Sheila takes a private money loan from Cordial Investment Corporation in order to renovate a condo to flip in the Five Points area of Lake City, FL. The list price of the property is $280,000. The lender agrees to issue a loan with a 85% loan to value (LTV) so they will loan $238,000 on the house. The terms of the deal also include a five percent origination fee that will be paid at closing and a 12 month, interest-only note with a 10% rate of interest.
According to the terms of the note, Sheila will be required to pay a $11,900 origination fee plus 15% of the purchase price, or $42,000, based on the 85% LTV. After the deal closes, she will need to pay Cordial Investment Corporation $1,983 in monthly interest payments, or 10% multiplied by $238,000 divided by 12 months in the year. Sheila's intention is to complete the house within the 12 months and re-sell it for $350,000. If she succeeds she will collect a gross profit of $34,300 ($350,000 sales price - $238,000 principle - $42,000 cash at closing - $11,900 origination points - $23,800 in total interest.