Yet lending all your money in second position is like buying a ticking time bomb without knowing when it will go off.Where I disagree with you is that adding “3-5% higher (min)” to a 13% second position loan somehow mitigates the risk (and I know your numbers were made up for illustration).

Hopefully, that could help mitigate some of the risks.

The bottom line is you might want to make some changes to the house to help make it easier to mitigate some things.

Risk Assessment: Identify potential risks and mitigate them before investing.2.

Others might be fine with taking risk, but least by doing this a person can get an idea of what might go wrong.e) Legal document analysis: it will usually take a few days to go through the legal document properly, as almost inevitably there are tons of gotchas that either have to be explained, or mitigated with a side letter.That is the very short summary of what I do.

It’s crucial to have a solid agreement to mitigate these risks.The Ugly: Without clear agreements, co-ownership can lead to legal battles, credit issues, and potential loss of property.By carefully planning and seeking professional advice, you can navigate this situation effectively and find a solution that works for you and your family. 

I wouldn't take a loan on the one you own outright yet because you will mitigate the cash flow.

I use a property management company and am umbrella policy to mitigate risk.

There are some things you will want to think about before purchasing in the area - insurance, fire mitigation, etc.  

BUT you can mitigate that by buying outside of an HOA and a newer home which will give you more affordable insurance.