How stack deals work

Because the purchase is funded by a stack of layers: a new senior loan at the bottom, the seller's carried equity in the middle, and your ownership on top. Each layer has a different place in line to be paid.

Sellers typically get a stronger price than a cash buyer would offer, a large payment at closing, and steady monthly income on the balance. Because the balance is structured as an installment sale, the seller may be able to spread their taxable gain over several years instead of taking it all at once. The buyer also covers all closing costs, title insurance and commissions, so the seller has no out-of-pocket costs.

Title to the property through an LLC you manage, control of the asset, and all appreciation and income above your obligations to the lender and the seller. You also get acquisition terms that are hard to find with conventional financing: little or no down payment, a fixed return owed to the seller instead of a second mortgage, and the right to pay the seller off early without penalty.

Often the deal is structured so no down payment stays in the property, and some deals project cash back to you at closing. But you should plan for real money along the way:

• Earnest money when the PSA is signed.
• Due diligence costs such as inspections and appraisal.
• All closing costs, title insurance premiums, lender fees and any brokerage commissions.
• Liquidity to complete the first leg of closing. Our LOI contemplates the buyer closing the first leg in cash, with the new loan and escrow returning funds afterward. Ask the stacksforsale.com team how the deal you're looking at will be funded at closing.

No. Instead of recording a second mortgage or deed of trust, the seller becomes a minority member of the LLC that owns the property. Their stake has a fixed face amount (the carried balance), earns a preferred return paid monthly, and sits behind the senior lender but ahead of your ownership. It's paid off in full when the LLC sells or refinances the property, or at the stated maturity.

Each deal page lists the rate and payment. Payments usually start about a month after closing, alongside your first loan payment. Depending on the deal, they may cover the preferred return only, leaving the full balance due at payoff, or principal and interest. Read the seller terms on each deal carefully.

Usually when you sell or refinance. Our standard terms set a balloon: any remaining balance is due no later than 10 years after closing. If you can't refinance at or below 80% loan-to-value despite good-faith efforts, the balloon can be extended one year at a time, with 30 days' written notice, proof of your refinance efforts, the seller's agreement and any extension fee. You can prepay at any time without penalty.

This is the most important term to understand. The LLC operating agreement includes a Seller Protection Clause: if you miss payments, let insurance lapse, or otherwise fail your financial obligations, the seller can take over 100% of the LLC, and with it the property, without a foreclosure. That means you could lose the property and everything you've put into it. Only take on a deal you can comfortably carry.

Most deals are built around a DSCR loan, a common investor loan that qualifies based on the property's income rather than your personal income, typically up to about 80% loan-to-value. You'll need to qualify with a lender, close in an entity, and confirm in writing that your lender permits the seller's preferred equity position in the LLC. Not every lender allows it, so raise it early.

The buyer does: title insurance premiums, escrow fees, customary closing costs, and any brokerage commissions, finder's fees or advisory fees on the transaction.

As-is, where-is. The seller doesn't make repairs or give credits. You rely on your own inspections during due diligence. The seller must disclose known material issues and provide records such as operating statements, rent rolls, leases, service contracts, maintenance and insurance history, tax bills and permits. If the property has tenants, you take over the leases and deposits at closing.

Redeeming signs a non-binding Letter of Intent. You aren't obligated to buy until a Purchase and Sale Agreement is signed by both sides, and you can still walk away during due diligence under the PSA's terms. The LOI's confidentiality and exclusivity terms are binding. If someone redeemed before you, you join the backup list and are next in line if their deal falls through.

• Appraisal and loan sizing. Any projected cash at closing depends on the loan appraising and sizing as modeled. A low appraisal reduces or eliminates it, or means you bring more money.
• Lender consent. Your lender must permit the seller's position. Don't assume it.
• Carrying costs. You're responsible for loan payments, seller payments, taxes, insurance, HOA dues, maintenance and vacancy from day one. Property taxes in some markets are substantial.
• The balloon. You need a realistic plan to sell or refinance before the seller's balance comes due.
• Default control. Falling behind can cost you the property without a foreclosure process.
• Exit timing. Higher-priced homes can take longer to sell. Model a longer hold than you expect.

Investors who are comfortable with creative financing, can qualify for a DSCR or similar investor loan, will hold title in an entity, and have reserves to carry the property through vacancies and surprises. First-time buyers can succeed with these deals, but should work closely with an attorney and lender who know seller-financed and preferred equity structures.

No. Deal figures on this site are illustrative and subject to verification, appraisal and lender terms. Nothing here is legal, tax or investment advice, and nothing is an offer to sell securities. Review every deal and its documents with your own attorney, CPA and lender before you commit.

Request access with your name, contact details, buyer type and the markets you buy in. The stacksforsale.com team reviews every request and, if approved, sends you a username, temporary password and membership details. Membership is $1,000 per month. Deal information on the site is confidential.