124: Investing in 2nd Liens, Case Studies and Turtle Pools

Note MBA

Investing in 2nd liens has been the topic all month around here. And you know what? We're not about to stop now! On today's show we've got two phenomenal investor talking all about investing in 2nd liens. They drop some deal examples and case studies. We also cover some of the difference between the due diligence process on 1sts and 2nds.

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We kick off today's show talking about some wall art in Gabe Kass' office. It's a wonderful piece with four Chinese characters paint laterally. Roughly translated that characters mean, "If you work hard you will reap great rewards." Not sure there has ever been a more fitting quote to start a show off with.

Investing in 2nd Liens

Kicking us off Kimberly Bank Fawcett talks about a 2nd she recently acquired in Miami. This particular deal has a performing first, which is her preferred style of investing when it comes to 2nds.

We previously discussed with Fuquan Bilal the 4 buckets of investing when it comes to 2nds. The three main buckets we talk about in this show are: performing first with equity, the non-performing 1st with equity, and the non-peforming with no equity.

She gives us a breakdown on the numbers, and why she wasn't too worried about a possible bankruptcy. The fear of bankruptcy, by the way, is one of the potential major downsides to investing in 2nd liens. Gabe gives a brief rundown all about it later in the show.

The Difference In Due Diligence

Later on in the show we spend a decent amount of time going over many of the due diligence nuances on 2nds. In a nutshell, the biggest difference in due diligence between 1sts and 2nds is what you're researching.

We covered it in many different forms on the show already, but for investing in 1st liens, your major due diligence piece is the property. That isn't the case with 2nds. When you're investing in 2nd liens you want to start by researching the borrower. One of the main tools both Kimberly and Gage talk about using is TLO.

According to Kimberly, using just someone's name and where they live you can do some gnarly research. With that information, which admittedly isn't much, you can pull their social security number, date of birth, every email address they've ever used, the age of all of their cousins, the last time they ate a gyro from that weird Greek place at the mall.

You get the picture.

From there we move to the next really important piece of due diligence, pulling credit. The interesting thing about this is that you really have to rely on your sources/seller of the deal to get this vital piece of data.

That’s it for this week! Thanks for listening everyone and as always, if you have any questions, comments or potential deals to send our way, email us at [e-mail].

Listen & Watch this Week’s Show to Learn:

• The Major Due Diligence Differences Between 1sts and 2nds
• Why Many Investors Are Sticking With 2nds
• Why Two Different 2nds Investors Recommend You Start Your Business Differently
• Some Amazing Resources And Vendors To Use When Investing In 2nd Liens
• What To Do When Your Investment Gets Picked Up And Destroyed In A Tornado
• And much more!

Featured on the Show:

• Due Diligence Pro
• Inspired Capital Group
• Surf City Investors
• TLO
• Pacer

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Thanks for listening to our show! We’ll be back next Wednesday morning.

Cheers,

Chase & Robby