Effie closes on a $350,000 rehab project in Bell Gardens, CA, using a private money loan from North Shore Investment Group. Because the lender sets a 55% loan to value, Effie will need to put 45% down and the principle amount of the loan will be $192,500. The parameters of the loan dictate a 8% note for 18 months. They also stipulate a 3 point origination fee, which will also be paid upon closing.
Effie will need to contribute $157,500 to closing (45% on the 55% loan to value), plus she will pay the $5,775 origination fee. Once the deal closes, she will pay North Shore Investment Group $1,283 in monthly interest fees, or 8% multiplied times $192,500 divided by 12 months in a year. If Effie sells the property for $437,500 after 18 months, she would realize a total profit of $58,625 after subtracting the principle of $192,500, the money paid at closing of $157,500, the origination fee of $5,775, and the aggregate interest payments of $23,100. This amount does not account for rehab costs.