Redwood Mortgage Investors IX Annual Report - How They Did This Year

I’ve put together this guide to help you understand how Redwood Mortgage Investors IX (RMI IX) performed this year. My goal is to explain their latest annual report in plain English so you can decide if this investment fits your goals.

1. What does this company do?

Think of RMI IX as a private lender. Instead of a bank, they pool money from investors to provide loans to real estate borrowers. They focus on "trust deeds"—loans secured by California real estate—specifically in the San Francisco Bay Area and coastal Southern California.

As of December 31, 2025, the portfolio holds about 48 active loans. Redwood Mortgage Corp. manages the day-to-day operations, including loan approval and collections, since the company has no employees of its own.

2. How did they perform this year?

By the end of 2025, the company managed about $62.2 million in investor capital. Their goal is to provide steady cash flow while protecting your original investment.

In 2025, the company earned $3.1 million in profit, which supported a 5.2% payout to investors. This profit is influenced by:

• Interest Rates: The difference between the 9.8% average rate they charge borrowers and the interest they pay on their $10 million bank line of credit.
• Loan Activity: They issued $12.5 million in new loans but received $14.2 million in repayments, meaning the total portfolio size adjusted slightly.
• Costs: Management and servicing fees paid to Redwood Mortgage Corp. totaled about $850,000.

3. Financial Health & Loan Quality

The company focuses on "Loan-to-Value" (LTV) ratios to create a safety buffer; if a borrower stops paying, the property should be worth enough to cover the loan. The current average LTV is 58%, giving the company a 42% equity cushion.

They manage risk through several key strategies:

• Prioritizing "First Liens": 96% of their loans are first-priority. If a borrower defaults, the company has the primary claim to the collateral.
• Setting Aside Reserves: They keep $450,000 (about 0.7% of the portfolio) to cover potential losses.
• Active Management: Three loans totaling $2.8 million are currently not paying interest. The company is using forbearance agreements or foreclosure to recover these funds.

4. Key Risks

The primary risk is the California real estate market. Because their loans are concentrated in one state, a regional downturn could make it harder to recover money if borrowers default. Additionally, their $10 million line of credit has a variable interest rate. If market rates rise, the company’s borrowing costs increase, which can impact the cash available for investor payouts.

5. What’s Next?

The company is navigating a high-interest-rate environment. They are closely monitoring $8.4 million in loans that have reached their maturity date. Management is currently deciding whether to extend these terms at higher rates or initiate foreclosure proceedings to sell the properties.

Note: This is a high-level overview. Your returns are not guaranteed and depend on the performance of the loan portfolio. Before investing, consider whether the current payout rate aligns with your personal risk tolerance and the specific challenges facing the California real estate market.