San Diego Multifamily Loans: Apartment & Multi-Unit Financing [2026 Guide]

San Diego stands as one of the most compelling multifamily investment markets on the West Coast. With a metro population of over 3.3 million people, roughly 48% renter-occupied households, and a housing shortage exceeding 134,000 units for low-income renters alone, the structural demand for apartment buildings here is enormous. Whether you are acquiring a duplex in North Park, refinancing a 50-unit complex in Mission Valley, or building new multifamily units in Chula Vista, the right financing strategy can make or break your returns.

This guide breaks down the multifamily loan landscape in San Diego for 2026, covering current rates, loan programs, local market conditions, and neighborhood-level insights to help you make a confident financing decision.

Why Is San Diego Such a Strong Market for Multifamily Investment?

San Diego's multifamily fundamentals remain among the strongest in the nation, even as the market absorbs a wave of new construction. Several factors drive sustained rental demand across the region.

First, the housing affordability gap is severe. The median home price in San Diego County exceeds $900,000, pricing out a large share of the workforce from homeownership and pushing them into the rental market. The average rent sits around $2,800 per month, roughly 53% above the national average, yet demand remains resilient because buying is even more expensive on a monthly basis.

Second, the employment base is exceptionally diversified. San Diego's economy is anchored by three pillars: military and defense, life sciences and biotech, and tourism and hospitality. The defense sector alone supports nearly 357,000 local jobs and contributes $61.3 billion to the region's total economic output, according to the 2025 Military Economic Impact Report. Defense spending accounts for 22.2% of the region's Gross Regional Product, providing a layer of recession resistance that few metros can match.

Third, geographic constraints limit sprawl. The Pacific Ocean to the west, Camp Pendleton to the north, the Mexican border to the south, and mountainous terrain to the east all restrict outward development. This creates a supply-constrained environment where infill multifamily projects command premium pricing.

What Multifamily Loan Programs Are Available in San Diego?

Borrowers financing apartment buildings in San Diego have access to a wide range of loan programs. The right choice depends on your property size, investment timeline, and financial profile.

Conventional/Bank Loans work well for stabilized properties with 5 or more units. These typically offer loan-to-value ratios up to 75%, competitive fixed rates, and terms of 5 to 10 years with 25- to 30-year amortization. Most banks require a minimum DSCR of 1.20x to 1.25x.

Agency Loans (Fannie Mae/Freddie Mac) are the gold standard for larger stabilized apartment properties. They offer the lowest rates in the market, high leverage up to 80% LTV, non-recourse structures, and interest-only options. The Federal Housing Finance Agency increased agency multifamily loan purchase caps for 2026, signaling expanded lending capacity.

Bridge Loans serve investors who need short-term capital for acquisitions, renovations, or lease-up situations. If you are purchasing a value-add property in Pacific Beach or repositioning an older complex in Kearny Mesa, a bridge loan provides 12- to 36-month financing with flexible terms while you stabilize the asset.

DSCR Loans focus on the property's income rather than the borrower's personal financials. These are popular among investors who own multiple properties or have complex tax returns. A DSCR loan qualifies based on the property's debt service coverage ratio, making it accessible for investors who might not qualify through traditional income documentation.

SBA Loans can finance mixed-use or owner-occupied multifamily properties. The SBA 504 and 7(a) programs offer competitive rates and lower down payments for borrowers who occupy at least 51% of the property.

Hard Money/Private Loans fill the gap when speed matters more than rate. These are typically used for competitive acquisitions, auction purchases, or properties that need significant renovation before qualifying for permanent financing.

What Are Current Multifamily Loan Rates in San Diego?

As of early 2026, San Diego multifamily loan rates vary by program and term length. Agency loans from Fannie Mae and Freddie Mac are pricing in the low-to-mid 5% range for stabilized apartment properties. Conventional bank loans typically start around 5.50% to 6.50% depending on leverage and borrower strength. Bridge loans range from 7.50% to 10.00%, while DSCR loans generally fall between 6.00% and 8.00%.

Several factors are keeping rates elevated compared to the historic lows of 2021 and 2022. The Federal Reserve has maintained a cautious approach to rate cuts, and the 10-year Treasury yield, which directly influences fixed-rate commercial loans, has remained volatile. That said, most market observers expect rates to drift modestly lower through mid-2026, creating a potential window for refinancing.

For a more precise estimate on your San Diego multifamily financing, try our commercial mortgage calculator or DSCR calculator to model different scenarios.

How Does the San Diego Multifamily Market Look in 2026?

The San Diego multifamily market is navigating a transitional period marked by elevated new supply and steady underlying demand. Here is what the key metrics look like heading into 2026.

Vacancy has ticked up to approximately 5.4% as of late 2025, up 60 basis points year-over-year. This increase is driven primarily by a surge in new deliveries, with roughly 6,200 units delivered in 2025 alone. However, vacancy at Class B and C properties remains exceptionally tight at around 2.5%, while Class A properties have absorbed the bulk of new supply pressure at a 6.6% vacancy rate.

Rent Growth has been modest, with asking rents averaging $2,391 per month and showing just 0.1% year-over-year growth in Q4 2025. Concessions are widespread at newer Class A developments, particularly in Downtown and UTC. Most forecasters project rent growth to re-accelerate to 2.5% year-over-year by mid-to-late 2026 as the construction pipeline thins.

New Supply is declining. About 4,000 units are scheduled for delivery in 2026, down significantly from the 6,200 units delivered in 2025. Units under construction fell to 11,850, a 22% decrease year-over-year, pointing toward a supply-demand rebalancing by 2027.

Cap Rates have held steady at approximately 4.5% on average for the third consecutive year. Class A properties trade at 4.74%, Class B at 4.92%, and Class C at 5.38%. The median price per unit is $333,300, down 5% year-over-year, though this softening has been concentrated in Class B assets.

Which San Diego Neighborhoods Offer the Best Multifamily Opportunities?

San Diego's multifamily market is not monolithic. Performance varies significantly across submarkets, and understanding neighborhood-level dynamics is critical for both acquisition and financing decisions.

Downtown/East Village/Gaslamp: This submarket has absorbed the largest share of new construction, pushing vacancy higher and rents down 1.4% year-over-year to about $2,087 per month. For investors, this creates potential value-add opportunities in older buildings that can be repositioned below the new-construction price point. Bridge financing is often the right tool here.

North Park/Hillcrest/University Heights: These neighborhoods remain tenant favorites for walkability, dining, and nightlife. Smaller multifamily properties (4-20 units) dominate the landscape, and vacancy stays tight due to limited new construction. Cap rates tend to compress to 4.0% to 4.5% range because of strong tenant demand.

Pacific Beach/Mission Beach: Proximity to the coast drives premium rents, but tighter short-term rental regulations are shifting investor focus toward traditional long-term leasing. Properties near transit stops and the beach command strong NOI for DSCR loan qualification.

Mission Valley: A major development corridor with access to trolley lines and freeways. Several large multifamily projects have delivered here recently, but the submarket benefits from strong renter demand driven by proximity to major employers and retail amenities.

Chula Vista/National City: South Bay submarkets have been standout performers. Chula Vista saw median prices jump 38% to $409,500 per unit in 2025, reflecting investor appetite for workforce housing in areas with sub-4% vacancy. These neighborhoods benefit from proximity to the border economy and more affordable entry points.

Kearny Mesa/Clairemont: These centrally located areas attract renters who work in the defense and biotech corridors along the I-15 and I-805 freeways. Older apartment stock provides value-add repositioning opportunities.

Carlsbad/Escondido/North County: More suburban in character, these markets attract families and military-affiliated renters from Camp Pendleton and MCAS Miramar. Escondido maintains long-term sub-4% vacancy, making it a target for investors seeking stable cash flow with lower per-unit acquisition costs.

La Jolla/UTC/Sorrento Valley: The biotech and tech employment hub. UTC and Sorrento Valley have seen significant new multifamily development, but proximity to UC San Diego and major life sciences employers provides steady demand from high-income renters.

How Does Military Housing Demand Affect San Diego Multifamily Investment?

San Diego is home to one of the largest military concentrations in the world, and this directly shapes the multifamily rental market across multiple submarkets.

Naval Base San Diego is the principal homeport of the Pacific Fleet, housing over 54 ships and submarines. Camp Pendleton, the Marine Corps' largest West Coast expeditionary base, covers 125,000 acres in north San Diego County. MCAS Miramar provides a major employment center in the central part of the metro.

The housing impact is substantial. Camp Pendleton has only 6,680 on-base housing units, with waitlists averaging 10 to 12 months for senior enlisted positions. This pushes thousands of service members and their families into the off-base rental market in areas like Oceanside, Carlsbad, Vista, and Escondido.

Basic Allowance for Housing (BAH) rates for San Diego are among the highest in the nation, reflecting the area's elevated cost of living. This means military renters often have reliable, government-backed income streams, making them attractive tenants for multifamily property owners. Properties within a reasonable commute of major bases tend to maintain higher occupancy rates and more predictable cash flow.

For investors, this military demand creates a floor under rental demand that persists regardless of broader economic cycles. Lenders view this favorably when underwriting multifamily loans in military-adjacent submarkets.

What Should You Know About San Diego Multifamily Loan Underwriting?

Lenders evaluating multifamily loans in San Diego pay close attention to several market-specific factors that borrowers should be prepared to address.

Debt Service Coverage Ratio (DSCR): Most lenders require a minimum DSCR of 1.20x to 1.25x. Given San Diego's strong rents, many stabilized properties clear this threshold comfortably. However, for newly constructed or lease-up properties, you may need to demonstrate projected stabilized NOI. Use our DSCR calculator to check where your property stands.

Loan-to-Value (LTV): Conventional lenders typically cap at 70% to 75% LTV for multifamily. Agency loans can go up to 80% LTV for qualified borrowers and properties. Bridge lenders may offer 75% to 85% of purchase price for value-add deals.

Rent Comparables: Lenders will scrutinize your rent roll against local comps. In submarkets with heavy new construction like Downtown or Mission Valley, lenders may apply a discount to your projected rents to account for concession pressure.

Environmental and Seismic Considerations: San Diego falls within seismic zones, and many older apartment buildings may require retrofit assessments. Phase I environmental reports are standard for commercial multifamily transactions.

Rent Control Awareness: California's Tenant Protection Act (AB 1482) caps annual rent increases at 5% plus local CPI (maximum 10%) for buildings 15 years or older. Lenders factor this into their underwriting models when projecting future NOI growth.

What Is the Process for Getting a Multifamily Loan in San Diego?

Securing multifamily financing in San Diego follows a structured process that typically takes 30 to 90 days depending on the loan type and complexity.

The timeline varies by loan type. Bridge loans and hard money can close in as little as 2 to 3 weeks. Conventional bank loans typically require 45 to 60 days. Agency loans from Fannie Mae or Freddie Mac may take 60 to 90 days due to additional underwriting requirements.

Having your documentation organized before you begin, including rent rolls, trailing 12-month operating statements, tax returns, and a property condition summary, will significantly accelerate the process.

How Can Value-Add Investors Finance Multifamily Projects in San Diego?

Value-add multifamily investing is one of the most active strategies in San Diego, particularly as older apartment stock becomes dated relative to the wave of new Class A deliveries.

Typical value-add plays include unit interior renovations (kitchens, bathrooms, flooring), common area upgrades, adding in-unit laundry, converting underutilized spaces, and improving energy efficiency to reduce operating costs.

The financing approach usually involves two phases. First, a bridge loan covers the acquisition and renovation costs. Bridge lenders in the San Diego market typically provide 75% to 85% of purchase price plus 100% of renovation costs (subject to a total loan-to-cost limit). Second, once the property is stabilized at higher rents, you refinance into a permanent loan, often through an agency or conventional program, extracting your renovation capital and locking in a lower long-term rate.

This strategy works especially well in neighborhoods like North Park, City Heights, Normal Heights, and El Cajon, where older 1960s and 1970s apartment buildings trade at significant discounts to replacement cost and can achieve meaningful rent increases after renovation.

What Tax Benefits and Incentives Apply to San Diego Multifamily Properties?

San Diego multifamily investors can access several tax advantages that improve after-tax returns.

Cost Segregation: Accelerated depreciation through cost segregation studies can front-load tax deductions, particularly valuable for larger acquisitions. Multifamily properties benefit from shorter depreciation schedules on components like appliances, flooring, and site improvements.

Opportunity Zones: Parts of San Diego, including sections of Downtown, Barrio Logan, City Heights, and National City, are designated Opportunity Zones. Investments in qualified Opportunity Zone funds can defer and reduce capital gains taxes.

1031 Exchanges: Many San Diego multifamily investors use 1031 exchanges to defer capital gains when selling one property and acquiring another. The San Diego market's strong fundamentals make it both a target market for incoming 1031 exchange buyers and an exit market for investors trading into other regions.

Energy Efficiency Incentives: San Diego Gas and Electric offers rebate programs for multifamily properties that install energy-efficient systems. These improvements can reduce operating expenses and increase NOI, which directly benefits your loan qualification metrics.

Frequently Asked Questions About San Diego Multifamily Loans

What is the minimum down payment for a multifamily loan in San Diego?

Most conventional multifamily loans require 20% to 30% down. Agency loans from Fannie Mae or Freddie Mac can go as low as 20% down for qualified properties and borrowers. SBA loans may allow 10% to 15% down for owner-occupied multifamily properties. The exact requirement depends on property size, condition, your experience, and the loan program selected.

Can I get a multifamily loan for a 2-4 unit property in San Diego?

Yes, but financing differs based on occupancy. If you live in one of the units, you can use residential loan programs (FHA, VA, conventional) with lower down payments and rates. If the property is purely an investment, you will need a commercial or DSCR loan program. For investor-owned 2-4 unit properties, DSCR loans are often the most straightforward option.

How do San Diego's high property values affect multifamily loan qualification?

San Diego's elevated property values mean larger loan amounts, which can work in your favor for agency lending where minimum loan sizes apply. However, higher acquisition costs also mean you need to demonstrate stronger cash flow to meet DSCR requirements. The market's high rents generally offset the higher values, keeping DSCR ratios within acceptable ranges for most stabilized properties.

Are there prepayment penalties on San Diego multifamily loans?

Most commercial multifamily loans include some form of prepayment protection. Agency loans typically use yield maintenance or defeasance, which can be costly in the early years. Bank loans may feature step-down prepayment penalties (e.g., 5-4-3-2-1%). Bridge loans generally have shorter lockout periods of 6 to 12 months. Understanding the prepayment structure is critical if you plan to sell or refinance within a few years.

What credit score do I need for a multifamily loan in San Diego?

Most lenders require a minimum credit score of 660 to 680 for conventional multifamily loans. Agency loans typically require 680 or higher. DSCR loans may be available with scores as low as 620, since the primary qualification metric is the property's income. Bridge and hard money lenders are generally the most flexible on credit, focusing more on the property's value and the borrower's equity position.

How long does it take to close a multifamily loan in San Diego?

Timelines range from 2 weeks to 90 days depending on the loan type. Hard money and bridge loans can close in 14 to 21 days. Conventional bank loans typically close in 45 to 60 days. Agency loans require 60 to 90 days. Having complete documentation, clean title, and a current appraisal ready can shorten these timelines significantly.

Ready to Finance Your San Diego Multifamily Property?

The San Diego multifamily market offers a rare combination of strong rental demand, military-backed housing needs, a diversified employment base, and geographic supply constraints that support long-term property values. Whether you are a first-time apartment investor or an experienced operator scaling your portfolio, the right loan structure can help you maximize returns in this market.

Our team specializes in commercial multifamily financing across San Diego County, from small 4-unit properties in Hillcrest to large apartment complexes in Mission Valley and everything in between. We work with a wide network of lenders to match you with the best available rates and terms for your specific situation.

Contact us today to discuss your San Diego multifamily loan needs and get a personalized rate quote.