Here’s an insightful post by CrowdStreet, a leading real estate investing platform, explaining the capital stack and the difference between debt versus equity investing in commercial real estate. CrowdStreet is a leading real estate crowdfunding platform focused mostly on secondary cities with lower valuations and higher cap rates.
Most individual investors tend to buy physical real estate and hope the equity in our property grows over time. We tend to take all the risk and bear all of the reward or failure. However, if you are more risk-averse, you may want to invest in real estate debt instead. In other words, you can act more like the lender to make a return.
Where you invest on the capital stack matters with regards to when and how you get paid. Let’s take a deeper dive into debt versus equity investing in real estate. I’ll then share some concluding thoughts.