Optimizing The Capital Stack In Today’s Market

Once you’ve found a great real estate investment opportunity, it will be time to raise capital for the transaction. This step typically involves structuring the layers of equity and debt. In simple terms, equity refers to money that you’ll bring to the table and debt includes the different types of financing you’ll secure for the deal. You’ll likely be working with a partner for this step, along with other investors and lenders.

For simplicity purposes, in this article we’ll look at two types of equity: common equity and preferred equity. In a future article, we’ll consider two forms of debt: senior debt and mezzanine debt. Let’s look at the equity portion of the capital stack in the following sections, along with the risks and rewards that each layer brings and how they play out in today’s market.