We invest in notes but prefer first over seconds because seconds typically carry much higher risk - for example a jr lien could be 100% wiped out in a bankruptcy whereas not happening with a firstPros and cons to all - if you at buying at auction with liens still attached most lenders will want the full payoff or foreclose

However, the rents are slightly lower and could potentially wipe out your monthly cashflows with one major repair.As for higher appreciation market like West/East Coast, it's more expensive, but rents are higher due to a strong labor market, there will be a certain amount of demand for those markets, but the downside is that you will need to be creative by adding more values for the property.

Compare that to your offered purchase price and surely it would be more profitable for him to wipe his hands clean and let you take over.

This is called a Deed in Lieu Foreclosure or Deed in Lieu (DIL).As an option to avoid a long drawn-out foreclosure process (more painful for the lender than the borrower), your friend might be able to negotiate a deal with her lender to accept the property and wipe the slate clean.

I know a lot of operators that have wiped out investor equity and have paused distributions but have still not sold yet.

Pref equity makes no sense because if the LPs are essentially wiped out already that would put pref equity too high in the capital stack.  

The next house will bring in passive income (rents) and that plus the equity it builds can wipe out debts fast!

Instead most people trading here will be getting absolutely wiped out. 

The largest generation in history (baby boomers) are retiring.

If property values fall and you are forced to sell you would be wiped out.