Hard Money Lenders San Francisco: Alternative Financing Options

Published on July 25th, 2024
10 min read

Joseph Gordon Editor
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Joseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.

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San Francisco’s real estate market presents unique opportunities and challenges for investors and homeowners alike. Whether you’re a seasoned house flipper or a homeowner looking to leverage your property’s equity, knowing how to finance your next move is important. One option to consider is a hard money loan, a type of financing that offers flexibility and speed, ideal for competitive markets like the Bay Area. If you have questions about hard money lenders in San Francisco, you’ve come to the right place.

In this guide, we’ll explore the ins and outs of hard money loans in San Francisco. From understanding what hard money lenders look for to exploring alternative financing options, we’ll provide you with the knowledge to make informed decisions about your property investments.

Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.

What is a hard money lender?

A hard money lender provides short-term loans secured by real estate. They cater primarily to house flippers and rental property investors. Unlike traditional lenders, hard money lenders focus on the property’s value rather than the borrower’s credit score. They determine loan amounts based on the after-repair value (ARV), which is the estimated value of the property after renovations.

Interest rates for hard money loans are typically higher than traditional loans due to the increased risk and convenience of fast funding, ranging from 8% to 15% or more, and shorter repayment periods, usually between 6 to 24 months.

Additional costs can include origination fees, closing costs, and points, which are a percentage of the loan amount paid upfront. As with any secured loan, failure to repay a hard money loan can result in the lender seizing the asset, such as a house, to recover their investment.

How does a hard money loan work?

Hard money loans offer a unique financing solution tailored to competitive markets like San Francisco. Here’s a breakdown of how these loans work:

Short-term loan: Typically lasts between 6 months to 3 years, perfect for quick turnarounds.
Faster funding option: Often approved and funded within a few days, unlike traditional mortgages that can take 30 to 50 days.
Less focus on creditworthiness: Approval depends more on the property’s value than your credit score.
More focus on property value: Lenders assess the loan-to-value ratio of the property.
Not traditional lenders: Private investors or companies, not banks, typically provide these loans.
Loan denial option: Lenders may refuse if the property doesn’t meet their criteria or the project appears too risky.
Higher interest rates: Rates can range from 8% to 15% or more due to the higher risk involved.
Might require larger down payments: Often 20%–30% of the property’s value.
More flexibility: Terms can be negotiated directly with the lender, offering tailored solutions.
Potential for interest-only payments: Some loans allow for lower initial payments, focusing on interest-only until the end of the term.

How does a hard money loan work in San Francisco?

Hard money loans offer a unique financing solution tailored to San Francisco’s competitive market. Here’s a breakdown of how these loans work:

Short-term loan: Typically lasts between 6 months to 3 years, perfect for quick turnarounds.
Faster funding option: Often approved and funded within a few days, unlike traditional mortgages that can take 30 to 50 days.
Less focus on creditworthiness: Approval depends more on the property’s value than your credit score.
More focus on property value: Lenders assess the loan-to-value ratio of the property.
Not traditional lenders: Private investors or companies, not banks, typically provide these loans.
Loan denial option: Lenders may refuse if the property doesn’t meet their criteria or the project appears too risky.
Higher interest rates: Rates can range from 8% to 15% or more due to the higher risk involved.
Might require larger down payments: Often 20%–30% of the property’s value.
More flexibility: Terms can be negotiated directly with the lender, offering tailored solutions.
Potential for interest-only payments: Some loans allow for lower initial payments, focusing on interest-only until the end of the term.

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What are hard money loans used for?

Hard money loans can be a versatile tool for various real estate needs:

Flipping a house: Perfect for flipping homes, providing quick funds for renovations.
Buying an investment rental property: Investors use these loans to quickly secure rental properties.
Purchasing commercial real estate: Ideal for acquiring and renovating commercial spaces.
Borrowers who can’t qualify for traditional loans: Provides an option for those with less-than-perfect credit or unusual income sources.
Homeowners facing foreclosure: A solution for homeowners looking to avoid foreclosure by tapping into their home equity for necessary funds.

How much do hard money loans cost?

Hard money loans generally cost more than traditional loans due to the higher risk for lenders and the convenience of quick, flexible funding. Typical costs include:

Interest rates: 8% to 15% or higher, based on risk assessment.
Origination fees: 1% to 5% of the loan amount.
Closing costs: Legal, appraisal, and administrative fees.
Points: A percentage of the loan amount charged upfront.

Online calculators can help estimate these costs.

Alternatives to working with hard money lenders

If you’re considering alternatives to hard money loans, here are some options:

Take out a second mortgage: Consider a home equity loan or HELOC.
Cash-out refinance: Refinance an existing property to pull out cash.
Borrow from family or friends: Often offers more flexible terms and lower costs.
Use a government-backed loan program: Programs like FHA loans can provide lower rates.
Peer-to-peer loan: Online platforms offer loans from individual investors.
Specialized loan programs: Explore options for specific needs like fixer-uppers.
Request a seller financing option: Some sellers may finance the purchase directly.

How to buy before you sell

Sometimes, the perfect listing pops up when you’re least expecting it. Maybe it’s a rare mid-century modern home or a two-bedroom condo within walking distance of your job.

If you’re a San Francisco homeowner wanting to buy a new home before selling your current one, HomeLight offers an innovative solution that streamlines the process.

The Buy Before You Sell (BBYS) program allows you to leverage the equity in your existing home to make a stronger, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved in 24 hours or less, with no cost or commitment required. Once approved, you can confidently purchase your next home and then sell your current one vacant, avoiding the hassle of moving twice.

Here’s how HomeLight Buy Before You Sell works:

Although there’s a flat fee of 2.4% of your current home’s sold price, the potential savings in other areas might outweigh the cost. For example, you might save on moving expenses, temporary housing, and even the final purchase price of your new home. On top of that, HomeLight’s BBYS fees are typically much lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.

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3 top hard money lenders in San Francisco

Traditional lenders might not be the solution for every real estate investment. If you’re looking to move quickly and capitalize on an opportunity, explore the hard money lending options available in San Francisco.

Kiavi

Kiavi, based in San Francisco, was founded in 2013. They specialize in providing financing solutions for real estate investors, including fix and flip, rental, and bridge loans.

Lending clientele: Residential real estate investors. They fund various types of properties, including single-family homes, multifamily properties, and condominiums.

Loan criteria: LTV up to 80% of ARV

Kiavi has a 4.1-star rating on Google, based on over 340 reviews. Client reviews generally note Kiavi’s fast and streamlined loan process, praising the company’s efficient communication and supportive customer service.

kiavi.com

844-415-4663

SunnyHill Financial

SunnyHill Financial, headquartered in San Francisco, California, was founded to deliver customized financing solutions for real estate investors. The company provides a diverse array of loan programs, including fix and flip, rental, and new construction loans.

Lending clientele: Residential, commercial, and development real estate investors

Loan criteria: Up to 100% LTV 720+ median FICO

SunnyHill Financial has a 4.9-star rating on Google, based on 313 reviews. Clients reviews focus on SunnyHill Financial’s efficient and straightforward loan process. Many highlight the company’s responsive customer service and quick funding times.

sunnyhillfinancial.com

800-371-7986

Wilshire Quinn Capital, Inc.

Wilshire Quinn Capital, Inc. was founded in 2004. The company specializes in providing hard money loans to real estate investors, offering fast and reliable funding solutions for a variety of projects. Wilshire Quinn offers several loan programs, including bridge loans and cash-out refinance loans.

Lending clientele: Residential, commercial, and development real estate investors

Loan criteria: LTV up to 60% of ARV

Wilshire Quinn Capital has a 5.0-star rating on Google. Clients frequently commend Wilshire Quinn Capital for their efficient loan process and exceptional customer service. Many reviews highlight the company’s quick response times and the ease of working with their professional team.

wilshirequinn.com

415-881-3100

Should I partner with a hard money lender in San Francisco?

Deciding whether a hard money loan is right for you depends on your goals and circumstances. These loans are best suited for real estate investors who need quick access to capital for projects like house flipping or acquiring rental properties. They offer speed and flexibility but come with higher costs and risks.

For homeowners looking to leverage their equity without the higher costs of a hard money loan, consider HomeLight’s Buy Before You Sell program. This option allows you to buy a new home before selling your current one, giving you the convenience and financial flexibility needed in San Francisco’s competitive market. Explore all your options and choose the one that aligns best with your needs.

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