However if you do It might mean both a loss due to the note being uncollectible or even go to jail for not haveing the apropriate license.

Since the beginning of Q2 2014, the average growth rate for industrial-using employment in Los Angeles has been -1.1% per year, representing the average annual loss of 6,824 jobs.

not sure about your experience but the second loan you got sounds like a great deal.most lenders really price by experience to get the really low rates very few will qualify for the best rates..Experience has more weight that fico in the HML world. 

I get an email informing me that one of the investments went bad, the company had to foreclose on the property and that I can expect an 87% loss of my total capital on that investment. 

Alec,From an Insurance perspective, ask the current owner to get from their agent "Loss Runs" for the past 5 years.  

The goal of any insurance company is to minimize there losses. 

Or one who assumes the risk of loss prior to settlement? 

So it wasn't a complete loss.  

Properties, for novices, which look good on paper and have good cash flow usually come with C to D+ areas, risky tenants, and a lot of cap ex that you can't see on the internet (basements, roofs, water issues, outdated mechanicals).You are turning a terrible loss into a springboard which is great, but you are trying to move too quickly it sounds like.

Let me know if you want to connect and chat more about it and other ways to create losses to offset your gains.