When to Use Hard Money in a Wrap Deal: Loan Stacking 101

Wraparound mortgages are one of the most powerful tools in creative real estate, especially when paired with loan stacking. Loan stacking combines hard money and long-term financing to maximize leverage and cash flow.

But hard money is not always the right move. It is expensive, short-term, and risky if you do not have a clear exit plan. In this post, we will break down when to use hard money in a wrap, how to stack loans for maximum ROI, and how we make it work in our own deals at Mac Does REI.

What Is Loan Stacking?

Loan stacking means using multiple funding sources in one deal. A common example is pairing a hard money loan for the purchase with a DSCR loan or seller carryback for the refinance or resale exit.

This layered approach allows investors to act quickly, secure properties, and then transition into more favorable financing for long-term profitability.

Why Use Hard Money in a Wrap?

Hard money can help you:

• Close quickly when the deal is competitive
• Take control of the property before structuring a resale
• Fund rehab or cover arrears on a subject-to acquisition

When used wisely, hard money creates immediate equity or cash flow. The key is making sure the numbers work before committing.

Example: The Mac Wrap Model

Imagine finding a property you can acquire subject-to the existing loan at 3.5 percent, but the seller needs $10,000 to walk away.

Here is how we structure it:

• Borrow $10,000 from a private lender at 12 percent interest-only
• Close with a wrap at $195,000 with 10 percent down
• Use the buyer’s down payment to repay the private lender

The result:

• No money out of pocket
• Cash flow created from the wrap
• Backend equity available if the buyer refinances or sells

When Not to Use Hard Money

Hard money is powerful, but it is not for every deal. Avoid it when:

• Margins are thin. If the wrap does not cash flow at least $300–500 per month, the risk outweighs the reward.
• You lack an exit plan. If you are unsure when or how you will sell, do not stack loans until you have a clear timeline.
• Buyers have low down payments. You need enough capital from the resale to cover your hard money position.

Tips for Smart Loan Stacking

• Line up your DSCR or resale exit early
• Avoid over-leveraging on tight deals
• Structure wrap terms that outperform your funding terms
• Always plan for three exits: sell the note, refinance, or hold

Hard money is a tool, not a crutch. When used strategically, it allows investors to take control of deals, stack leverage, and turn small positions into strong cash-flowing assets.

At Mac Does REI, we use hard money carefully and only when the numbers justify it. With the right structure, it can be the difference between walking away and creating long-term income.

Curious about stacking loans in your next deal? Schedule a strategy call with Mac Does REI and learn how we use this model to build passive income one creative deal at a time.

Visit MacDoesREI.com to book your call.