Alberta closes on a $170,000 renovation project in Lincoln Park, MI, using a private money loan from Flourish Finance Group. The terms of the deal include a 70% loan to value (LTV), so she must contribute 30% of the price as cash at closing, making the principle note amount $119,000. The note is interest-only, with monthly payments, and is for 12 months at 9% interest with 1 points to be paid when the deal closes.
On top of the $1,190 origination fee, Alberta will also fund $51,000 of the purchase with her own funds, or 30% of the purchase price. After the loan closes, she will need to pay Flourish Finance Group $893 in monthly interest fees, or 9% multiplied times $119,000 divided by 12 months in a year. If Alberta achieves her goal of a $221,000 sales price when the loan expires, she would collect a total profit of $39,100 after re-paying the principle amount and deducting the cash she contributed at closing, the origination fee, and the monthly interest payments.