Some want equity which is a little tougher to structure but possible.

I like that you pointed out all the positives and negatives for a fair balanced post that will help other investors evaluate future options.I have been posting for a while on how hard the North Alabama market has become, and this post shows a good example of it. 

I think many of the homes you see for sale are just investors that are trying to realize the equity growth in their properties.

Or do they leverage debt, and use the subsidies to cover the equity needed?

If so you need to fall into the guidelines (for the investor whos funding it) regarding non arms length transactions.The most common scenarios they typically prohibit are:- Gifts of Equity- Bailouts- Leaseback OptionsAt the end of the day it needs to be a legitimate transaction, with legitimate funds coming into close.

i say that not to discourage you, but so that you have a realistic picture of what to expect.as @Travis Timmons alluded to, you need to be in a strong financial position to even think about starting to invest. 

This can encourage positive word-of-mouth and build goodwill if they’re ever a reference for your property.Ultimately, focus on fairness and clear documentation.

I just re-read and realized you're talking about getting loans for lien position 2, is that correct?

Hi Anthony, it sounds like you’re in a good position to start building your STR portfolio, especially with no debt, great credit, and rent-free living!

I would keep as much liquid as possible and essentially get you to 20% equity or more by renovating the property.