Expert: Troy Labani - 6/14/2009

Question
Dear Troy,

Thanks for helping out all allexperts.com.

I am in the process of purchasing a commercial property using a Contract for Deed with a significant of the purchase loan carried by the seller.

I'm just wondering if it's possible to borrow a 2nd loan from traditional lending sources in the future?  This is a Contract for Deed transaction, so I'm not sure if lenders are willing to lend a 2nd loan down the road.

Thanks,
Andrew

Answer
Andrew,

First, my most humble apology for taking so long to respond to your question. I have been unavailable for the past month and a half, and failed to set my status on allexperts appropriately. Promptness is very important to all of us, so again, my apology.

Your question in general can be answered with a "usually yes". However, there are a number of caveats that apply. First, it varies from state to state. This you will find is true with most everything. Also, it will depend very much on the lender, and the deed holder. In most cases, what you need is for the deed holder to execute a subordination agreement. This then allows the lender to take a first position, and your seller to take a second position. It is common, but not all sellers are willing to take that subordinate position. Your track record, financial status, and relationship with the seller will all come into play.

There are also tax related issues with what you are talking about. Some to your advantage and others to your disadvantage. You should contact a qualified CPA regarding these issues.

I hope I have answered your question fully. Please don't hesitate to ask more. I promise that I will respond in a much more timely fashion in the future, or set my away status appropriately if I will be unavailable.

Good luck with your venture!

Troy