Figuring ROI on money I would lend

[Sal Livreri]

I am considering lending my money out to REIs. What I am trying to figure out are the ROI on this and the mechanics/logistics.

I set up an excel spreadhseet to try to do this.  The assumptions are:

1) It is an amortized loan of 10k (to make the math easy)

2) The interest rate is 12% and the term is 10 years.

3) the payment is 143.47 and total interest paid is 7216.51

So, after a year, I would have received 1721.64 of which 1170.33 is interest. My thinking then, and this may be faulty, is my ROI after 1 year is 11.7%. Each year after that is 11.4, 11.0, 10.6, 10.1, 9.6 all the way down eventually to 7.2% at the end of 10 years, not the 12% I was originally thinking. So, basically my money is tied up for 10 years and I only get 7.2% (per year averaged over the 10 year). Am I not figuring this out correctly?

When I first started envisioning this, my fear was I would go through all the work of loaning the money out, and they would pay back early.  So less interest for the same amount of work compared to someone who took the whole 10 year payback.

Now my fear is that my money will be tied up in an ever-decreasing ROI.

I feel like I am missing something. Am I not supposed to use amortization and do simple interest instead? Obviously I am new to the lending game, but I am trying to gauge ROI compared to other possible investment choices.

Thanks in advance.