Not Sure About CRE Equity? Here’s Everything You Should Know

In a nutshell: Knowing how to use commercial real estate (CRE) equity financing is a powerful way to build a successful property portfolio. Partnering with a specialist provider like Duckfund can help you unlock the fast and flexible equity financing you need to help you close your deals quickly without getting bogged down by traditional lending hurdles.

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Commercial real estate equity plays a central role in building wealth through property investments, yet many investors don’t use its full potential. 

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This can be a huge missed opportunity as equity is an important tool when dealing with CRE investment’s pitfalls, including:

• Slow liquidity and cashflow, with capital often getting tied up in commercial real estate investments,
• Accessing capital for new deals, with lenders tightening their belts amid economic uncertainty
• Balancing risk and return, as investors struggle to manage exposure to potential losses. 

If you’re an investor still getting your head around the nuances of equity structures, then you’re not alone. There are several types of equity out there and working out the differences between them takes a little studying. 

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Making the best use of your equity is another important challenge.

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Read on as we explain the key equity types CRE investors should know, and how you can best use them to get ahead in a tough market.

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Contents:‍

1. What is equity in commercial real estate?
2. Common equity vs referred equity vs private equity: what’s the difference?
3. Does a commercial real estate loan build equity?
4. Put your equity to work and grow your portfolio with Duckfund’s fast and flexible equity financing

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‍Want to find out how CRE equity can help you grow your business? Check out Duckfund’s fast and simple equity funding that will land you your next property ahead of rivals.

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‍What is equity in commercial real estate?

Equity in commercial real estate is the share of a property’s value that the buyer owns. 

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‍To get there, you simply need to subtract any outstanding debt (like mortgages, loans, or mezzanine financing) from the property’s market value.

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The more equity a property has, the better for its investors or developers. They can use this to secure more financing, invest in other properties, or simply make higher profits when selling.

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At Duckfund, we offer fast and flexible equity financing, allowing you to secure the funding you need faster and easier. Here’s how much time you need to make it happen.

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• 2 minutes: Fill out a quick digital form faster than brewing your morning coffee.
• 24 hours: Get approval in just one day, thanks to our sky-high approval rates.
• 48 hours: Access the funds you need to close your deal in two days.

NC investors quickly buy an apartment building with Duckfund's helpWe’ve helped our customers seal over $1.5 billion worth of deals because our funding works. Here’s an example of how that works.

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1. Target: 36-unit, Class A apartment building in the Southeast US.
2. Challenge: Competitive bidding required a $240,000 EMD.
3. Duckfund's Solution: Provided the EMD, securing the deal.
4. Closing the Deal: Duckfund invested $3 million in equity.
5. Result: Investors expanded their portfolio without tying up significant personal funds.

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Common equity vs referred equity vs private equity: what’s the difference?As someone working in the CRE industry, you should be familiar with the different types of commercial real estate equity that apply to investors. Investors who work as a syndicate or Real Estate Investment Trust (REIT) can hold several types of equity in a property.Here are quick descriptions of three of the most common types.

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1. Common Equity

Holding common equity means you have a share in the property along with voting rights, so you have a say in business decisions. However, common equity holders are the last to get paid if the company or project faces financial trouble. They typically benefit from the upside potential through capital appreciation and dividends, but they also face the highest risk.

2. Preferred Equity

Preferred equity investors have a priority claim on returns over common equity holders, so they get paid first in case of profits or liquidation. They usually don’t have voting rights but receive more stable, fixed returns. This is seen as a safer, lower-risk option than common equity, though with potentially lower upside.

3. Private Equity

Commercial real estate private equity refers to investments in private companies or projects.  Private equity investors usually invest in businesses or assets that require capital for growth or restructuring, and they can seek significant returns through strategic changes and eventual sales. This is higher risk but also higher reward, often involving a hands-on approach to managing this type of investment.

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To sum up: common equity offers ownership and voting rights but comes with higher risk, while preferred equity offers more security but without control. Private equity, meanwhile,  involves more active management with high potential returns and high risk.

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Does a commercial real estate loan build equity?

A commercial real estate loan doesn’t directly build equity. Equity in a property increases over time through two main factors: the decrease in the loan balance as it’s paid down, and any appreciation in the property's value.For example, let's say an investor purchases a commercial property for $1 million with a $700,000 loan.

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The investor has $300,000 in equity to start — the difference between the property value and the loan amount. Over time, as the investor makes mortgage payments, the loan balance reduces, and their equity grows. 

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If, after several years, the investor has paid down $100,000 of the loan, their equity would increase to $400,000, plus any rise in value in that time.

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Let’s say its market worth increases to $1.2 million due to renovations or market conditions, the investor’s equity would rise to $500,000, even though they have only paid down the loan by $100,000.

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‍An investor’s growth in equity over five years (assuming positive market conditions)

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So, while the loan itself doesn’t directly build equity, paying it down and benefiting from property value increases both contribute to growing the investor's share. This makes equity-building a long-term process tied to both loan repayment and market performance.

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The 6 best ways to use commercial real estate equity

So, let’s say you have this $500,000 sitting in one of your investments: just how do you use this precious commercial real estate equity?Well, CRE professionals are great at getting back for their buck. To do this, they use a number of techniques, which we’ll summarize here.

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1. Investing for cash flow

When you own commercial real estate — whether it's multifamily or office buildings— your equity investment plays a key role in generating cash flow. The more equity you have in the property, the less you need to borrow, which means your loan repayments are smaller. With fewer loan payments, you keep a larger portion of the rental income.

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‍This increased cash flow makes it easier to reinvest in the property or simply enjoy higher returns.This is why many investors look to build their equity in commercial real estate over time — to reduce debt, keep more of the income, and generate a more stable cash flow from their investment.

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2. Using equity to diversify your portfolio

CRE equity allows you to diversify your portfolios with real estate deals from different sectors, whether it’s through direct property ownership or crowdfunding platforms. 

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Commercial real estate investors seek out investment opportunities in specific sectors, like multifamily or office buildings, based on their risk tolerance and desired returns.Multifamily commercial real estate is the most preferred asset class for US investors in 2025, according to CBRE research, with key markets including Phoenix, Salt Lake City, and Nashville set to enjoy declining vacancy rates and positive rent growth.                                  

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‍The multifamily recovery in key US markets

Source: CBRE

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3. Value-add strategies

Value-add commercial real estate projects are great targets for extra equity. 

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Investors inject capital into properties needing renovation or repositioning in a bid to get an internal rate of return (IRR) through increased property values.

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‍For example, an investor might buy an older office building in a prime location with outdated features. By injecting extra equity, they fund upgrades like a new HVAC system and energy-efficient lighting. These renovations attract tenants and reduce operating costs, bringing a higher IRR than they would have initially got. 

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4. Boosting liquidity 

Commercial real estate equity strengthens liquidity, particularly in the case of institutional investors or real estate investment trusts (REITs). These structures allow investors to enter and exit commercial real estate markets more easily than direct property ownership via the buying and selling of shares. 

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For example, publicly traded REITs let investors trade shares similarly to stocks, so that they access capital without the complexities of liquidating physical assets. 

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Institutional investors can also pool equity capital into larger portfolios, which spreads risk and offers professional management.This increased liquidity is particularly valuable during economic downturns or when new opportunities arise because it gives investors the agility to reallocate capital strategically.

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5. Participation in the capital stack

Equity investment is a key piece of the puzzle when putting together the capital stack in a CRE deal.Equity is the portion of the funding that comes from investors, not loans. These investors—often called equity holders—can include individuals, limited partners in investment groups, or other organizations.

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They take on more risk because they’re at the "top of the risk ladder," meaning they only get paid after the property's debt (like mortgages or other loans) has been repaid.

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But there’s a big upside: once the debt is covered, equity holders get a share of the remaining profits. This means their returns can be much higher compared to lenders, who only earn fixed-interest payments. In short, equity investment is riskier but offers bigger potential rewards if the project succeeds.

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6. Using equity for debt financing

CRE equity can be used to secure debt financing. Borrowers use their equity as collateral to obtain loans from lenders, which then provide capital for commercial real estate projects. Lenders assess the value of the property, including its equity, before providing the loan.

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Debt financing has typically taken the form of lump-sum loans, which often come with lengthy application processes, strict repayment schedules, and high interest rates.However, in a depressed lending market, even traditional funding like this is hard to come by.Alternative solutions like CRE equity credit lines are coming to the fore as a result. These options are quicker than traditional loans, with higher approval rates and less form-filling. 

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“In volatile times, traditional sources of capital may be more hesitant to invest,”, says Lee Pagnotta, Business Development Manager at Structured Financing LLC.“Alternative sources of capital, such as private equity lines or joint ventures, may be more receptive to investing in CRE projects”. 

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Using equity to unlock these growth funds in this way may just give CRE investors the edge over rivals.Close deals faster with Duckfund’s flexible equity financingTake a look at any successful CRE investment strategy and you’ll see access to funding as a central part of it. 

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Yet this can be complex with lenders often dragging their heels due to lending restrictions and red tape. At Duckfund, we know that these issues can torpedo a property purchase, which is why we designed our flexible equity and debt funding model to help investors and developers their deals over the line.Struggling to find earnest money for a property? Our EMD funding lets you outbid rivals and seal the deal.

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Need to fund a long-term project? Duckfund’s equity and debt financing provides LP/Co-GP and preferred equity, as well as Senior Debt.Unlike traditional finance, there are no early repayment penalties, hidden fees, or lengthy paperwork. Plus, our revolving line of credit means you can reborrow funds as often as needed to keep growing your portfolio.Backed by a $100M equity boost from Clear Haven Capital Management, Duckfund’s institutionally-backed financing solution has the resources you need to grow your portfolio quickly.

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Ready to secure your next deal with Duckfund? Contact us today and find out how our EQT Financing can help you grow your CRE portfolio.