Find out what a capital stack for builders is in this video.
Builders who are building either large or small subdivisions generally get their loans from a bank. But often, builders cannot get all the funds they need so they get funds from secondary and even third lenders.
Generally, third lenders get a portion of the profits that a commercial real estate property gets when it's sold.
You capital stack is your lenders: A first deed of trust lender is “in line” first if a project goes south; they generally do not participate in any profits a property earns. A second deed of trust lender is, of course, second in line; they too do not often earn any equity in a deal.
A third deed of trust lender, however, because they are in last position to get any of their investment back when a real estate deal goes bad (i.e., a loan default), they often require not only higher fees and rates, but also a piece of any profits that a real estate property earns when it is sold.
For more information about hard money, hard money loans, and other real estate investing topics, contact hard money lender and real estate investor Beau Eckstein. His website is at:
or you can call him at 925-852-8261