Second position loan for rehab
I have a deal that's come my way through a mutual friend who is doing their first flip. They have a hard money loan for 70% of the purchase price, and need the other 30%. They're offering 12% for six month, interest only, on $150K. I've been provided the hard money agreement, which puts me in the second position.
The house is in good shape, in so cal. Purchase price is $695K, ARV is $905K, with rehab costs estimated to be $60K.
I've been provided the holding costs, and they expect the rehab to take 6 months.
As this would be my first foray into RE investing (much less private money lending), I'm looking for some advice. Am I crazy for considering this?
Red flags: This is their first rehab, second position, money tied up for six months.
Positives: Learn the process by participating, put my money to work, rehab is local.
I've seen the property (outside). Any advice is greatly appreciated. Thanks!!