The Stack Method

[Edward Johnson]

If you're an investor or wholesaler running into dead ends due to down payment gaps or tight lending terms, you need to know about the Stack Method—a powerful and creative funding strategy that helps close more deals with less capital.

🔑 How it works:

• The buyer uses a DSCR loan as the primary financing tool (65–75% LTV).
• The seller carries back the down payment as a 2nd-position lien, preserving their equity and deferring taxes.
• A transactional lender covers the temporary funding gap to ensure a seamless double close or to facilitate acquisition.

✅ Benefits:

• No need to bring in cash for the down payment
• Seller gets long-term returns and capital gains tax advantages
• Buyer acquires a cash-flowing asset with minimal out-of-pocket investment
• Works for SFR, multifamily, land, and even self-storage

This method is especially effective when there's strong equity and a motivated seller willing to be flexible. I’m happy discuss any deals people may have!

Thanks!

[Chris Seveney]

Quote from @Don Konipol:

Quote from @Edward Johnson:

Hi Dan, 

In our system whether or not a DSCR lender allows 2nd doesn't matter. We close the 2nd leg of the transaction with a real estate attorney. Has nothing to do with the lender

That’s not really an answer.  If you sign a statement that falsifies the source of the down payment, it’s mortgage fraud.  If the use of a junior lien violates a mortgage covenant (due on sale) the loan is immediately callable at the option of the lender.  And while you may “get away with it” 20 times, it’s the 21st time that may get you.

There are lots of people who have lost lots of money and ended lots more who ended up with criminal convictions for taking bad legal advice.  Of course without knowing the specific situation it’s impossible to comment except in a general sense. 

I’ve been a private/hard money lender a long time. I personally know 4 borrowers who served 4 years plus time for mortgage fraud.  Closing “with a real estate attorney” is a necessity for almost all real estate transactions - it does not insure that the participants acted either legally or acted in compliance with contracts. 

laughed when I saw that comment as you are correct don, we correspond with multiple DSCR lenders who are the institutional lenders and most do not allow a second and if you do it has to be disclosed upfront and never would allow 100% financing on it AND it still has to meet their DSCR requirements.

Saying it does not matter basically is admitting to mortgage fraud.