Friday, June 24, 2005

Hard Money Lending Results

Today I received the payoff of the hard money loan I made back in April. All in all, it was a pretty good experience. To recap, I loaned $1,200 at 18% interest for 3 months with a $200 loan origination fee and 10 points. The loan was paid off about one half month early, although I still received interest for the full last month.

The borrower had to make a total of three interest payments, plus the payoff payment. Unfortunately, two of the interest payments were late. The first was only about 3 days late, which wasn't a big deal. Because that payment was late, I sent a reminder email a week before the next payment was due. I got a reply back saying the loan would likely be paid off early and to expect a check shortly. The due date came and went and I didn't get a check, so when the payment was 5 days late, I sent another email stating the loan was in default. I got no response. When it was 10 days late, I sent another email saying I was starting foreclosure proceedings. Once again, I received no response. Yesterday (12 days past due), I had just selected a law firm specializing in collections and was about to contact them, when I received an email saying the final interest payment and payoff amount was being sent to me overnight. I received the checks today and the loan is now paid in full. As an added bonus, the borrower voluntarily enclosed an additional month's interest because the payment was late.

So there was a little bit of a hassle, but all in all, it was a fairly good experience. Here are the final numbers:

Loan Amount


Loan Length

76 days

Interest Received


Origination Fee Received


Points Received


Total Received


Total Return (ROI)


Annualized Return



biophase said...

For some reason this post makes me feel uneasy. Was it a personal check? Have the funds cleared?

Andrew said...

I just wanted to say that your blog is really cool Shaun. I'm a 19 year old student from the Netherlands, so you can tell your friends you've gone international now ;)

Shaun said...

Yes, it was a personal check. Don't you pay your bills with a personal check? Don't worry, I'm going to wait until I am sure the check has cleared before I return the promissory note marked "Paid In Full."

Steve said...

Nice job, Shaun. what some people will do is look at the ~$400 profit and say "Oh wow - is that all you got." They don't see the bigger picture here that you made an awesome return on your investment in a short time. Sure it's only $400, but it's $400 more than they probably made. And, more importantly, it's $400 more than you had had the beginning of the deal.

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