Subordinating a loan

[Mike G.]

Will, I have a followup question to your suggestion. It's a bit off-topic now because the OP indicated he didn't use cash, but I'm thinking others might be interested in your answer, too.

Let's say the house was purchased all cash and there is a 1st trust deed on it. If you get a private money lender to come in for say, 50% or 55%, I would assume that new lender would want 1st TD position. How do you swap the two positions? Also, does the amount on the original Note have to be adjusted, or does that not matter?

[Mike G.]

Yes, it would be easier, except for two things:

1. I need proof of funds for the next offer, and it's much easier to show proof of funds with your own money.

2. You never know if a lender will be interested in a specific offer (or have funds available). Whereas with the current property, the equity is high and the rehab has been done, and the turnaround time should be shorter, so it should be attractive to a lender. Also, there is no specific time crunch to get the loan, as is the case once a property is under contract (we offer at most two week closings).