We choose to invest in first mortgages (as opposed to second mortgages) to place our company and our investors’ capital in the best position possible. Here’s why.
- Investors are more comfortable putting their capital in first mortgages.
- The inventory of non-performing first mortgages is about five times greater than the second-mortgage inventory.
- Seconds are subordinate to a non-performing first. In other words, you run the risk of losing your entire investment.
- First mortgages come with more exit strategies (see Number 4).
Firsts are simply the more intelligent investment option. You invest in something familiar while setting your own level of return and managing your risk level.