U.S. Real Estate Investors Face Refinancing Risk From Debt-to-Hold Mismatch

Written by:

Rudi Davis

Date:

12 Apr 2026

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Private lenders are reporting a growing mismatch between how real estate investors finance acquisitions and how long they actually hold properties. Many borrowers structure deals expecting rising values to resolve leverage problems before the debt matures. This approach carries significant risk.

H. Jack Miller, president and CEO of Gelt Financial, says the problem goes beyond current market weakness. It reflects a persistent failure to align the debt structure with actual holding periods.

“People expect values to go up, but that doesn’t always happen. They have long-term horizons, but short-term debt, and that’s a recipe for disaster,” Miller says.

Gelt Financial is a national private lender founded in 1989. The company specializes in bridge loans averaging $365,000 with terms of two to three years. Miller notes the company now holds 47 loans outstanding for more than 15 years, showing that borrowers often keep properties well beyond their original debt terms. This gap between expected and actual hold periods leaves investors exposed to refinancing risk and market downturns, particularly when property values do not rise enough to support new loans at maturity.

Overleveraging Spans All Property Types

The problem of excessive leverage is not limited to one property type. Miller says the problem affects single-family, multifamily, and commercial real estate. While recent coverage has focused on multifamily distress, the same pattern appears across other sectors.

“A lot of people overpaid for real estate. They took high-leverage loans, and now the real estate is worth less than the debt,” Miller says.

Investors have often assumed that appreciation would generate enough equity to refinance into permanent debt. When prices stagnate or fall, borrowers are often unable to refinance or sell without taking losses. As a result, many remain current on payments but cannot exit their debt positions.

The problem is most acute for investors who bought in 2021 and 2022, when competition pushed prices higher, and underwriting standards weakened. These investors now face bridge loan maturities on properties worth less than their outstanding debt, leaving them dependent on a market rebound or fresh capital to avoid default.

Qualified Borrowers Are Scarce

Miller points out that the challenge in private lending is not a lack of demand, but a shortage of qualified borrowers. Gelt Financial continues to receive loan inquiries, but most applicants fail to meet underwriting standards because their properties are underwater or their leverage is too high.

“The problem isn’t demand. It’s finding qualified people,” Miller says.

Private lenders remain willing to provide financing, but only when borrowers carry sufficient equity to offset downside risk. When properties are worth less than the debt, even private lenders cannot make the numbers work. When the market stalls or corrects, borrowers are left with no viable path to refinance or sell at a profit.

When Borrowers Wait Too Long

The rise in overleveraged properties has brought a corresponding increase in distressed borrowers seeking last-resort financing. Miller says the volume of troubled loans in the market has grown considerably. “There’s much more distress in the market than we’ve seen in a while,” he says.

Yet many borrowers in crisis do not seek help early. Instead, they delay until their options have narrowed significantly. “Unfortunately, they ignore the problem until it’s a crisis,” Miller says. By that point, the window for resolution is narrow, and the range of available solutions is limited.

This pattern compounds the original problem. A borrower who acts when a bridge loan is approaching maturity has more options than one who waits until default is imminent. Early intervention can mean the difference between a refinance, a negotiated extension, or a forced sale. Delay frequently eliminates the first two. Even lenders with higher risk tolerance and faster turnaround times cannot reverse the damage done when borrowers treat an escalating leverage problem as something that will resolve on its own.

The broader implication is that debt structure discipline does not end at origination. It requires active monitoring throughout the hold period, with contingency planning built in well before maturity. Borrowers who lack that discipline often find that by the time they acknowledge the problem, the market has made the decision for them.

Lessons for Investors and Lenders

Pairing long-term ownership with short-term, high-leverage debt has left many real estate investors exposed as market conditions shift. The key lesson, Miller suggests, is that relying on appreciation as a primary exit strategy is risky and unsustainable. Investors need to align their debt structures with realistic holding periods and assume that values may not rise as expected.

For private lenders, the current environment rewards discipline and careful underwriting over aggressive growth. As more distressed deals emerge, only those with strong equity positions and credible exit strategies will qualify for new financing. The coming months will test whether borrowers and lenders have learned to prioritize fundamentals over speculation.