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Apartment Loans


There’s never been a better time to get an apartment loan in San Francisco!


Interest rates are down and rents are up.  This makes it an ideal time to get a loan for multi-family properties in San Francisco and the greater Bay Area whether for a purchase or refinance.

Why is it a good time to get a loan?
1.    Interest rates are low
·    This means properties will have more cash-flow after debt service which is a good thing for lenders and borrowers alike.

2.    Rents continue to rise
·    For refinances, higher rents result in higher debt service coverage ratios which are used by lenders to qualify a loan.  A higher DCR in conjunction with a low loan to value can allow borrowers to qualify for preferred rates and terms from some lenders or open doors to others that may not be available otherwise (like life insurance companies)

3.    Lenders want to do loans in San Francisco
·    A lot of lenders got burned by making loans in secondary and even tertiary markets during the boom.  As a result, lenders are eager to make loans today in stable and desirable locations and are offering competitive pricing to try to capture a share of this market.

What are some issues borrowers could face even in San Francisco?
1.    Rent control
·    A lot of San Francisco property owners deal with rent control in the management of their properties.  What they may not realize is that this is an issue that effects financing as well.  Lenders use actual rents to qualify a property for a loan and if actual rents are below market due to rent control the property will not qualify for the same loan amount as it could if all units were at market rents.

2.    Mixed-use properties
·    Properties with a commercial component are fairly common in San Francisco but are not found in such abundance elsewhere.  This creates an issue for lenders that are not familiar with these property types and have to try to figure out how accurately assess the risk of rent received from the commercial space.  Many lenders simply avoid mixed-use properties as a result.

3.    Soft-Story and tuck-under parking 
·    These construction types are especially problematic in seismically active locations like the Bay Area.  The reason?  Open space on the ground floor is less structurally rigid than the residential space above it with interior walls tying everything together.  This can result in a collapsed ground floor in the event of an earthquake.  Lenders are becoming increasing weary of these types of properties if they haven’t been seismically retrofitted to current building code standards.

What are the best sources of loans for apartment owners today?
This is a question without a simple answer.  Every apartment owner has different objectives.  Some are planning on holding the property long term and eventually paying the loan off completely, others have a short-term plan and are looking for a loan with no pre-payment penalty, still others make disbursements to investment groups and want to maximize cash-flow however they can. 

For each of these different types of owners, there will be a different “best” source of financing and it is important that borrowers understand which type of lender will best meet their needs.  Generally speaking, life insurance companies and agency approved lenders (Fannie Mae and FHA) will be best for those with a long-term perspective, credit unions and local banks can provide attractive adjustable rate loans without pre-payment penalties for those that may be looking to trade up in a relatively short period of time, and for those owners looking to maximize cash flow some of the mid-size specialty lenders are offering attractive interest-only financing.

There’s never been a better time to get a loan for an apartment building in San Francisco.  Property owners and those interested in buying should be exploring their options right now to see if they can improve their current financial picture and lay the foundation for their future.


Pacific Bay Financial Corporation is helping our clients make the best financial decisions for their real estate portfolios.  We work with a variety of lenders which allows us to find the loan that is right for our client’s unique objectives. 

For more information about this article or obtaining a loan for your investment property call Shannon Levenson at 415-LOAN-411 (415-562-6411) or email him at ShannonPBF@gmail.com
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