Multifamily Loans California
Multifamily financing in California — apartment buildings of 5 units or more — operates under commercial loan guidelines, not residential. The underwriting is property-income driven rather than borrower-income driven, the down payment requirements are higher, and the lender landscape is completely different from what you use for a 1–4 unit rental property. I’ve been helping California investors finance apartment buildings for years, and I work with commercial lenders, agency multifamily programs (Fannie Mae Multifamily, Freddie Mac Multifamily), and debt fund products across the spectrum.
I’m Michael DiVita, owner of DiVita Home Finance. Licensed in California since 2007. Multifamily is not my only specialty, but it’s one I know well. If you’re acquiring, refinancing, or repositioning an apartment building in California, call me.
How Multifamily Loans Work
For 5+ unit properties, lenders underwrite based on the property’s net operating income (NOI): gross rents minus vacancy, operating expenses, and property management costs. The NOI is divided by the mortgage payment to calculate the debt service coverage ratio (DSCR). Most multifamily lenders want DSCR of 1.20–1.25x at minimum — meaning the property generates 20–25% more income than the debt payments.
California multifamily presents specific challenges: rent control in many cities (LA, SF, Oakland, San Jose) affects rent growth assumptions and underwriter conservatism; high acquisition prices mean cap rates are often compressed; and tenant protections can complicate value-add business plans. The right lender understands California-specific multifamily dynamics and underwrites accordingly.
Multifamily Loan Programs — California
- Agency Multifamily (Fannie/Freddie) — for stabilized 5+ unit properties with 90%+ occupancy. Competitive fixed rates, 25–30 year amortization, 75–80% LTV. Best for well-performing assets.
- CMBS Loans — for larger stabilized properties. Fixed rate, 10-year term with 25–30 year amortization. Non-recourse available. Best for $5M+ loan amounts.
- Portfolio/Bridge Loans — for value-add acquisitions with below-market rents, high vacancy, or repositioning needed. Interest-only, 12–36 month terms, 65–75% LTV. Used to stabilize before refinancing to permanent agency financing.
- Debt Service Coverage Ratio (DSCR) Loans — for smaller multifamily (5–20 units) where personal income is minimal. Qualified on property income alone.
- HUD/FHA Multifamily — for large developments. Low rates, long amortization (35–40 years), fully amortizing. Complex process — best for experienced developers.
Multifamily Loan FAQ — California
What’s the minimum down payment for a multifamily apartment building in California?
For stabilized multifamily through agency programs (Fannie/Freddie Multifamily), LTV is typically 75–80%, meaning 20–25% down. For value-add or transitional properties through bridge lenders, LTV is 65–70%, requiring 30–35% down. For DSCR-based portfolio loans on smaller 5–10 unit buildings, expect 25–30% down. The larger and more stabilized the property, the better the LTV you can typically achieve. California cap rates are compressed enough that even 25% down on a $3M building represents $750K in equity — so matching the right loan program to avoid unnecessary capital deployment is an important conversation we’ll have upfront.
How does rent control affect multifamily financing in California cities?
Rent control is a significant underwriting consideration for California multifamily lenders. In cities with strong rent control (LA, SF, Oakland, Berkeley, Santa Monica), lenders may cap their rental income assumptions based on current below-market rents rather than market-rate projections. This can reduce the DSCR calculation and push down the loan amount. Value-add investors buying rent-controlled buildings with plans to bring rents to market need to be realistic: if units are occupied under rent control, the timeline to market-rate rents is often 10+ years through attrition. Lenders who understand California multifamily will underwrite to current actuals, not proforma projections. I’ll help you identify the right lender for your specific market and business plan.
When should I use a bridge loan vs. permanent financing on a California apartment building?
If the property is fully stabilized — 90%+ occupied at market rents — go permanent. Agency multifamily financing will be cheaper long-term than bridge. If the property has significant vacancy, below-market rents, deferred maintenance, or you’re planning a renovation to upgrade units, you typically need a bridge loan first. Bridge lenders are comfortable with transitional assets; agency lenders are not. The typical exit strategy is: bridge for 12–24 months while you stabilize the asset, then refinance into agency permanent financing. The cost of bridging (higher rate, origination fees) is offset by the value-add upside in rents and appraised value. Call me with your specific asset and business plan and I’ll map out the financing path.
Talk to Michael Directly
DiVita Home Finance | Marin County, CA | Licensed since 2007. DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
