Private lending in 2nd position

[Jarrod Ochsenbein]

2nd position loan questions

How do you insure you mitigate the risk of not being paid back?

For me I use;

2nd lien on target property or cross collateral property deed of trust

JV agreement

Promissory Note

Personal Guarantee

May be over kill, but I am fine with it.

Also if you ever foreclose on a property that has enough equity to cover your loan I assume the 1st lien gets paid and then the rest would go to the 2nd position or is that not correct?

Thanks in advance.   I am hoping to never go through the foreclose process.

Jarrod

[Chris Seveney]

@Jarrod Ochsenbein

You are correct that if property has equity coverage you would get paid off in a foreclosure

Just realize what is loan for, if it’s fix and flip the property may not be fully renovated which add risk

It comes down to underwriting the borrower. There are no guarantees in life. We had a borrower who first three loans did great and this fourth one is in default (we are in first).

It’s unfortunate but it happens