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Real Estate Deal Structuring: How Smart Investors Split Risk, Equity, and Debt
Real Estate Deal Structuring: How the Capital Stack Splits Risk, Equity, and Debt
Two deals can share the same property, the same purchase price, and the same business plan, and still deliver completely different outcomes for the people who fund them. The difference isn’t the real estate. It’s the capital stack.
Key takeaways
● A capital stack orders every dollar in a deal (senior debt, gap capital such as mezzanine debt or preferred equity, and common equity) by who gets paid first and who takes the most risk.
● Senior debt on stabilized commercial and multifamily properties averaged a 59.6% and 63.3% loan-to-value ratio in Q2 2026, at an average 5.7% mortgage rate, according to CBRE.
● Mezzanine debt and preferred equity both typically price in the 10%-15% return range, per capital advisory firm George Smith Partners.
● In a fully worked $10 million acquisition example below, an 8% preferred return with a 20% promote turns a 25%-of-cost equity check into a 15.0% LP IRR and a 26.6% GP IRR over a five-year hold, computed layer by layer, not assumed.
