2nd position on a loan, any safe options

We currently have our park listed for sale. One of the prospects who has been looking at buying the property says he can get 70% of the asking price from his bank, however he’s also asked if I would be willing to carry a note for the remaining 30%.

I been told and have read that taking 2nd position on a loan is bad news, but I also wonder if there are any safe work arounds or options.

Thanks for your thoughts,


So they want the park to be 100% financed…

Well, I would tie the financing to another asset, (like their home), I would require them to be really, really strong as borrowers, and just me- I would want a long and strong track record in ownership and operations for the park.

I would write performance standards into the loan with a non judicial forfeit of ownership if certain things trigger default. Vacancy, upkeep etc…

That advice from Jim makes a lot of sense. I’d add that you would want to have some say as to the terms of the 1st loan. For example, if the rate on the 1st was “hard money” (say, 12% with a 2 year term), then the buyer could default and you’d may have to pay off the note to keep the park. Yet, if the 70% 1st note had excellent terms (such as 3% for 30 years), then that may work if you had to take the park back. Of course you would have the proceeds from the sale regardless.