Supercharge Your Real Estate Business with a Diverse Capital Stack

by Matt Rodak, Fund That Flip

A s a real estate investor, you’re constantly looking for ways that you can grow your real estate business. Some investors may be perfectly content to maintain their current deal flow, but if you’re look - ing to reach the next level of scale, it’s valuable to know how you can use different types of funding source for different types of projects and strategies. Having a diverse capi- tal stack can be a game-changing strategy for increasing your veloci- ty. To best understand how you can create the optimal capital stack for your business, it’s important to be well-informed of the various sources of funding you can utilize, the pros and cons of each, and how they can fit to your unique investing plan. To decide how to use this strat- egy, it’s important to start with the basics: what exactly is a capital stack? “Capital stack” is a term used

money is often more flexible than a bank loan or a hard money lender, so this could be a great choice for an investor who may not meet the exact criteria that other lenders require. Terms and rates can be more agree- able because the lender is often an individual and is not tied to institu- tional lending boxes or standards. If you operate at a relatively low velocity and have time to manage relationships, private money might be a favorable addition to your capi- tal stack. The flexibility that comes with private money could be a huge selling point for some borrowers, but it is still important to consider some of the drawbacks that come with it. As private money is often relationship-based, it can require a hefty amount of networking that may demand a lot of time on the part of the borrower. Furthermore, private money is often much more

to describe the various sources of financing a real estate investor has access to deploy into their real estate investment projects; these most often include private money, hard money, conventional bank loans, or personal funds. Though there isn’t a perfect recipe for building a capital stack, each source of funding has its benefits, and understanding the dif - ferences can have a huge impact on the speed of execution and ultimate- ly the profitability of your projects. Oftentimes, the best capital stack is one that aligns with your exit strat- egy--or strategies!--and offers the most flexibility for your business. PRIVATE MONEY Private money refers to funding that typically is based on a relation- ship between two parties, such as a friend or family member (think of the proverbial “rich uncle”). Private


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