How to Come in 2nd (position) and Still Win Every Time
April 20, 2021
A lot of people are surprised to hear close to 50% of my annual loan volume is in 2nd position loans. They are even more surprised to hear that despite funding nearly $100M in loans in the last six years – mostly through direct placement of whole note (also known as trust deed) investments for our private lender investors – our company has not had a single principal loss and sub 2% default rate.
While there can be some increased risk involved in these types of junior lien loans, the same could be said for all private or hard money loans, regardless of position. And when done properly, junior liens can provide higher interest rates than funding a loan in 1st position.
Why is this true? Let’s break down some of the major myths and little-known facts around junior lien position loans.