So they would first payoff the first mortgage, if there is a second then $ goes to the second and if anything above that goes to any other lienholders or the homeowner.There are a lot of people who invest in 2nd mortgages because they are cheaper than a first, but in Ohio (not sure all counties) you have to pay off the first at foreclosure so if you do not have the money to pay off the first you are out of luck. 

I took no money from the cash flow (when there was any) and I never made a late payment to the bank.This fall, nearly 12 years after the bank gave me that house, and over 15 years after I knocked on that door - after evictions, vacancies, insurance claims, and never taking a dime out of it - I sold that house and placed all of the proceeds in a 1031 exchange.

Why would someone buy now and make little money for the chance that the rates will adjust later?

@Ella Marie the Pro's are you can build long term wealth, the Cons are you can lose money if you cannot properly quantify risk.

DSCR loans are not that low and regular hard money loans will be in the double digits.

Is it possible that at times you lose money (such as soft costs - paying for property inspections for example and the deal ends of falling through)?

I've never had to use hard money before, so I am not sure what type of conditions are reasonable.

.#2  MINDSET:  Just like some people will NEVER become real estate investors regardless of time, money, related profession, - MOST people will never become real estate investors.   

An example of this would be mixing your personal money and LLC money in the same bank account.3.

Higher risk structures can achieve higher IRRs, but can also break even or even lose money.