Cash out Refi on owner financed deal. Owner wants to keep debt

[Michael Ablan]

Hey Guys and Gals,

I was hoping someone could offer insight on how to handle the following situation.

I purchased 3 properties from an owner for $320k with $20k down.  He owned one of the homes free and clear, and had mortgages on the other two.  He currently holds 1st position lien on the free and clear house for $100k, while holding a land contract on the other two for $200k.

He owes $90k to the bank on one property and $40k on the other, for a total of $130k.  We are currently working with a bank to do a cash out refinance on the property that we have equitable title to.  We expect to get $145k on the cashout.  So $100k would go to the lien holder and we'd get to keep the 45k.  However, we want to pay off those banks ASAP so we can get rid of the land contract and get full ownership of the other two properties.  

I'm meeting with him tomorrow to discuss the fine details on the next steps.  What I'd like is for him to use the $100k to pay off $100k of the bank debt, and replace it with his own 1st position lien.  However, this will knock $100k off from his $300k note, which he wanted to ride out for the next 5-15 years for retirement cash.  

So now I'm at my dilemma.  How do I pay off those bank mortgages, while allowing the seller to retain as much debt as possible on his note?  One thing I considered was to refinance 2 out of 3 properties and let him re-stack his 300k as 2nds on 2 of the properties, and a 1st on the 3rd.  There are more negatives than positives to this idea though.

I'm sorry if I was unable to articulate this in a comprehensible manner.  Any ideas would be greatly appreciated though!

Thanks!