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?

[Bill Gulley]

Mike, the way I read this you loaned funds to your LLC and took a 1st DOT from the LLC. You could also just release the DOT, leaving the note in place, but at a time unsecured, since it's your LLC. Now the property is clear and you can borrow from you lender giving a 1st position.

If you have other reasons for the redundant security, you can file a second DOT from the LLC. That means filing one deed of relase and a new 2nd DOT. Using a subordination will require filing the subordination agreement, but filing fees will likely be higher as there will likely be more pages with the subordination than a one page DOR.

You might want to look into using blanket mortgages in your operations and a Partitioned Note with one DOT.