v2.38 - No Investor Left Behind: The Capital Stack

If you buy a building with all cash, there’s one “layer” of money in it: yours. Add a bank loan, and now there’s two, with the bank paid before you are. Add a second position loan, and now there are two people getting paid before you. That order of layers is known as the capital stack – and every real estate deal has one. In this No Investor Left Behind episode, Dustin and Adam walk through each layer from bottom to top, who gets paid first, which layer has the most risk, and what each layer can do to get its money back if a deal goes south. They also get into what to ask a sponsor before you invest, including whether they could later raise preferred equity to rescue the deal (which would get paid before your common equity), and whether they’d even have to tell you if they did. Your position in the capital stack shapes both how much you can earn and how likely you are to be paid back. Key Timestamps: 00:00:00 Knowing where your money sits 00:01:06 Investing in Northern California 00:05:08 What the capital stack is 00:07:49 Why the order matters 00:09:08 Mezz debt and pref equity 00:14:50 Most investing = common equity 00:16:43 What happens when a deal fails 00:17:36 Asking about rescue capital See all Wealth Independence episodes at https://wealthindependencepod.com Connect with Dustin: Big Spring Capital: https://bigspringcap.com LinkedIn:   / thedustinbailey   Twitter/X: https://x.com/TheDustinBailey Connect with Adam: Bidwell Capital: https://bidwellcapitalfund.com