Latonya closes on a $190,000 renovation project in Sebring, FL, using a hard money loan from Dynamic Funding Company. The loan-to-value (LTV) on the deal is 75%. This means that Latonya will need to bring 25% of the purchase price to the closing and the principle will be $142,500 on the deal. The loan is interest-only, with monthly payments, and is for 6 months at 11% interest with 5 origination points paid at closing.
In addition to paying the $7,125 origination fee, Latonya will also have to fund $47,500 of the purchase with her own funds, or 25% of the purchase price. she will then pay $1,306 monthly to Dynamic Funding Company. If Latonya sells the property for $266,000 after 6 months, she would then make a gross profit of $61,038 after subtracting the original principle of $142,500, the cash contributed at closing of $47,500, the origination points of $7,125, and the total interest payments of $7,838. This gross profit doesn't account for rehab costs.