What is Transitional loan?

A partially leased building that a bank will not finance until occupancy stabilizes is a transitional deal.

RTL is the umbrella the private lending market uses for short-term loans on residential property that is moving from one state to another — being bought and renovated, being repositioned, or being held while a longer-term facility is arranged. The purchase-and-rehab loan and the bridge both sit inside it, which is why the same deal can honestly be described by either name.

The distinction that actually matters to a borrower is not the label but the exit. Every transitional loan is written against a specific way it gets repaid: a sale, a refinance onto a term loan, or a lease-up that makes the property bankable. Underwriting spends most of its attention there, because a transitional loan with no credible exit is simply a short loan on a property nobody has agreed to take out.

The category exists because conventional lenders underwrite stabilised cash flow. A building that is half-leased, mid-renovation, or newly acquired does not have it yet, so it falls outside those programmes regardless of how sound the plan is. That gap is the whole reason the transitional market is priced and structured differently.