What is Lien Position?

What is Lien Position?

Many people consider lien position an important concept when it comes to real estate investing.

Lien holder position is not something you want to ignore because doing so could be detrimental in the long run. Depending on what position you hold, you can have less or more risk for your investment.

Read on to learn more about this important concept and how it can affect your investment opportunities.

Order of Liens on a Property

There are three main positions when it comes to liens.  There can be more, but for our purposes, we’ll talk about the three.  These positions are:

  • First Lien
  • Second Lien
  • Third Lien

The order of liens on a property is very important. Liens are used frequently in lending on real estate.

What is First Lien Position

The first position is the most important because it has the first claim on the property.

If there is ever a situation where the property needs to be sold, the holder of the first position receives payment first. This is why it is so important to have a good understanding of what your lien priority is in any real estate investment. Lien priority affects your ability to receive payment in case the borrower defaults and the property enters foreclosure.

If you are looking to invest in real estate, do the research and understand the different types of liens attached to the property. Often, there might be one or two liens on a property.

Knowing the legal claims against the property, will help you make informed decisions about your investment risk.

Owning the first position is the most important and gives the investor the greatest level of security for their investment.

What is 2nd and 3rd Lien Position

The second and third positions are the next most important after the first position. If there is ever a situation where the property needs to be sold, the holder of the second and third positions will be paid in order.

This is why lien priority is important in real estate.  For holders in the number 2 or 3 positions, they are exposed to more risk.  It is possible for these lien holders to miss out if the outstanding debt exceeds the value of the property.

Types of Liens in Real Estate

There are three types of liens that can be placed on a property. The types are as follows:

Mortgage Lien

This is the most common type of lien. It is used to secure debt against the property.  In these cases, typically the lien holder is the mortgage lender.

Tax Lien

This type of lien is used to secure taxes that are owed by the owner.   This could be federal income taxes or unpaid property taxes. The federal and/or local government(s) can place a lien on the property and ultimately take possession of it.

In the case of a tax lien, lien holders with priority can lose out when local or the federal government goes after a property owner

Mechanic’s Lien

This type of lien is used to secure services or materials that have been provided to the property. It is common in the construction industry, and the lienholder has the right to take possession of the property if the debt is not paid.

Understanding the different types of liens that can be placed on a property is important for anyone looking to invest in real estate. Make sure to understand how each type of lien will affect your ability to sell or refinance the property.

Remember, the first position is the most important because it has the first claim on the property. If there is ever a situation where you need to sell or refinance, you will have to deal with whatever types of liens are in place before obtaining a clear title.

How Lienholders Get Paid

In the case of a foreclosure, the lien holder in the first position or senior position will receive the proceeds before any junior lienholder (second and third positions). This means that a junior lienholder has more risk in the case of foreclosure.

This is know as the “First in Time, First in Right Rule.”

Often, the first lienholder is a mortgage lender that issued the original mortgage. If a second mortgage is active, that lienholder will take a junior position to the first mortgage holder.

In the case of property tax liens, these tax liens outrank senior and junior lienholders. The government will take the property if the taxes are not paid.

Invest in Mortgage Notes and Take First Lien Priority

Interested in additional information about using lien position to create passive income streams for yourself?  One form of this type of passive investing  involves investing into mortgage notes.

Investing in notes that have a first position gives the investor lien priority over any other type of lien.

This means that as a note holder with a first priority lien on the asset (the property) you are protected in the case of a default.  All of Secured Investment Corp’s mortgage investment notes take a first position with the property held as collateral on a private money loan.

Learn more about available properties you can invest into clicking the button below.



Earning and Income statements made by our company and its customers are supplied directly from the company or customer. Any and all claims or representations as to income earnings made on our web sites or in our materials or information are not to be considered as average earnings. There is no guarantee that you will make these levels of income — in fact, most people do not — and you accept the risk that the earnings and income statements differ by individual. Individual performance depends upon each customer’s unique skills, time commitment and effort. Our programs are not designed or intended to qualify individuals for employment. Our programs are avocational in nature and are intended for the purpose of the personal enrichment, development, and enjoyment of individuals.

Past performance is not an indicator of any future results. All investments contain risk and may lose value. Any historical returns, target returns, expected returns or probability projections may not reflect actual future performance. Investors should not rely on forward-looking statements because such statements are inherently uncertain and involve risks. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. We do not make any representations as to the accuracy or completeness of the information contained on this website and undertake no obligation to update the information. Neither Secured Investment Corp. nor any of its affiliates are registered investment advisors or broker-dealers and do not provide investment advice. No communication from Secured Investment Corp. or its affiliates through this website or any other materials is intended to be or should be construed as investment, tax, financial, accounting or legal advice.


Secured Investment High Yield Fund II, LLC is open to “accredited investors” only, through an offering made in accordance with Regulation D, Rule 506(c) of the Securities Act of 1933, as amended. In purchasing securities through a 506(c) offering, we are obligated to verify any participating investor’s status as an “accredited investor” in accordance with Rule 501 of Regulation D.

Circle of Wealth Fund III LLC has filed offering circulars and may make additional filings with the Securities and Exchange Commission covering its current offering of membership interests. Each investor should carefully consider the risk factors and other information discussed in the qualified offering circulars (including any amendments) before purchasing membership interests. The Offering Circular and other supporting documentation may be found at: https://www.sec.gov/cgi-bin/browse-edgar?CIK=1762825