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Subordination Clause


Hey, this is Terry Hale touching base here with you real quick.
I’m here renovating this 45-unit apartment, I wanted to talk about strategy
That was used for this deal. It’s called a subordination clause. Now what is
Subordination clause is when the seller has a seller finance note,
And they drop it to a junior-lien position. Now in this case they own
This property free and clear. So it’s very easy for them to strike one note, right?
That’s the seller finance note. And it drops off the subordination clause
In the second position. This allows us now to negotiate to take out a new first,
Then the new first obviously is kept. We kept that new first at 390,000.
That’ll take care of the renovation for this project.
And it’s very easy to get money in first position. Once we go ahead and finish up
And get the drywall here back up on the walls in.
Place looks great and it’s all rented up and it’s pulling positive cash flow.
We’ll be able to go after a non-recourse meaning, no personal guarantee,
Non-recourse structure on a SBA loan, and be able to get real attractive rates.
And it’s all on the merit of the project because the project at now
Went from rough to finish with people paying money. And that’s the power
Of moving forward on these kind of distressed projects. We purchased this one
With only 5% down and the purchase price on was 2.350
And it got a real attractive interest rate at 4% interest for the seller finance note
That’ll carry us through before we stabilize and refinance.
But the subordination clause is awesome. It gives you an opportunity
To go after money that will be locked in on first position
And motivated seller to get the deal done. They got their asking price and
They picked this thing up at an auction for basically pennies on the dollar.
They’re making money, we’re making money and
When we eventually have it for cash flow or sell it. Regardless, there is
An opportunity to build exponential wealth, I can show you exactly how to do it as well.
So if you liked this segment, go ahead and click the link in the description or better yet,
Let’s go to my website,
That’s T-E-R-Y H-A-L-E
And I look forward to engaging again with you real soon. Take care.
To learn more strategies and techniques,
Visit or go ahead and
Click the link in this video description
And I look forward to engaging with you real soon.


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