You have 45 days to identify and 180 days to close. In a tight San Francisco market, that clock can make or break your 1031 exchange into a multifamily asset. You want financing that fits the timeline, preserves your tax deferral, and clears local underwriting hurdles without surprises. In this guide, you’ll compare loan types, see how SF rules affect terms, and follow a simple checklist to keep your exchange on track. Let’s dive in.
What a 1031 means for your loan
Buying through a 1031 exchange comes with two firm deadlines: identify replacement property within 45 days and close within 180 days, measured from the sale of your relinquished property. These periods run at the same time, with limited disaster exceptions. You report the exchange on IRS Form 8824, so documentation has to line up with the loan file and closing timeline. Review the 1031 deadlines and basics and the Form 8824 instructions.
To fully defer taxes, you typically need to buy equal or greater value and replace equal or greater debt, or add cash to make up the difference. A net drop in mortgage debt can be taxable boot. That test often dictates how much you borrow and which loan structure you choose.
A Qualified Intermediary holds your proceeds so you never have constructive receipt. Lenders, escrow, and your QI must coordinate fund flows and documents, especially for reverse or improvement exchanges. Expect lenders to request direct verification of QI-held proceeds. Learn more about exchange structures and QI coordination in this overview of delayed, reverse, and improvement exchanges.
Financing options for SF multifamily 1031 buyers
Agency loans: Fannie Mae
Fannie Mae programs serve stabilized acquisitions with competitive fixed rates, nonrecourse options, and typical amortizations up to 30 years. Small-loan and DUS executions are common on 1031 purchases when timelines and documentation are set early. See how DUS and Small Loan executions differ in this program comparison.
What to know: Many Fannie lenders close 1031 acquisitions when the QI paperwork is clean and the asset is stabilized. DSCR and LTV vary by market and deal profile.
Agency loans: Freddie Mac SBL
Freddie Mac’s Small Balance Loan program often fits SF’s smaller buildings, generally in the roughly 1 to 7.5 million loan-size range. Terms can be competitive with streamlined underwriting through approved sellers and servicers. Explore Freddie Mac’s SBL platform and reporting to understand typical execution for small assets here.
What to know: SBL can align well with 1031 timelines for boutique 5 to 15 unit assets, provided the property is stabilized and well documented.
HUD/FHA multifamily
FHA-insured loans like 223(f) can offer high leverage and long terms for existing properties. Underwriting and approvals are extensive, which can be challenging inside 45 and 180 day windows unless you plan far ahead or structure the exchange accordingly. Program overviews are available from lenders that place HUD-insured debt, such as this summary of debt products.
What to know: Best for long-term holds and regulated or affordable assets. Build in extra time and align HUD steps with your exchange timeline.
Bank portfolio loans
Local and regional banks can be flexible on structure and timing. Expect 5 to 10 year terms, 20 to 30 year amortization, and LTV that reflects sponsor strength and property risk. Banks will examine rent rolls, income history, and SF-specific compliance. Many require clear verification that QI-held proceeds will fund closing and will look at debt replacement to help you avoid mortgage boot.
What to know: Bank credit standards can vary widely, especially for rent-regulated buildings. Early conversations prevent last-minute term changes.
Bridge and private loans
Bridge financing solves two common problems: speed and reverse exchanges. Short terms and higher rates are typical, but execution can win a deal when you need to close fast or park title with an accommodator. Plan your exit to permanent financing in advance and confirm the lender can work with the exchange structure.
What to know: Useful when the 45 day clock or a reverse exchange requires fast action. Price the carry and refinance timing up front.
CMBS and life company loans
CMBS delivers long-term fixed-rate options, though prepayment provisions can be strict. Life companies tend to offer conservative leverage with attractive rates for strong sponsors and stable assets. Both can work with 1031 acquisitions if you coordinate early and match the loan to your hold plan.
What to know: Mind prepayment and flexibility. These options fit predictability rather than heavy value-add.
Assumptions and seller financing
Assuming an existing loan can help preserve debt levels, which may reduce mortgage boot risk if the assumed balance meets or exceeds the debt you paid off. Seller carry can be arranged but needs careful structuring to avoid unintended taxable boot. Review key points on assumptions and seller financing in exchanges with your tax advisor and lender.
Delaware Statutory Trusts (DSTs)
DST interests can qualify as replacement property and often come with nonrecourse debt already in place. That can help you meet debt-replacement tests and close quickly if time is short. The tradeoff is limited control and strict operating restrictions at the sponsor level. Get a quick primer on DSTs and their constraints in this overview.
San Francisco factors that shape terms
Rent regulation and tenant protections
San Francisco has robust tenant protections and rent regulation. Lenders typically underwrite more conservatively for regulated buildings, which can reduce proceeds or raise DSCR requirements. Expect requests for a certified rent roll, lease terms, and a history of tenant payments.
Soft-story seismic retrofit
Many wood-frame multifamily buildings with five or more units built before 1978 fall under the Mandatory Soft Story Retrofit Program. Lenders will ask for engineering reports, compliance status, cost estimates, and reserve plans. Check a property’s status with the Department of Building Inspection’s program page.
Small-building dynamics
San Francisco’s inventory skews to smaller, vintage buildings. That makes small-balance programs and local banks especially relevant. Underwriting often focuses on unit-by-unit income, vacancy assumptions, and realistic capex for older systems and code compliance.
Insurance and code compliance
Insurance costs, including earthquake coverage, are major inputs. Any open code enforcement or retrofit orders will likely need to be addressed in escrow or reserved for at closing.
Align your loan with the 1031 timeline
Map the process before you list or buy
- Engage a Qualified Intermediary and tax counsel early so your sale and purchase documents match exchange rules.
- Pre-screen lenders that regularly close 1031 deals and know SF rent regulation and retrofit issues.
- Build a short list of financeable replacement properties before your sale closes, since the 45 day identification window is binding. Review the core 1031 timing rules.
Prepare the documents lenders expect
- Exchange agreement naming the QI and escrow statements showing QI control of funds.
- 12 month trailing operating statements, current rent roll and leases, property tax data, and any local compliance reports.
- Expect a lender checklist similar to conventional guides that outline QI verification and operating history needs. See a representative conventional lending guide for the type of documentation often requested.
Plan debt replacement to avoid boot
- If your relinquished property had debt, either borrow equal or greater on the replacement or add cash.
- Assumptions or DSTs can help satisfy the debt test, but structure carefully and confirm with your tax advisor.
Coordinate for reverse exchanges
- If you need to buy first, work with an accommodator who can hold title and a lender comfortable lending into that structure.
- Use bridge debt if necessary, then refinance to long-term permanent financing after your sale closes.
Quick checklist you can use
- Identify a QI and tax advisor before you go under contract.
- Pre-qualify with two or three lenders that finance 1031 acquisitions in SF.
- Confirm property financeability: rent roll, leases, soft-story status, insurance quotes.
- Match loan type to your strategy: agency for stabilized, banks for flexibility, bridge for speed, DST as a backup or passive option.
- Model debt replacement to avoid mortgage boot, then lock the plan with your lender and tax counsel.
- Keep communication tight among the QI, lender, escrow, and your advisory team so funds and closing documents align with 45 and 180 day milestones.
Ready to evaluate your options against live inventory and lender terms in San Francisco? Reach out to The Batlin Group for scenario planning, property valuation, and 1031-exchange support. Connect with Philip Batlin to map your exchange and financing path.
FAQs
How do 45 and 180 day deadlines affect 1031 financing?
- Lenders must coordinate closing and QI fund flows within those fixed windows, so you should pre-qualify early, gather documents up front, and align appraisal and third parties to avoid timing risk.
Which loans fit small San Francisco apartment buildings?
- Freddie Mac Small Balance Loans and bank portfolio loans often fit 5 to 15 unit assets, provided the building is stabilized and documentation is clear.
Can I assume a loan to help avoid mortgage boot in a 1031?
- Yes, if the assumed balance meets or exceeds the debt you paid off, it can help satisfy the debt-replacement test, subject to lender consent and proper documentation.
How do soft-story retrofit requirements impact my loan?
- Lenders will underwrite the engineering scope, cost, and timeline, then may reduce proceeds or hold back reserves until work is completed or compliance is verified.
Are DSTs a reliable backup if I am tight on the 45 day window?
- DSTs can close quickly and often include nonrecourse financing that helps you meet debt-replacement needs, but they limit control and flexibility, so review the sponsor and terms carefully.
