Hard Money Loan from Houston Hard Money Lenders
James finds a duplex in a Cypress subdivision of Houston, TX to renovate and then “flip.” Since he doesn’t have sufficient funds to purchase the $250,000 project outright, he takes out a private or hard money loan from GL&L Holdings. The terms of the loan include a 70% loan-to-value (LTV), so James must bring 30% of the price as cash at closing, making the principal loan amount $175,500.
The deal also includes these features:
1) 12-month term without a prepayment penalty
2) 10.5% interest-only note
3) Possible Rehab Funds taking advantage of rehab lending in Houston if the appraisal of the property is high enough
Therefore, James will have to make a $75,000 down payment in addition to paying an origination fee. James must then pay a monthly loan payment GL&L Holdings.
James accomplishes his goal of a $345,000 sales price when the loan term expires, that means that James makes a gross total profit of $95,000. James has to reduce the interest paid during rehab and insurance, property taxes, utilities, HOA, commissions, etc.
