Lending money in second position?

[Taylor Green]

Hi,

I was wondering what everybody's opinion is of making loans in second position. Under what circumstances is it alright to consider a loan in second position? Thanks in advance!

[Ellis San Jose]

Excellent advice from the pro's. If this is a loan on a flip or any property, make sure you have LOTS of equity cushion today, not based off ARV. 70% ARV on a rehab that fails or a market hiccup is when 2nd's make the poooof sound & disappear.

A information that your are in 2nd position doesn't define the entire risk without knowing the other factors.

Here are 2 examples that illustrate:

example 1: $200,000 ARV Bread & butter entry level home stable neighborhood

$130,000 1st TD

$10,000 2nd TD

example 2: $2,000,000 ARV Luxury custom home

$1,300,000 1st TD

$100,000 2nd TD

Are both equal in risk? They are both 2nd position & 70% LTV