Jimmy closes on a $150,000 rehab project in Zephyrhills, FL, using a hard money loan from Red City Investments. The terms of the deal include a 65% loan to value (LTV), so he must bring 35% of the price as cash to closing, making the principle loan amount $97,500. The note is interest-only, paid monthly, and is for 18 months at 12% interest with 2 points paid at closing.
Jimmy will need to fund a total of $32,400 upon closing to cover the $52,500 down payment in addition to the $1,950 origination fee. After the deal is executed and Jimmy takes the project, he will begin making payments each month of $975 to the lender ($97,500 principle x 12% / 12 months). Jimmy's plan is to complete the project within the 18 months and sell it for $202,500. If he succeeds he will earn a profit of $33,000 ($202,500 sales price - $97,500 principle - $52,500 cash at closing - $1,950 origination fee - $17,550 in total interest.