What a senior secured note position that hit trouble and recovered looks like in the numbers

Consider a $35,000 senior secured position on a 96 unit value add multifamily deal in a mid sized midwest market, raised through a portal. Structure: 11% current pay, monthly, 24 month term with two six month extension options at the sponsor's election, loan to cost around 68%, sponsor equity of about $4.1m subordinate to the note, personal guarantee from the two principals. The platform took 1% at origination from the borrower's side plus a small servicing spread, so the quoted 11% is what reaches the investor. Months 1 through 13 paid on schedule, roughly $320 a month. Then months 14 and 15 did not arrive. The update cited a cost overrun on unit turns and slower lease up than the pro forma, a sentence worth learning to translate on any deal. What kept a case like this from becoming a loss is a default rate clause: interest steps from 11% to 16% after a 10 day cure period, and platforms that actually invoke that clause matter. In this shape of deal, the sponsor returned in month 17 with the missed payments plus default interest on the arrears, paid current afterward, exercised the first extension option, and paid off at par plus the final month around month 26. All in, that is $9,240 of interest on $35,000 over 26 months, about 12.2% annualized once default interest is counted, with principal returned whole. The two silent months are the real risk to price in. A first update 19 days after a missed payment with little detail is common; getting the construction draw log and current rent roll usually requires asking directly. The lesson worth keeping: favor deals where the default rate steps up meaningfully and the platform can point to having invoked it before on another deal, and always read the cure period before the rate.