(b) Pre-paid rent limitation.

@Dale MillerYes, the prepaids/escrows and the other closing costs are pretty much guesses. 

The loan specifies: ESTIMATED SETTLEMENT CHARGES, ESTIMATED DETAILS OF TRANSACTION, ESTIMATED PREPAID ESCROWS, and ESTIMATED SCHEDULED PAYMENT.

Add $900 for 1pt rate charge, and additional costs of about $300-$1k for Prepaid’s (partial month interest, insurance renewal if within 3 months of policy expiration) and New Impound account (reserve for property tax and insurance.

Here's how I would look @ the numbers and break it all down: Purchase Price: $65,000Rehab Budget: $35,000 ARV: $160,000Renovation Ratio: 53.85% Initial LTC70.0% Construction Holdback %100.0% Initial Funded Amount$45,500 (for the purchase)Construction Reserve$35,000 Total Loan$80,500 LTARV50.31% (you should be at 65% LTARV or below)Interest Rate14.000% (reflects low purchase price + no experience)Monthly Payment$939 (interest only monthly)Origination Fee$2,415  (3 points - low purchase price + no experience)Interest Reserve$2,818 (prepaid interest - 3 months)I think the above terms are realistic from a hard money lending company.

It doesn't include prepaids or escrow which is property taxes and property insurance.Loan fees are where most lenders make their money because most do not hold the loans.

It is a C class neighborhood, but the previous tenant I had when I first bought it was quite responsible; rent always prepaid, few issues and quickly resolved, and just a hard-working family man.

Courts routinely tell Condo HOA's that they can designate building as non rental building.The idea that a HOA tels you that you cannotI look for properties where the HOA fee is no more that 8-10% of expected rent and expense it off for what it is Pre-Paid Maintenance and Capital Improvements.

Hard pass unless they can do many months of prepaid rent and sec deposit. rents should be the last part of lease not the first part so they still need to pay monthly up front.

For some data points:11CapitalFinance30 year fixed loan at 70% LTV with a 3 year pre-payment penalty and is based on a 800 FICO score.6.75% APR$1918: 2 lender points $1720: lender underwriting / doc fee$1918: 2 point broker fee$500 appraisal Total cost: $6056 + pre paidsPrime Lending30 year, 70% LTV5.625% APR (was told today that it’s come down this week from this)Lender: $1350Appraisal: $475Title: $1300Total cost: $3125 + pre paids