April closes on a $250,000 renovation project in the Desert Hills neighborhood of Lake Havasu City, AZ, using a private money loan from Presitge Lending Corporation. The borrower will need to bring 35% of the sales price in cash to closing based on a 65% loan to value stipulated by the lending company. This makes the principle amount from Presitge Lending Corporation $162,500. The parameters of the deal dictate a 8% note for 18 months. They also stipulate a 2 point origination fee, which will also need to be paid when the property closes.
The borrower must bring a total of $32,400 up front to cover the $87,500 down payment in addition to the $3,250 origination fee. Once the deal is executed and April takes on the property, she will need to begin making payments each month of $1,083 to the lender ($162,500 principle x 8% / 12 months). If April sells the house for $362,500 after 18 months, she would then realize a total profit of $89,750 after deducting the principle amount of $162,500, the cash paid at the close of $87,500, the origination points of $3,250, and the aggregate interest payments of $19,500. This profit does not account for rehab costs.