Real estate investors sometimes have a workable deal but still need capital to cover the amount required at closing. Stack Method funding addresses that gap by combining a first-position loan with seller carryback financing and funding the amount the buyer needs to bring to the table. iFundwise provides Stack Method funding alongside other real estate financing options, including earnest money deposit and double-close funding.
This guide explains how the Stack Method works, what iFundwise funds, how the process works, and what investors should have ready before submitting a deal.
What Is Stack Method Funding?
The Stack Method is a real estate financing structure that combines a new first-position loan, usually a DSCR loan, with a seller carryback note in second position. The term "stack" refers to the way these financing layers work together to fund a property purchase.
A seller carryback means the seller agrees to finance part of their equity instead of receiving all of it at closing. For example, if a property sells for $250,000 and the seller has $150,000 in equity, the seller could receive part of that equity at closing and carry the remaining amount as a note.
The first-position lender provides the primary financing for the purchase. The seller carryback sits behind that loan. iFundwise funds the amount that the first-position lender does not cover and that still needs to be available at closing.
This can include more than the down payment. Depending on the deal, the funding need can also include closing costs, agent fees, and assignment fees.
How the Stack Method Works
The easiest way to understand the structure is to look at how the financing layers fit together.
Consider a $250,000 property. If a DSCR lender provides $200,000, there is a $50,000 down payment that needs to be covered. The seller may agree to carry $100,000 of their equity as a second-position note.
The challenge is that the seller carry note is created as part of the closing transaction. The money still needs to be available at the closing table before that note can serve its intended purpose. That is where transactional funding comes in.
iFundwise funds the amount that the first-position lender does not cover. In a $50,000 down payment example, additional closing costs and fees could increase the total funding requirement to $65,000. The seller carryback then provides the repayment source for that funding.
One important requirement is that the amount being funded must be less than the seller carry amount. If the seller carries $100,000 and the funding need is $65,000, the structure can work. If the funding need is $65,000 but the seller carry is only $50,000, it does not meet iFundwise's stated funding requirement.
What iFundwise Funds in a Stack Method Deal
Stack Method funding is designed to cover the portion of the transaction that the first-position lender does not provide.
That can include:
- The down payment
- Closing costs
- Agent fees
- Assignment fees
The exact funding requirement depends on the transaction. Investors therefore need to look beyond the down payment and calculate the full amount that must be available at closing.
The seller's equity is also an important part of the calculation. The seller cannot carry more than the equity they have in the property, so iFundwise reviews the seller's equity position as part of determining whether the structure works.
How iFundwise Stack Method Funding Works
The iFundwise process focuses on reviewing the deal structure, confirming the financing layers, and preparing the transaction for closing.
1. Submit the Deal for Review
The process starts with submitting the deal and the information needed to evaluate the structure. iFundwise typically reviews Stack Method requests within 30 minutes.
The initial review focuses on whether the seller has clearly agreed to the carryback structure and whether the seller carry is sufficient to cover the closing costs and fees involved in the transaction.
Investors should be prepared to provide the purchase contract, first-position lender details, seller carry terms, seller equity information, and the full closing figure. Providing the relevant details upfront can make it easier to determine whether the numbers work.
2. Complete the Stack Method Setup
After the initial review, iFundwise provides a setup guide for the transaction. This includes the contracts needed to establish the funding arrangement and clarify iFundwise's role.
The setup also helps coordinate the different parties involved in the financing structure. This is particularly important because the seller carryback must be properly disclosed and permitted by the first-position lender.
3. Complete the Intake Call
iFundwise schedules an intake call to review the details of the transaction and determine whether the structure can move forward.
The call also provides an opportunity to determine whether the investor qualifies for the Stack Pro program. iFundwise describes Stack Pro as an option that allows qualifying investors to bypass the upfront fee and handle the contracts and lending logistics themselves.
4. Set Up the Dashboard
Once the deal is set up, iFundwise creates a dashboard account for the investor. The dashboard provides a central way to communicate with the team and coordinate the remaining steps required to move the deal toward closing.
The process ultimately depends on having the financing structure, contracts, lender requirements, and closing details properly aligned.
What iFundwise Looks for in a Stack Method Deal
Stack Method deals require careful verification because multiple financing layers have to work together.
iFundwise specifically looks at:
- The purchase contract and transaction details
- The first-position lender and loan amount
- The seller carry terms
- The seller's available equity
- The full amount required at closing
The first-position lender is especially important. The DSCR or hard money lender needs to know about the second-position seller carry and approve the structure. iFundwise states that it contacts the first-position lender on every Stack Method deal it funds.
This is more than a procedural step. A second-position note that is concealed from a lender that does not permit secondary financing can create serious legal problems. The financing arrangement therefore needs to be properly disclosed and permitted before the transaction moves forward.
Understanding the Risks of Stack Method Funding
The Stack Method can reduce the amount of cash an investor needs to bring to closing, but it does not eliminate the financial risks of the transaction.
One important consideration is the amount of debt relative to the property's purchase price. In iFundwise's example, a $200,000 DSCR loan combined with a $100,000 seller carry creates $300,000 in debt against a $250,000 property. That means the property starts with negative equity.
That structure can therefore require an experienced investor who understands the financing arrangement and has considered how the property will perform after closing. iFundwise specifically notes that the structure is better suited to experienced investors rather than first-time deals.
Investors should also make sure the seller carryback is fully disclosed to the first-position lender and permitted under the lender's terms. The structure should be reviewed carefully before any agreements are finalized.
Is Stack Method Funding Right for Your Deal?
Stack Method funding can make sense when a property purchase involves a first-position loan and a seller willing to carry part of their equity, but the buyer still needs capital available at closing.
The structure may be worth exploring when:
- A DSCR or hard money lender is providing first-position financing.
- The seller has sufficient equity to support the carryback.
- The seller agrees to the carry terms in writing.
- The first-position lender approves the second-position arrangement.
- The total funding need is less than the seller carry amount.
Final Thoughts
Stack Method funding combines a first-position loan, seller carryback financing, and transactional capital to address the amount that still needs to be available at closing. The structure can help investors reduce the cash they need to bring to a property purchase, but it also requires careful attention to the numbers, lender requirements, seller equity, and closing costs.
With iFundwise, the process starts with a deal review and moves through setup, an intake call, and dashboard coordination. The key is having the full financing structure ready, including the purchase contract, lender details, seller carry terms, and total closing requirements.
Submit your deal to iFundwise today to review the structure and determine whether Stack Method funding could fit your transaction.
