offered incentives, while 38% cut prices (with an average cut of 6%). However, the rules for concessions differ when buying an investment property versus a primary home. In this guide, we’ll break down the types of concessions available to investors, the limits to watch out for, and the pros and cons to consider when shopping for new build rentals!
Summary:
Builder concessions are financial incentives that reduce the overall cost of buying a home while helping builders sell available inventory. Concessions include mortgage rate buydowns, closing cost credits, cash back at closing, and design upgrades—perks that attract buyers while protecting a community’s recorded sale price.
The terms “concessions” and “incentives” are often used interchangeably. However, concessions are typically negotiated during the transaction, while incentives are usually advertised upfront. Seller concessions work similarly to builder concessions, but they’re offered by individual sellers (non-builders) on existing properties (not new construction).
Lenders treat both concessions and incentives as “interested party contributions,” with builders named as an interested party on a new build property.
Rent to Retirement works with builders to get you wholesale pricing and some of the highest concessions!
Builder concessions come in several forms, and some builders give investors multiple options. Be sure to choose the incentive that best aligns with your investing goals, whether that’s higher cash flow, more equity, or less cash upfront.
These credits can help reduce the cash needed to close by covering closing costs like lender fees, title fees, appraisals, and prepaid expenses. Check the purchase contract and closing cost breakdown carefully, as some builders may shift costs that sellers would normally pay (such as transfer taxes) to the buyer.
There are two main types of interest rate buydowns: permanent and temporary. With a permanent buydown, the builder buys discount points to lower the rate for the entire loan term. With a temporary buydown, the rate is usually reduced early in the loan term before returning to the normal note rate. For example, a 2-1 buydown lowers your rate by 2% in year one and 1% in year two. From year three on, it adjusts to a fixed rate.
A price reduction lowers the contract price, allowing the investor to take out a smaller loan and gain instant equity. However, many builders prefer concessions that preserve the sales price, as this helps protect comparable sales in the community.
These are funds you receive at closing. You can use them to pad your reserves or help fund your next investment property.
Get money back at closing for your next headache-free turnkey rental property!
Some builders will offer design upgrades, such as free or discounted finishes and appliances, to potentially give you a better product at a lower overall cost. Investors should evaluate whether these upgrades improve durability, justify higher rents, and/or increase the property’s value.
Concession limits depend less on how much the builder is willing to offer and more on the loan program being used. These limits are based on the property’s sale price or appraised value, whichever is lower:
|
Loan / Occupancy |
Down Payment (LTV) |
Max Concession (% of lower of price or appraised value) |
|
Conventional: primary or second home |
Under 10% down (>90% LTV) |
3% |
|
Conventional: primary or second home |
10–24.99% down (75.01–90% LTV) |
6% |
|
Conventional: primary or second home |
Over 25% down (≤75% LTV) |
9% |
|
Conventional: investment property |
Any |
2% |
|
FHA |
Any |
6% |
|
VA |
Any |
4% (plus customary closing costs) |
Sources: Fannie Mae B3-4.1-02, Freddie Mac 5501.6, LegalClarity. FHA and VA rows are for context only (since both are owner-occupant programs).
A builder could advertise “$20,000 in concessions,” but the usable amount depends on the investment property loan type and its concession limits. Conventional loans cap concessions on investment properties at 2%, regardless of the down payment amount. For example, if you buy a rental property for $300,000, builder concessions will be capped at $6,000. Builder-paid buydowns and credits count toward the cap, while local “common and customary” seller-paid fees do not.
If builder concessions exceed the conventional loan cap, the excess cannot be used toward closing costs or expenses. It must be treated as a “sales concession” and deducted from the sales price when recalculating the property’s loan-to-value (LTV) ratio.
Investors can get more than 2% in concessions by either negotiating a price reduction (which isn’t capped) or using portfolio financing with more flexible limits, such as Rent to Retirement’s 5%-down select new build options. What’s more, using a portfolio loan to buy multiple rental properties with 5% down keeps your conventional loan slots open for future deals!
How much money do investors really save through builder concessions? Let’s do the math:
The builder may offer a certain percentage of the home’s price or appraised value (whichever is lower). To calculate the actual dollar amount, you’ll use this formula:
Concession ($) = Lower of Price or Appraised Value × Concession %
So, let’s say a builder is offering 3% concessions on a $356,000 home (the median new-home price as of early 2026). 3% of $356,000 is $10,680, which would be the total amount you could apply toward closing costs, rate buydowns, or other incentives.
If you’re buying a $300,000 rental property with a conventional investment loan, the 2% cap allows up to $6,000 in closing cost credits or rate buydowns. If the builder offers $10,000 in concessions, the remaining $4,000 is lost unless it’s taken as a price reduction. If the builder offers $20,000 in concessions, the remaining $14,000 is lost unless it’s taken as a price reduction.
With a portfolio loan, the lender sets its own limit, which means more of the concession amount could be used toward closing cost credits and rate buydowns.
First, let’s create a baseline. For this example, we’re using a $300,000 new build investment property, Rent to Retirement’s builder incentives (10% or $30,000), and Rent to Retirement’s 5%-down portfolio loan at an 8.5% investment property mortgage rate.
$300,000 home - $30,000 incentive (10%) = $270,000 purchase ($256,500 loan)
Pre-concession: $2,191/month payment (principal and interest only)
Post-concession: $1,972/month payment (principal and interest only)
= $219/month savings ($2,630/year)
Pre-concession: $15,000 down (5%) + $12,000 closing costs (4%) = $27,000 out of pocket
Post-concession: $15,000 down (5%) + $0 closing costs = $15,000 out of pocket
= $12,000 savings (the remaining $18,000 could be used for another concession)
Pre-concession (8.5%): $2,191/month (principal and interest only)
Post-concession (6.5%): $1,801/month (principal and interest only)
= $390/month savings ($4,680 in year 1)
Compare the results from each option against your investing goals. With Rent to Retirement, you can combine all three!
A permanent interest rate buydown isn’t always worth the upfront cost (even if your builder pays for it!). Use the following formula to calculate your break-even point and determine how long it will take for your monthly savings to pay off:
Buydown Cost ÷ Monthly Payment Savings = Break-Even Point (Months)
One point equals 1% of the loan and lowers the rate by about 0.25–0.375%.
For example, a $10,000 buydown saving you $100 each month would be paid back in 100 months, or 8.3 years.
Unlock tens of thousands in concessions with Rent to Retirement’s select new builds!
As an investor, you should choose the concession(s) that matches your investing goals. A rate buydown lowers your monthly mortgage payment, increasing your cash flow. A price reduction gives you instant equity. Closing credits or cash back can bolster your reserves or give you more money to scale your real estate portfolio. Remember that buydowns and closing cost credits count toward the 2% conventional cap!
While builder concessions can help reduce the overall cost of a new investment property, it’s important to know the pros and the cons so you’re not caught off guard by any concession limits or fine print:
Concessions can help you save money on a new build investment in multiple ways:
Concessions can save investors money, but there are also a few potential drawbacks to keep in mind:
To maximize the builder concessions on your new investment property, follow these steps:
…OR let Rent to Retirement do the heavy lifting with builder-negotiated turnkey rentals!
Most builders are still offering incentives on new construction homes (66% of builders as of September 2026), but investors need to be mindful of the 2% conventional cap and choose the type of concession that best fits their investing goals.
With Rent to Retirement, you could get 5%-down financing on a select new build, plus your choice of a price reduction, rate buydown, closing credits, and/or cash back at closing—giving you more value than a standard conventional loan allows!
Builder concessions are credits or financial incentives builders offer to help sell new homes. They typically go toward closing costs, interest rate buydowns, or, less commonly, price reductions.
$10,000 in seller concessions means the builder or seller puts up to $10,000 toward your closing costs and/or prepaid expenses. However, the actual amount they can contribute is limited by your loan’s cap and your closing costs. On a $300,000 home with a conventional investment loan, only $6,000 (2%) of the concessions could be used.
3% concessions means the builder or seller will contribute up to 3% of the property’s purchase price toward eligible expenses (e.g., $9,000 on a $300,000 home). This is the conventional loan limit when buying a primary home with less than 10% down. Conventional investor loans are capped at 2%.
Yes, builder concessions can be used on investment properties, but keep in mind that conventional loans cap them at 2% no matter the down payment. Portfolio loans have their own limits, potentially giving you more flexibility.
Typically, builder concessions can only be used to pay for closing costs, buy down the mortgage rate, or cover prepaid expenses rather than fund your investment property down payment. However, some builders offer cash back at closing, putting money right back in your pocket.