Table of Contents
What Is Gap Funding?
Gap funding real estate is short-term capital that covers the difference between what a lender provides and what’s required to close or complete a project.
Examples:
- Down payments lenders don’t cover.
- Carrying costs (taxes, insurance, utilities).
- Rehab overruns not included in the original loan.
As Scott Jelinek (Slow Flip investor) says: “It’s not the deal that kills you — it’s the gaps in funding.”
Why Gap Funding Matters for Investors {#why-gap-funding-matters}
Without gap funding:
- Deals fall through when down payments are too high.
- Rehab projects stall when unexpected costs hit.
- Wholesalers lose credibility if deposits can’t be funded.
With gap funding:
- You leverage other people’s money (OPM) to scale.
- You keep your cash free for emergencies or new opportunities.
- You avoid losing deals over small shortfalls.
When to Use Gap Funding
- Fix-and-flips → Cover down payments & rehab costs.
- Wholesaling → Secure earnest money deposits (EMDs).
- Multifamily deals → Bridge equity until investor capital is raised.
- Commercial projects → Carry costs until refinance.
Types of Gap Funding
- Private money gap loans – Friends/family/partners providing quick cash.
- Institutional gap funding – Specialized lenders like us.
- Joint venture partners – Exchange equity for gap capital.
- Equity share agreements – Partner takes % ownership until refinance.
Gap Funding Real Estate: State-by-State Examples
California
- High entry costs (EMDs often $20k–$50k).
- Example: Los Angeles investor needed $25k gap for duplex rehab. Gap loan → $62k profit.
Florida
- Fast-paced wholesaling markets.
- Example: Orlando wholesaler used $15k gap for EMD, closed, made $28k assignment fee.
Texas
- Big multifamily deals require large equity injections.
- Example: Houston group needed $250k gap to close on $10M deal. Gap funding → 22% IRR after refinance.
Missouri
- Midwestern flips still need $5k–$15k gap for deposits/rehabs.
- Example: St. Louis flipper short $12k on rehab budget. Gap loan → deal saved, $40k net profit.
Gap Funding Real Estate: Real-Life Investor Stories
- Dallas Investor: Short $18k on a fourplex rehab. Gap loan bridged costs → property sold for $85k profit.
- Miami Wholesaler: Missed out on $20k assignment fee until gap funding covered the EMD.
- LA Syndicator: Gap funding filled $200k shortfall in equity raise → deal closed, $500k annual cash flow created.
As Pace Morby teaches: “Money is never the problem. Structure is.” Gap funding is how you solve the structure problem.
Challenges With Gap Funding
- High cost of capital – Gap loans are short-term and riskier.
- Legal structuring – Must be documented properly (JV, loan docs).
- Scalability limits – Too much reliance = thin margins.
- Predatory lenders – Some take equity without fair terms.
How We Structure Gap Loans (Our Solution)
We provide:
- 100% coverage of shortfalls – down payments, EMDs, rehabs.
- Flexible terms – loans, JV agreements, or equity shares.
- Scalability – repeat deals by liquidating notes when possible.
- Legal protections – attorney-prepared docs, title-verified.
- Fast funding – deals funded in as little as 24 hours.
This means you never lose a deal because of missing capital.
Gap Funding Real Estate: Best Practices for Investors
- Line up gap funding before you need it.
- Always protect partners with proper legal docs.
- Budget conservatively — assume rehab overruns.
- Use gap funding to scale, not to cover bad deals.
FAQs
Q: What is gap funding in real estate?
Gap funding bridges shortfalls between a primary loan and the cash required to close.
Q: Can gap funding cover EMDs?
Yes — many wholesalers use gap funding for deposits.
Q: How much does gap funding cost?
Depends on structure — often higher rates due to short-term nature.
Q: Is gap funding risky?
Yes, if used poorly. Structured properly, it’s a tool to scale.
Q: Does your company provide gap funding?
Yes — for wholesaling, flips, multifamily, and commercial deals.
