How have you used gap lending to structure and close a real estate deal?

Question

For investors who have used gap funding/gap lending, I’d be interested to hear about your experience.

When the primary lender doesn’t cover the full capital requirement, how did you handle the remaining funding gap? Did you use gap financing, private money, a JV partner, or another strategy?

I’d especially like to hear about:

• What type of deal you used it for—fix & flip, rental, commercial, construction, etc.
• How much of the funding gap needed to be covered
• How you structured the gap financing alongside your primary loan
• What terms or costs you considered before moving forward
• Whether the additional financing helped you close a deal you otherwise would have missed
• What challenges or lessons you learned from the experience

What type of deal you used it for—fix & flip, rental, commercial, construction, etc.

How much of the funding gap needed to be covered

How you structured the gap financing alongside your primary loan

What terms or costs you considered before moving forward

Whether the additional financing helped you close a deal you otherwise would have missed

What challenges or lessons you learned from the experience

For those who have used gap lending, would you use it again on your next deal, and what would you do differently?

James Jones · Answer

I'll give you the honest answer from the other side: I don't use gap lending. I BRRRR in Memphis, and my capital gap gets closed by the refinance, not by stacking more debt.

Here's how I structure it. I buy single-family under $100K all-in with short-term money, rehab with standardized scopes, then refinance into a DSCR loan at 70-80% LTV. The refi pulls most of my capital back out. If a deal needs gap financing on top of the primary loan to close, it's telling me the numbers are too thin — I'd rather pass than layer expensive junior debt on a marginal deal.

The lesson I've learned: the cheapest capital is the capital you get back. Every dollar I leave trapped in a property is a dollar that can't fund the next one, and deal flow is my bottleneck. So I underwrite the refi first — price, ARV, rent, rehab — and if the takeout loan doesn't return my capital, it's not my deal.

How have you used gap lending to structure and close a real estate deal?

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