Georgia closes on a $170,000 rehab project in Moreno Valley, CA, using a private money loan from Rolling Brook Investment Corporation. Since the lender sets a 75% loan-to-value, Georgia will need to put 25% down so the total amount of the note will be $127,500. The terms of the deal dictate a 9% note for 18 months. They also stipulate a 5 point origination fee, which will also have to be paid upon closing.
Accordingly, Georgia will need to contribute a $42,500 down payment in addition to paying a $6,375 origination fee. Once the deal closes, she will need to pay Rolling Brook Investment Corporation $956 in monthly interest fees, or 9% multiplied times $127,500 divided by 12 months in the year. Assuming Georgia sells the renovated house for $255,000 at the end of the 18 month term, her gross profit (not including rehab expenses) would be $61,413. This is computed by taking the purchase price ($255,000) and subtracting the original note amount ($127,500), the origination fee ($6,375), the money she brought to closing ($42,500), and the total interest expenses ($17,213).