In commercial real estate, when someone says they “structured the deal creatively” — it’s not code for shady. It’s code for savvy.

Creative deal structure means you didn’t rely solely on one big loan and a fat down payment. You built a capital stack — a blend of funding sources, layered together to close the deal.

So What’s a Capital Stack?

The capital stack is how your deal is funded — think of it like a financial layer cake. Each layer represents a source of money, and each comes with different levels of risk, reward, and control.

The typical capital stack looks like this (from most secure to most risky):

1. Senior Debt (like a bank loan) — gets paid first

2. Mezzanine Debt or Seller Carry — fills the gap if the bank won’t fund it all

3. Preferred Equity — higher up than regular equity, but doesn’t control the deal

4. Common Equity (you + investors) — gets the biggest upside after everyone else is paid

Creative deal-making means playing mix-and-match with these layers — especially when the seller becomes one of them.

1. What Is Seller Financing?

Seller Financing is the umbrella term for anytime the seller becomes the lender — either partially or fully.

This includes:

• Full seller financing (no bank — seller loans the whole amount)

• Partial seller financing (seller provides a second loan)

• Seller carryback (seller fills a small gap behind a traditional lender)

Think of seller financing as a flexible ingredient in your capital stack smoothie.

2. What Is a Seller Carry?

Seller Carry (aka seller carry back) is a subtype of seller financing, where the seller loans a portion of the purchase price, often in second position.

Structure:

• Debt-based

• Secured by: Promissory note + second lien on the property

• Seller’s role: Lender, not owner

• Terms: Interest-only, amortized, or balloon — fully negotiable

Example:

• Purchase Price: $1,000,000

• Bank Loan: $700,000

• Seller Carry: $200,000

• Buyer Equity: $100,000

Now you owe the seller $200K with monthly payments — but no ownership, no voting rights, and no share of upside.

3. What Is Full Seller Financing?

This is when the seller acts as the only lender. No bank. No underwriter grilling you. And you get to negotiate the terms directly with the seller aka lender, how much, what interest, for what period?

Structure:

• Debt-based

• Secured by: First-position lien

• Seller provides: Full financing, just like a private lender

Example:

• Purchase Price: $500,000

• Down Payment: $50,000

• Seller Financing: $450,000 at 6% interest with a 5-year balloon

You and the seller agree on terms, sign a note, record a mortgage or deed of trust — done.

4. What Is Seller Equity Participation?

This is when the seller says, “Forget the loan — I want in.”

They contribute capital or roll over equity into your new entity and become a co-owner — sharing in the upside, tax benefits, and long-term profits. This is a great option when the seller knows the potential of the property but do not have the team or patience to go through the process themselves. This helps offset your need to bring in more private investors while giving the seller the opportunity to benefit from the improved property and increased NOI.

Structure:

• Equity-based

• No lien. Seller owns a percentage of the LLC or LP

• Tax-friendly. May defer capital gains and receive K-1’s

 Example:

• Purchase Price: $1,000,000

• Bank Loan: $700,000

• Buyer Equity: $100,000

• Seller Equity Roll: $200,000 = 20% ownership

They’re not just holding paper — they’re in the deal.