Meredith closes on a $320,000 rehab project in Rancho Palos Verdes, CA, using a private money loan from North End Investments. As the lender sets a 70% loan-to-value, Meredith will be required to put 30% down so the principle amount of the loan will be $224,000. The loan is interest-only, paid monthly, and is for 18 months at 12% interest with 4 points to be paid when the deal closes.
Meredith will have to contribute $96,000 to closing (30% on the 70% LTV), plus she will pay the $8,960 origination fee. The monthly interest-only payments will then total $2,240 to the lender. If Meredith sells the house for $432,000 after 18 months, she would then realize a gross profit of $62,720 after subtracting the original principle of $224,000, the cash contributed at the close of $96,000, the origination points of $8,960, and the total interest payments of $40,320. This amount does not account for rehab costs.