Key Takeaways
- Bridge loans enable value-add with higher leverage and interest-only payments, but require a clear exit strategy.
- Mezzanine debt and preferred equity fill capital stack gaps but add fixed obligations that increase risk.
- Seller financing can dramatically improve returns by reducing equity requirements and offering flexible terms.
- Model the full capital stack waterfall—senior debt, mezz, pref equity, then common equity—to accurately project returns.
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Test Your Knowledge
1.How does a bridge loan differ from permanent agency financing?
2.What is mezzanine debt in a capital stack?
3.Why can seller financing dramatically improve IRR?