What a foreclosure timeline can do to the return on a tenant-occupied note

Consider a private first position loan on a tenant-occupied three bedroom in a mid-size southern metro: 96k against a house appraised at 148k, 24 months interest only at 11 percent, one point at close. The note, deed of trust, personal guaranty, and lease all read clean on paper. What is easy to miss is how long it takes to get possession back in a given state. Say the borrower pays for nine months, then stops, while the house stays occupied by a paying tenant whose rent goes to the borrower rather than the lender, because no assignment of rents was recorded that could actually be acted on quickly. Foreclosure timelines are set state by state, and in a judicial state that means court, not a notice posted at the courthouse. Fourteen months from first missed payment to sale is not unusual in that setting. Over that stretch, a loan servicer might advance several thousand dollars in property taxes and forced-place insurance to protect the lien position, legal fees can run near ten thousand dollars, and those costs typically come out of recovery before the lender sees anything. Principal often comes back whole, but a yield modeled at 11 percent can land closer to 3 percent once the timeline and legal costs are counted, with the money tied up for two years instead of one. The lesson is to underwrite the remedy, not just the collateral: know the median days to complete a foreclosure in that specific county, confirm with local counsel that an assignment of rents is actually enforceable there and get it recorded, and require a tax and insurance escrow rather than trusting a borrower to keep both current.