Loan Payoff and Investor Distribution

[Account Closed]

I have a property under contract and trying to better understand the potential profitability of the project.  I feel as though I have massively overlooked something.  

Details:

Purchase $425k

Rehab $130k

ARV $685k

Hard money loan $547,781 @ 12%

Down Payment $97,000

Holding costs $5000/ month

Project timeline 5 months

Realtor Fees and Closing $40k

Investor payback $23,400 @ 15%

I am looking at a return of $53,000 but I feel like I missing something.  Am I over analyzing.  Anyone willing to help I am happy to share more details. 

[Matt Hurley]

Woa, where are you getting your closing cost number? That’s almost 10% of asking, what type of property is it? Right now I’m not understanding your numbers: 

Purchase $ + rehab = $555k

HM loan @ 80% of $555k = $444k 

Down payment $111k + closing costs ($4k?) = $115k cash needed to close

Interest only/mo. $4440 + utilities = $5k

Holding costs for 5mo. = $25k

So: holding costs + cash to close+ loan payback = $584k

ARV $685k x 75% CO refi = $513k

Sounds like a losing deal to me. Also keep in mind you’re going to need at least another $50k cash on hand to act as a slush fund for your contractors. HM lenders pay in draws, meaning you have to complete the work first, get final inspection from the city, THEN you get your draw money. You don’t want to keep your contractors waiting that long, they won’t work for you again.