Understanding The Real Estate Investment Capital Stack for Passive Investors
Understanding The Real Estate Investment Capital Stack for Passive Investors
Have you ever had Belgian waffles before? If you haven’t, I want to inform you that they are devilishly delicious. Especially when you stack them on top of each other, fluffy waffle after fluffy waffle, drizzle on your favorite maple syrup, some fresh fruit and a dash of powdered sugar and, if you really want to indulge, some whipped cream.
OK you can wipe the water from your mouth.
Financing real estate investments is a lot like Belgian waffles. OK, they may not make your mouth water, but I digress. So how are they they similar? Allow me to introduce you to the capital stack; the layers of funds (i.e. money) used to finance a real estate investment.
Defined: The Capital Stack
Capital refers to money used in an investment.
The capital stack of a real estate investment is the composition of all the different means/sources of funds used to finance a transaction and the related rights (and responsibilities) to income/profits (or losses/obligations) generated by the investment and the ownership of the property.
