The borrower is under no obligation to advise the 1st lien holder of the existence of the 2nd lien; in other words “no harm no foul”.  

Also, I would get an extension from the original note holder, to extend that to 7-10 years. 

Cash flow is a holder why your asset appreciates.then you 1031 into a bigger property and keep rolling up that way.. without any or meaningful appreciation and capturing that appreciation to move to bigger and better .. your numbers are correct. 

From what I've seen, a lot of CCRs state that if a single mortgage holder requires flood insurance, the HOA is usually responsible to purchase it for the building.

 I am working in the US currently on H1b visa.

The point Jimmy Napier was making in the book was this: If you are the buyer (Johnny) the true rate of interest you are paying depends on the amount of discount the mortgage holder is willing to give you.

Be careful because the first lien holder can call the note due if they find out the house is sold.  

Can only the note holder deduct interest and tax expenses?

Nobody who can get a 3.5% mortgage is saying let's go with the 9% loan.Next change the UPB to reflect your purchase price, if there are any costs to you as a note holder (servicing being most prominent) adjust the Monthly payment.  

In most cases, you will find that the long term holder lost a ton of money over the life of the property.