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 broker 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.