Almost every new residential building in San Francisco is infill: a narrow lot, a teardown cottage, a side yard or an underused corner. The constraint is rarely demand for the finished units. It is the path through Planning and the cost of building on a tight urban site.
In short: LendingStreet finances ground-up construction of 1 to 8 unit investment properties in San Francisco, including infill duplexes and fourplexes, small 5-8 unit buildings and spec homes. Loans are sized on loan-to-cost with terms set per project, and funds are released through a draw schedule after inspections. Approved plans or a clear permit path, a realistic budget and an experienced builder or general contractor are what get a project approved.
Typical projects replace a small cottage or garage with a two- to four-unit building, add a new home on a vacant lot in the Excelsior, Bayview or Outer Sunset, or build a small 5-8 unit building on a corridor lot. State laws on accessory dwelling units and lot splits, along with recent city zoning changes, have opened more parcels to added density. Confirm with the Planning Department what your specific parcel allows before you buy it.
Most lots are 25 feet wide and many are steep. Hillside sites in Bernal Heights, Diamond Heights and Twin Peaks often need retaining walls and deeper foundations, which shift the budget toward the structure rather than the finishes.
New buildings go through the Planning Department before the Department of Building Inspection issues the site permit and addenda. Projects that change the building envelope generally require neighborhood notification, and a discretionary review request from a neighbor can add months. Demolition of existing housing has its own review and replacement rules.
We finance projects that have approved plans or are far enough along that the remaining steps are predictable. A lot with no design, no Planning feedback and no permit history is usually too early for a construction loan.
This example is illustrative and not a quote. An investor buys a lot with a small, dated cottage for $1,150,000 and plans a new two-unit building. Hard costs are $1,450,000 and soft costs, including design, engineering, permits and city fees, are $350,000. Total cost is $2,950,000.
For illustration, the loan is sized at 75% of cost, or $2,212,500, and the investor contributes $737,500. Because interest accrues only on funds drawn, estimated interest over a 20-month build is about $232,312. The finished duplex is estimated at $3,600,000, and each new unit would lease near $6,800 a month, giving the investor a choice between selling or refinancing into a DSCR loan.
| Budget line | Amount |
|---|---|
| Lot with a small existing cottage | $1,150,000 |
| Hard costs (demolition, foundation, framing, finishes) | $1,450,000 |
| Soft costs (architect, engineering, permits, fees) | $350,000 |
| Total project cost | $2,950,000 |
| Loan sized at 75% of cost (illustrative) | $2,212,500 |
| Borrower equity | $737,500 |
| Estimated interest over 20 months on drawn funds | $232,312 |
| Estimated finished value of the duplex | $3,600,000 |
Many western neighborhoods sit on sand dunes, and parts of the eastern waterfront sit on fill. Your geotechnical report drives the foundation design, and the foundation often drives the schedule. Excavation on a shared-wall lot also requires shoring and neighbor notices, sometimes with pre-construction surveys of adjacent buildings.
Budget for these early-phase costs carefully. The first draws on a San Francisco project are often larger than on a comparable suburban build, since demolition, shoring and foundation work happen before anything goes vertical.
Funds are released in stages after an inspector confirms completed work. A typical schedule follows demolition and site prep, foundation, framing, rough mechanical and electrical, insulation and drywall, finishes and final. Matching each draw to a city inspection makes the process cleaner.
Use our construction draw schedule calculator to model how the balance grows and how much interest the project carries in each phase. Delays between phases, such as waiting on a special inspection or a utility connection, keep interest running without adding value, so build slack into the schedule rather than the budget alone.
Keep change orders documented. Inspectors compare completed work against the approved budget line by line, and an unapproved change can hold up a draw.
Urban infill is unforgiving. We look for a borrower or general contractor who has completed comparable ground-up projects, ideally in San Francisco or another dense, high-cost city. A borrower without a build track record can still qualify when paired with an experienced, licensed general contractor and a fixed-price or detailed cost-plus contract.
Expect us to ask for the contractor's license, insurance, references and a list of recent completed projects.
On a new two- to four-unit building, investors typically sell the whole building, pursue a condo map and sell units individually where allowed, or hold and refinance into a DSCR loan. New construction in San Francisco is generally not subject to the Rent Ordinance's increase limits, though just-cause rules can still apply, which affects how a holding owner thinks about long-term rent growth.
Under Prop 13, the county adds the value of new construction to your assessed value when the work is complete, so budget the higher tax bill in your hold analysis.
Send the parcel, plans or Planning status, budget and builder details through the form below, or call (877) 298-1001. We will review the cost breakdown, map a draw schedule and tell you what the project needs to move forward. Our California construction page covers statewide terms.
We need approved plans or a clear, near-term permit path. Lots with no design or Planning feedback are usually too early.
On loan-to-cost, using the land and the full hard and soft cost budget. Terms are set per project based on scope, location and experience.
It depends on the parcel's zoning and current state and city rules. Confirm with the Planning Department before you buy.
New buildings are generally exempt from the Rent Ordinance's increase limits, but other tenant protections may apply. Confirm with the Rent Board.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
For ground-up work in San Francisco, almost always. It sets the foundation design and helps confirm the budget.
You can sell or refinance into a long-term DSCR loan qualified on the new leases. Buildings with 9 or more units move to commercial financing.
Adding a unit to an existing building is usually a renovation rather than ground-up work. Tell us the scope and we will suggest the right loan, whether construction, fix and flip or a cash-out on the building.
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