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.

Tenants not paying on time is a very unexpected reality that I would prepare for as well, and having an emergency fund out the gate will mitigate a lot of your financial stress upfront. 

Here are some key reasons why tenant screening is vital:- Risk Mitigation: Effective tenant screening helps mitigate risks such as rental payment defaults, property damage, and legal issues.

Implementing risk mitigation measures like fire-resistant materials, updated electrical systems, and security systems can help negotiate better rates.

You can take any reserves and ladder them with CDs/Treasuries/some other low-risk fixed income asset to provide liquidity in case things go sideways, all while mitigating most of the interest load on the loan. 

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.

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.

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