California Bridge Lending with Rubicon Mortgage Fund

Inside Rubicon Mortgage Fund: A Conversation with Vance Hillstrom

Vance opened the conversation by sharing how market dynamics have shifted in the past couple of years. While Rubicon used to fund about 10 loans out of every 100 submissions, they’re now reviewing 250–300 opportunities each month and closing only 5–6. Refinances dominate the pipeline, but most require cash-in from borrowers, as declining property values and tighter credit standards make many deals difficult to pencil.

This stems from a “collision between cap rates and interest rates,” Vance explained. Properties purchased in the last 4–5 years—especially in markets like San Francisco—are now worth significantly less, even if nothing operationally has changed. In rent-controlled areas, for example, cap rates have expanded from 3.5% to 5.5%, slashing valuations by up to 40%. The problem is compounded by banks requiring stronger debt coverage ratios and more restrictive underwriting.

Rubicon’s loan extensions reflect this new environment. Historically, their average payoff timeline was 12 months; today, it’s closer to two years. While defaults and foreclosures are rising across the private lending sector, Rubicon has avoided taking back property in over five years, thanks to its careful underwriting and borrower-friendly extension policies.

Inside the Rubicon Lending Model

Rubicon’s lending guidelines reflect its disciplined and relationship-driven approach. The firm lends between $500,000 and $15 million, but most deals fall in the $1M–$5M range. Their typical max LTV is 60%, occasionally reaching 65% or 70% under exceptional circumstances. Interest rates range from 8.75% to 10.75%, and all deals are underwritten in-house without appraisals.

This no-appraisal policy allows for quick turnaround and ensures every loan is backed by a site visit and direct valuationfrom someone on Vance’s team. Borrowers pay a $7,500 due diligence deposit—most of which is credited back at closing—to help filter out window-shoppers and commit to the process.

Rubicon does consider cross-collateralization—especially in scenarios involving reverse 1031 exchanges—but generally prefers single-asset deals. Construction loans and rehab projects are underwritten carefully with an emphasis on real costs, not speculative ARV.

Portfolio Composition & Property Preferences

While Rubicon’s portfolio is 100% California-focused, it’s highly diversified across property types. Commercial properties account for 65% of the portfolio, with multifamily at 20% and 1–4 unit residential investments at 15%. Vance has long preferred industrial real estate, citing its straightforward operations and strong resale value. However, they’ve grown more active in other sectors—including hospitality and office—as falling values create opportunities for strong borrowers with equity.

One unexpected standout in their portfolio? Gas stations—which currently make up 4% of Rubicon’s holdings. Vance views them as resilient, tax-revenue generating businesses that remain underbanked and misunderstood. He also expressed a cautious openness to assisted living deals, though he admits that space is outside his core area of expertise.

Geographic Reach: From the Bay to the Border

Rubicon’s bread-and-butter remains the Bay Area and Northern California, where the team has deep knowledge of submarkets like the Central Valley, Lake Tahoe, and Sacramento. While they’ll lend in less-populated areas, deals must justify the risk through pricing and LTV structure.

Meanwhile, Southern California is playing a larger role in the firm’s growth strategy. Vance mentioned increased activity in San Diego, Inland Empire, and Palm Springs—where he owns a second home and is deepening market familiarity.

Behind the Scenes at Rubicon

Rubicon operates as a true balance sheet lender, funding all deals through its internal mortgage fund, which was established in 2007. The fund has over 325 investors and offers monthly distributions or automatic reinvestment. Its average historical return is 7.48% over 19 years, with no external origination fees or management conflicts—everything goes into the fund before profits are distributed.

The firm is staffed by a tight-knit, 12-person team. Sales, underwriting, legal, and servicing are all handled in-house. The company’s CFO also serves as its in-house legal counsel, streamlining the loan closing process. Aside from one salesperson based in Sacramento, everyone works from the Lafayette headquarters.

Sample Deals: Real World Lending in Action

Throughout the interview, Vance shared several deal examples to illustrate Rubicon’s lending flexibility:

• A $3.9M loan for an empty Walgreens in Lafayette, acquired by a foreign investor with plans for redevelopment.

• A cross-collateral loan using a partially vacant Pleasanton office building and a fully-owned Peninsula industrial property, totaling $11M.

• A $1.3M loan for a contractor in Orinda doing a high-end residential flip—with Rubicon doing a second behind their own first.

• A retail loan in San Diego, funded at 60% LTC for an investor planning to renovate and occupy the space.

These examples highlight Rubicon’s ability to be creative while maintaining strict credit discipline. Whether you’re a broker, investor, or borrower, Rubicon offers a combination of speed, transparency, and capital reliability.

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