What's wrong with these numbers? - Posted by rerookie

Posted by JoeKaiser on February 18, 2001 at 14:01:47:

Couple things . . .

At 12% (or 1% per month), the payment is $1,072.50. At 14%, it’s a little higher (but not that much higher). Your calculation doesn’t take “time” into account. It’s 14% per annum (year), not per six months.

Hard money almost always means “points,” also known as loan fees. “Ten points” is not uncommon, so while you may borrow $107,250, the note will probably be $118,000 or more. Those points get paid when the loan is refinanced, so you’ll need more dough than you think down the stretch.

Finally, every transaction costs money. Every new purchase, sale, refinance requires a brand new title policy, appraisal, closing costs, etc. It’s usually a good idea to keep the number of transactions with one property to a minimum.


What’s wrong with these numbers? - Posted by rerookie

Posted by rerookie on February 18, 2001 at 12:31:00:

My wife and I will need to move within the next 6 months or so, so I figured why not use some creative technique. A seller has a duplex for sale with comps at 160K-165K. Here’s my plan (please don’t laugh TOO hard):

price: 165,000
hard money loan: 107250 (65%)
down pymt: 80000
6 months interest on hard money: 15015, or 2502/month
balance to seller + 10% interest: 93500
15 year 2nd mort to seller: 519/month

Rents for the area are 680-750. I’d be happy even if I had a $30 cash flow. The money we would save not having to pay rent would be worth it to us.

I would refinance after 6 months to pay off the hard money loan.

Question: Why can’t I pay 6 months interest ($15015) from the amount of the hard money loan?

Any and ALL help is appreciated.

the Rookie

Re: What’s wrong with these numbers? - Posted by PBoone

Posted by PBoone on February 18, 2001 at 13:08:30:

You can, just ask. The numbers given indicate 30%i/o for the hardmoney, reconsider the source of funds on this deal

What’s wrong with these numbers? - Posted by rerookie

Posted by rerookie on February 18, 2001 at 13:34:10:

Thanks for the advice on paying the interest out of the loan money itself. However, I am now TOTALLY lost! You say the numbers indicate 30% interest. The hard money interest is 14%. What did I do wrong?

I multiplied 107250 (the amount of the loan) times 14% to come up with $15,015 as total interest on the loan.

Please help. I know that these SIMPLE calculations are crucial to my success. Thanks again