Gap Funding for Real Estate Investors

What Gap Funding Is

Gap funding is short-term, business-purpose lending that closes the financial distance between two events in an investor's strategy — between buying a property and refinancing it into a permanent loan, between selling one property and acquiring the next, or between closing a deal and finishing the work that unlocks long-term financing. Terms typically run 6-18 months with interest-only payments, structured to be repaid from the next financing event or sale.

When Investors Use It

• Closing fast on a deal that needs permanent financing later. The opportunity won't wait for a 30-45 day conventional close, so gap financing funds the acquisition now and the borrower refinances into a DSCR or term loan once the property is stabilized.
• Bridging between sale and purchase. The investor is closing on a sale but the purchase is sooner; gap funding covers the down payment until the sale proceeds release.
• Funding a rehab that unlocks permanent financing. A property doesn't cash flow at acquisition but will after work. Gap funding covers the period between acquisition and stabilized refinance.
• Cross-collateralized capital. Equity from one property is used to fund another short-term, then repaid from the new property's long-term refinance.

What to Expect

• Term: 6-18 months typically, with extension options on some structures.
• Payments: Usually interest-only.
• Rate: Higher than DSCR or conventional, reflecting the short term and flexibility. Pricing varies by capital source and deal.
• Exit strategy: The lender wants to see a clear path to repayment — typically a refinance into permanent financing or a sale.
• Underwriting: Asset and exit driven, with borrower experience and credit considered. Faster and more flexible than long-term loans.

How Gap Funding Differs From Bridge

The terms are sometimes used interchangeably, but there's a useful distinction: a bridge loan typically refers to short-term financing on a single property until it's stabilized or sold, while gap funding more often describes capital that closes a structural gap in a transaction — between sale and purchase, between equity available and equity needed, or between acquisition and long-term refinance. Both are short-term and exit-driven; the difference is more about what the funding is plugging than how the loan is structured.

How LendingStreet Places Gap Funding

Gap deals tend to be time-sensitive and structure-specific. LendingStreet places gap funding through the capital sources in its 30+ lender network that specialize in short-term, exit-driven lending — matching the deal's timeline and exit plan to the source best equipped to fund it. Because gap funding is rarely "one size fits all," the multi-source model fits the product well: the right gap source for a 9-month sale bridge is often a different lender than the right one for a 12-month rehab-to-refinance.