Looking at a park were the previous seller carried paper to the current owner. The broker believes the if I guy the park I can take keep the paper outstanding. As of right now that would be about 50% LTV which would really hurt my returns. How would I approach a bank about lending me the additional 25% with me putting down 25%? I assume they would force the seller paper to be subordinated.
You are correct. Typically, any bank is going to demand a first position. I assume from this transaction that the seller is selling for more than he paid. Why not have him take a second on the profit above the mom & pop’s first lien note? You put down 20%, he carries 30% as a second, and the original note holder continues on with 50% as a first lien.