Real Estate Bridge Funds: An Expert Guide to Investing in a Volatile Market
Investors looking for passive income are buying into these funds, which offer capital to borrowers for short-term financing.


In volatile markets, it's often the creative investors — not just the conservative ones — who stay ahead. Real estate is no exception.
While many investors are sitting on the sidelines waiting for clarity, others are gaining exposure through lesser-known vehicles, such as bridge funds — investment strategies that lend short-term capital to real estate projects and generate potential returns through interest income and fees.
What are bridge funds?
Bridge funds pool investor capital to provide short-term loans — commonly known as bridge loans — to real estate operators and developers. These loans typically finance transitional properties or time-sensitive acquisitions before the borrower secures permanent financing.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
While bridge loans have long been a tool for developers, what's less widely known is that real estate investors can also participate in this space through professionally managed funds.
These funds issue loans backed by real estate collateral, and potentially earn interest, origination fees and other upside. Because most bridge funds are offered through private placements, participation is generally limited to accredited investors.
To qualify as accredited, an individual must meet specific income or net worth thresholds, such as having a net worth over $1 million (excluding a primary residence) or annual income exceeding $200,000 individually or $300,000 with a spouse.
How bridge funds work
Bridge funds serve two key groups:
- Borrowers. Real estate sponsors often need fast, flexible capital — whether they’re acquiring a property, making improvements or bridging to permanent financing. With banks tightening lending standards, these short-term loans help close deals on tight timelines.
- Investors. Instead of buying property yourself, you can pool money with others to fund these short-term loans. You’re not managing tenants or overseeing renovations. You’re stepping in when capital is needed most — and potentially earning income for providing that speed and flexibility.
The rise of bridge funds for investors
Bridge financing has become especially relevant in today’s real estate environment.
Interest rates are high, traditional financing is slower and many borrowers face tighter capital constraints. This has opened the door for private bridge lenders — and the investors who fund them.
For investors, bridge fund investments may offer:
- Passive income. Consistent income from loan interest and fees
- Shorter hold periods. Shorter durations than typical real estate investments
- Default protection. Collateralized by real estate assets pledged to secure the loan
For investors, this means the potential to earn attractive risk-adjusted returns while sitting higher in the capital stack than an equity investor.
In many cases, the loans are collateralized by the property itself, and borrowers are incentivized to repay quickly to transition to longer-term, lower-cost financing.
What investors should know
Bridge funds aren't magic. Like any investment, they come with risk, especially if the fund is poorly managed or if deals underperform.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
Loan defaults, delays in refinancing and valuation mismatches can all affect returns.
That’s why due diligence is essential. Investors should closely evaluate:
- Experience. The fund manager’s experience and underwriting track record
- Strategies. Diversification strategy (by asset type, geography and borrower)
- Structure. The fund’s liquidity terms and fee structure
An opportunity for the right investor
Bridge funds aren't just about plugging gaps, they're about seizing opportunities. Real estate sponsors use bridge loans to act quickly and reposition assets, and investors help power that flexibility without taking on the full risk of owning property.
In today’s uncertain equity markets, bridge lending can offer a creative, income-generating and countercyclical way to stay active in real estate — while others wait on the sidelines.
Related Content
- The Future of 1031 Exchanges Under Trump Looks Bright
- Why Canadian Snowbirds Are Ditching Their US Homes
- Will 2025 Be a Good Year to Sell Your House?
- Capital Gains Tax on Real Estate and Home Sales
- Eight Signs You Might Be Ready to Start Investing in Real Estate
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Edward Fernandez is President and Chief Executive Officer of 1031 Crowdfunding. With three-year revenue growth of 482%, 1031 Crowdfunding received ranking No. 1348 among America’s Fastest-Growing Private Companies on the Inc. 5000 list. Mr. Fernandez holds FINRA Series 6, 7, 24, and 63 licenses and is a Forbes Business Council Member. He has over 20 years of inside and outside sales experience and is personally involved in raising over $800 million of equity from individual and institutional investors through private and public real estate offerings. He is highly skilled in the simplification of highly complex real estate strategies and sophisticated investments and is regularly featured on Forbes, Inc., and the TD Ameritrade Network.
-
‘I Play Pickleball in Retirement.’ Is It HSA-Eligible?
Retirement Tax Staying active after you retire may be easier with these HSA expenses. But there’s a big catch.
-
What New Tariffs Mean for Car Shoppers
The Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
Five Mistakes to Avoid in Your First Year of Retirement
Retirement brings the freedom to choose how to spend your money and time. But choices made in the initial rush of excitement could create problems in future.
-
I'm an Investing Expert: This Is How You Can Invest Like Warren Buffett
Buffett just invested $15 billion in oil and gas, and you can leverage the same strategy in your IRA to potentially generate 8% to 12% quarterly cash flow while taking advantage of tax benefits that are unavailable in any other investment class.
-
Integrity, Generosity and Wealth: A Faith-Based Approach to Business
Entrepreneurs who align their business and financial decisions with the biblical principles of integrity, generosity and helping others can realize impactful and fulfilling success.
-
How to Invest as the AI Industry Grows Up
Here’s where to find the winners as artificial intelligence transitions from an emerging technology to an adolescent one.
-
How Much Income Can You Get From an Annuity? An Annuities Expert Gets Specific
Here's a detailed look at income annuities and the factors that determine your payout now and in the future.
-
Your Paycheck Stops in Retirement, But Your Life Doesn't: An Expert Guide to Planning for a Confident Future
Social Security will replace only about 40% of your salary, on average. A solid financial plan will help you plug the gap so you can rest easy in retirement.
-
Are You Jeopardizing Your Future to Help Your Adult Kids? An Expert Guide for How to Not Do That
If your adult child needs financial help, of course you want to provide it, but crafting a plan that also protects your financial and emotional well-being is vital.
-
Stock Market Today: Stocks Slip Ahead of Big Earnings, Inflation Week
Perhaps uncertainty about tariffs, inflation, interest rates and economic growth can only be answered with earnings.