First investment loan default. The saga begins

[Greg Moran]

Investment Info:

Single-family residence private money loan investment in Enid.

Cash invested: $27,600

Contributors:
Matt Mesick

UPDATE: (10/02/2022): Borrower has defaulted on the loan and emailed to say they are unable to pay until the property sells. I checked the listing and it's been on the market since 12 August (50 days), with one price drop. Drawing up "notice to cure" memo with late payment fee schedule now. B-(

Belated Update: (03/07/2022) Borrower reached out asking for an extension so we agreed to a 1.5 Origination Points extension fee and 6 more months at the same interest rate.

[Jay Hinrichs]

Quote from @Greg Moran:

Thanks @Jay Hinrichs and @Russell Brazil. Also tagging @Nathan Harden for this update: The property finally sold with sufficient proceeds to pay off the first lien holder. I, as the second lien holder, came up short.  Therefore, I offered to "roll over" my PML into another unsecured loan.  In negotiations with the investor, we agreed to a 6-month 15% interest only loan with 5 points to allow them additional time to pull the money together (Yes, this lack of liquidity is a red-flag). I also insisted on either: a) other collateral or b) a personal guarantee clause. The borrower opted to sign the personal guarantee. 

I wonder if i'm simply kicking the legal battle a few months down the road...? We shall see if they make the interest only payments on time.

bit of advice FWIW don't charge massive interest on money they owe you .. when deals turtle up your goal is capital preservation.. so just go for your principal your much more likely to get your borrower to pay just principal then trying to load them down with additional huge interest carries.. this could very well end up in the same place you are now.. the PG is worthless unless they have SUBSTANTIAL assets that you are aware of and can tag a year or more later after you spend thousands litigating.. and you never get your principal back.. that's my experience having been in the HML PML space for 30 plus years. PS I saw the loan amount was very low 27500. for sure just get your principal back and chalk it up to experience.. is how I would handle it..