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Why Gap Funding Real Estate Matters
You found the deal. Your hard money lender covers 80–90% of purchase and rehab. But there’s still a hole: the down payment, earnest money, and carrying costs.
That gap is what kills most new investors.
Gap funding fills that hole. It’s short-term financing designed to cover the missing piece so you can close deals, scale faster, and compete in markets where sellers expect big deposits and fast closings.
Our company specializes in gap funding — helping wholesalers, flippers, and creative investors close deals they otherwise couldn’t.
What Is Gap Funding Real Estate?
Gap funding is short-term financing that covers the portion of a deal not funded by your main lender.
Typical uses include:
- Down payments required by hard money/private lenders
- Earnest money deposits ($10k+ in hot markets)
- Carrying costs (taxes, insurance, utilities, loan payments)
- Minor repairs or contractor draws
Gap Funding vs Other Financing
| Type | Covers | Typical Use | Timeline | Cost |
| Hard Money Loan | 80–90% of purchase + rehab | Fix-and-flips | 6–12 months | Medium |
| Gap Loan | Down payment, EMD, carrying costs | Fill shortfall | 1–6 months | Higher |
| Transactional Funding | 100% purchase (same-day resale) | Double closings | 1–2 days | Higher |
| Private Loan | Flexible | Flips, rentals | 6–24 months | Variable |
Key Point: Hard money gets you most of the way. Gap funding gets you across the finish line.
How Gap Funding Works (Step-by-Step)
- Investor secures main loan (hard money/private).
- Gap lender funds missing costs: down payment, EMD, carrying costs.
- Investor completes rehab, resale, or wholesale.
- Gap lender repaid at closing — short-term, deal-based.
Real-Life Examples
Houston, TX (Fix-and-Flip)
- Deal: $250,000 distressed home
- Rehab: $60,000
- Hard money covered: $263,250 (85%)
- Gap needed: $46,750 (down payment + EMD + carry)
- Solution: Gap loan funded missing piece → investor resold for $400,000
- Profit: $60,000 after all costs
Miami, FL (Wholesale Double Closing)
- Deal: $180,000 condo
- Seller required: $15,000 EMD
- Investor had: $3,000 cash
- Solution: Gap lender covered $12,000 → deal closed
- Assignment profit: $25,000
Atlanta, GA (Slow Flip)
- Deal: $320,000 single-family
- Seller terms: $20,000 down, owner-financed balance
- Gap lender funded $20,000
- Investor rented property, refinanced in 5 years → equity gain $100k+
Benefits of Gap Funding Real Estate
- Close deals without draining personal savings
- Compete in markets with high EMDs
- Scale multiple projects at once
- Keep cash liquid for emergencies
Challenges & Risks of Gap Funding Real Estate
- Higher Cost – Short-term loans carry higher interest.
- Finding Reliable Lenders – Not all lenders understand gap structures.
- Repayment Timing – Must align with flip/wholesale exit.
Solution: Our company specializes in investor-focused gap loans — structured for real deals, covering down payments, EMDs, and carrying costs nationwide.
How to Qualify for Gap Funding Real Estate
- Based on the deal, not just your credit.
- Requirements:
- Strong ARV/profit margin
- Defined exit strategy (flip, wholesale, refinance)
- Contract + proof of end buyer (for wholesalers)
- New investors can qualify with loan sponsorships or JV partners.
Best Practices
- Match loan terms to your exit timeline.
- Only use gap loans for deal-critical expenses.
- Calculate profit after gap loan costs.
Build relationships with lenders who understand creative finance.
FAQs
What is gap funding in real estate?
Gap funding is short-term financing that covers down payments, EMDs, and carrying costs not funded by your main loan.
Do I need good credit for gap funding?
Not necessarily. Deals with strong profit margins qualify even if you’re new.
Can gap funding cover earnest money deposits?
Yes. We specialize in helping investors cover $10k–$20k+ EMDs in competitive markets.
How much can gap funding cover?
From $5,000 to $100,000+, depending on your deal.
Can new investors qualify?
Yes. With loan sponsorship or JV partnerships, beginners can close deals using gap funding.
