Elvira closes on a $210,000 rehab project in Auburn, CA, using a private money loan from Affluent Funding. Since the lender agrees to a 70% loan to value, Elvira will have to put 30% down so the principle amount of the note will be $147,000. The note is interest only, with monthly payments, and is for 6 months at 13% interest with 3 points paid when the deal closes.
By the parameters of the deal, Elvira will have to contribute a $4,410 origination fee in addition to 30% of the sales price, or $63,000, based on the 70% LTV. After the loan closes, she will have to pay Affluent Funding $1,593 in monthly interest fees, or 13% multiplied times $147,000 divided by 12 months in the year. If Elvira sells the house for $304,500 after 6 months, she would then earn a gross profit of $80,535 after deducting the original principle of $147,000, the money contributed at closing of $63,000, the origination points of $4,410, and the aggregate interest payments of $9,555. This amount does not include renovation costs.