Christie closes on a $170,000 renovation project in the Northwest Anaheim neighborhood of Fullerton, CA, using a hard money loan from City Investments. As the lender sets a 75% loan-to-value, Christie will need to put 25% down so the total amount of the loan will be $127,500. The loan is interest only, paid monthly, and is for 18 months at 11% interest with 3 points paid when the deal closes.
Christie will need to contribute $42,500 at the closing (25% on the 75% LTV), plus she will have to pay the $3,825 origination fee. Once the deal is closed and Christie takes the property, she will begin making monthly payments of $1,169 to City Investments ($127,500 principle x 11% / 12 months). Christie's plan is to complete the rehab within the 18 months and resell it for $204,000. If she succeeds she will make a total profit of $9,138 ($204,000 price - $127,500 principle - $42,500 funds brough to closing - $3,825 origination fee - $21,038 in total interest paid.