Dynamic Investment Group issues a private money loan to Kerry for a renovation project in Normal, IL, on a house that is listed for $190,000. The lender agrees to make a note with a 50% loan-to-value (LTV) so they are willing to extend $95,000 on the property. The note is interest only, paid monthly, and is for 18 months at 9% interest with 4 points paid at closing.
According to the terms of the note, Kerry will need to pay a $3,800 origination fee in addition to 50% of the purchase price, or $95,000, based on the 50% LTV. she will then pay $713 per month to Dynamic Investment Group. If Kerry sells the property for $275,500 after 18 months, she would then realize a gross profit of $68,875 after deducting the principle amount of $95,000, the cash paid at closing of $95,000, the origination points of $3,800, and the aggregate interest payments of $12,825. This amount does not include remodeling costs.