Episode 3: When Creative Financing Makes the Difference
A San Francisco Four-Plex Story About Strategy, Expectations, and Relationships
In San Francisco real estate, every property has a story — but so does every loan.
This one began inside a beautiful Victorian home in San Francisco that doubled as a real estate office. Frank and Katerina, two independent Realtors, ran their boutique brokerage there. Their Maltese dog, Charlie, greeted me enthusiastically every time I stopped by — a small detail, but one that captured the warmth, trust, and professionalism that defined their business.
Frank had spent many years working in international banking throughout Asia before opening his San Francisco real estate firm. His clients were primarily high-net-worth Asian investors focused on 5+ unit apartment buildings. Katerina specialized in single-family homes and condominiums, often working with buyers relocating to or investing in San Francisco.
Over the years, they referred many clients to me — borrowers whose financing needs went far beyond standard, off-the-shelf loan programs.
A Hybrid Buyer With a Very San Francisco Goal
One of those referrals was Karl.
Karl was a Korean client living in the Midwest, where he taught college-level physics. His daughter was attending school in San Francisco, and like many parents facing the city’s extreme housing costs, he explored a strategy that experienced investors often consider: purchasing a four-unit property.
The plan was straightforward in concept:
- Three units as rental investments
- One unit to house his daughter
In San Francisco, student housing can easily rival — or exceed — tuition and textbooks combined. Many parents take this approach, purchasing multi-unit or multi-bedroom properties so their child can live on-site while rental income helps offset ownership costs. In the best scenarios, it functions like a private dormitory — controlled, familiar, and financially intentional.
But even the best strategies only work when expectations are firmly grounded in reality.
The Financial Realities Many First-Time San Francisco Investors Miss
There are several realities that often surprise first-time multi-unit buyers in San Francisco — even those with strong incomes and savings:
- Property values often outpace rent growth, requiring larger down payments to make the numbers work
- Even with substantial equity, many buildings only break even on a monthly basis
- For many parents, the real return is housing stability for their child — not immediate profit
- Rent control, now statewide in California, limits rent increases even as expenses rise
- Student-occupied units can reduce conflict, but landlord risk remains real
- Much of San Francisco’s housing stock is 50–100+ years old, often with deferred maintenance
Frank and Katerina sat down with Karl early to set expectations. At best, they explained, this would be a long-term play — not a short-term win.
Karl believed a 30% down payment would be sufficient.
From his perspective, that same money could buy a large home outright back in the Midwest. His confidence wasn’t just academic — it was emotional, financial, and human.
Where Traditional Lending Said “No”
Karl did what most prudent borrowers do: he spoke with multiple lenders.
The result was consistent:
- The numbers didn’t pencil
- Underwriting guidelines wouldn’t support the deal
- No viable path forward
That’s when Katerina made the introduction.
“This is my money man,” she told him.
Creative Financing Isn’t About Rates — It’s About Structure
San Francisco is full of banks — but banks tend to offer very similar programs.
Yes, large institutions may advertise attractive rates, but those often come with:
- Required deposit relationships
- Limited flexibility
- Rigid underwriting criteria
As a mentor once told me:
“The big print giveth — and the little print taketh away.”
Karl’s transaction didn’t require a better rate.
It required the right structure.
I built the loan around real numbers:
- Principal & Interest (P&I)
- Estimated Property Taxes (T)
- Insurance (I)
Together, this forms PITI — the foundation of responsible loan planning.
The application, documentation, disclosures, and Good Faith Estimate followed. Three weeks later, the loan was approved — exactly as discussed — through one of my most flexible lending partners.
Karl removed his loan contingency. His 3% Earnest Money Deposit was now fully at risk.
When Numbers Become Real
As closing approached, Karl revisited the numbers — this time incorporating everything his Realtors had cautioned him about.
Suddenly, the margins felt tight.
He demanded that:
- The Realtors reduce their commissions
- I reduce my fully disclosed 1% compensation
The listing agent, Miranda — who was also one of the sellers — made it clear that walking away would mean forfeiting Karl’s EMD.
At that moment, the professor became the student.
Karl closed escrow.
The Long Game of Real Estate — and Relationships
Karl owned the building for two years. When he sold it, the price — after commissions — was essentially what he had paid.
Real estate is rarely a get-rich-quick strategy. It rewards patience, discipline, and long-term perspective.
While this transaction may appear purely transactional on the surface, its true value was relational.
Frank and Katerina continued referring clients for years.
Miranda — initially skeptical — later called me and asked,
“How did you get this loan done?”
My answer was simple:
Relationships. Experience. Creative problem-solving.
She’s referred investment clients ever since.
Final Thought for Borrowers and Advisors
San Francisco financing isn’t about finding a loan — it’s about finding the right structure, guided by professionals who understand both numbers and nuance.
Whether you’re a borrower, Realtor, CPA, financial planner, or estate professional, the right lending strategy can make or break a transaction.
And sometimes, the real return isn’t just financial —
it’s the relationships built along the way.
🔎 BROKER’S EDGE – Smarter Real Estate Lending
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📞 Steven Hook | Residential & Commercial Mortgage Broker
📱 415-260-9376 | 📠 415-449-3428
🎓 MBA | CMPS | CMA
👉 Schedule a Call
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This content is provided for informational purposes only and is not a loan commitment or guarantee of financing. Loan programs, rates, terms, and conditions are subject to change and borrower qualification. Individual results may vary.
