Principal payments built into construction loan

[Glenn Espinosa]

Believe it or not, I have been able to complete 2 successful rehabs now without having a full grasp on the loans and financing part of the equation. For my last two flips I've simply used the 20% ARV rule and used that figure to account for my holding costs to include financing, commissions, etc. etc. Little to no thought was put into the cost of the 50k construction loans I was taking out...

Anyway, I've gone back and reviewed my last two flips and my holding costs were actually more in the 14-16% range and that has motivated me to get better numbers on my holding costs. This will allow me to increase my maximum offer price and hopefully will get me into more houses.

So, finally, my question: For my last house I took out a 50k construction loan with an APR of 11.75% and a 60month pay back time. Our payments a month were $1,115 and our total finance charge for the life of the loan was $16,900. Stupidly on my part, I was under the impression that $1,115/month was going against my bottom line. In reality, I was paying less only $282/month in interest since $833/month was going towards the principal (is this right?). Unsurprisingly, we ended up a little short on cash because of the principal pay down and had to get creative towards the end.. In the future, would it be wiser to factor in the principal payments into a loan? I know the interest will go up since it will be a bigger loan. Do any other investors do this?

I haven't dabbled to much in hard money as the ones around my area (Southeast Virginia) want too much paperwork and are in my mind too much of a hassle to deal with (eg. draw payments, weekly progress inspections, control of fundamental rehab decisions, etc.). Generally, would I be getting a better deal with hard money than that construction loan I layed out above? Are there interest only loans with comparable APR's and balloon payments that I could try for (something were the principal doesnt kick in till say month 6)? In total, I paid 5 months worth of interest on my last flip and that came out to only $282 x 5 = $1,410 in financing charge. Not too shabby in my eyes.

Also, as a disclaimer It is quite possible that my math and calculations are all wrong but please bear with me.

Thanks ahead of time,

Glenn