Jacqueline closes on a $350,000 rehab project in the Garden City area of Avon, IN, using a hard money loan from Reliance Investments. The loan-to-value (LTV) on the deal is 85%. This means that Jacqueline will bring 15% of the sales price to the closing and the principle will be $297,500 on the deal. The note is interest only, with monthly payments, and is for 6 months at 12% interest with 5 origination points paid at closing.
In addition to paying the $14,875 origination fee, Jacqueline will also need to fund $52,500 of the purchase with her own funds, or 15% of the sales price. The monthly interest only payments will then total $2,975 to Reliance Investments. If Jacqueline sells the property for $490,000 after 6 months, she would then make a gross profit of $107,275 after deducting the principle of $297,500, the funds paid at closing of $52,500, the origination points of $14,875, and the total interest payments of $17,850. This profit does not account for renovation costs.