Harold closes on a $210,000 renovation project in Douglasville, GA, using a private money loan from All American Lending Group. The borrower will be required to bring 40% of the purchase price in cash to closing based on a 60% loan to value set by the lending company. This makes the principle amount from All American Lending Group $126,000. The deal also includes these features: 1) a 12 month term, 2) a 13% interest only note, and 3) a five percent origination fee.
Harold will have to bring $84,000 to the closing (40% on the 60% loan to value), plus he will need to pay the $6,300 origination fee. he must then pay $1,365 monthly to All American Lending Group. If he sells the rehabed house for $304,500 at the end of the 12 month term, his total profit (not including rehab costs) would be $71,820. This is computed by taking the purchase price ($304,500) and subtracting the original principle ($126,000), the origination cost ($6,300), the money he brought to closing ($84,000), and the total interest expenses ($16,380).