Dominique closes on a $210,000 rehab project in Windsor, CO, using a hard money loan from Affluent Lending Company. Since the lender agrees to a 85% loan-to-value, Dominique will need to put 15% down and the amount of the note will be $178,500. The loan also consists of the following features: 1) a 6 month term, 2) a 10% interest only note, and 3) a five percent origination fee.
In accordance with the parameters of the loan, Dominique will be required to pay a $8,925 origination fee plus 15% of the sales price, or $31,500, since there is a 85% LTV. she must then pay $1,488 monthly to the lender. Assuming Dominique sells the remodeled house for $252,000 at the end of the 6 month term, her gross profit (not accounting for rehab costs) would be $24,150. This is calculated by taking the purchase price ($252,000) and subtracting the original principle ($178,500), the origination cost ($8,925), the money she contributed to closing ($31,500), and the total interest expenses ($8,925).