Duplex Evaluation with short term private money loan

[Jordan B.]

Any help, tips, or any other comments on the below would be greatly appreciated!

I have a few family members that are willing to give me a private money loan at 10%. I will pay 10% interest for each month their money is in use and will pay them back in full once I have done a cash out refinance. 

The property is listed as a duplex with each having 1-bedroom and 1-bathroom. This is a bank owned property that is currently vacant in need of rehab. Property taxes are very low for my area and this is located in a 10/10 school district. 

Property Details:

• Purchase Price: $80,000
• Est Rehab Cost: $20,000
• Property Taxes: $2510

Private money Loan:

• $50,000
• 10% Interest
• Monthly Interest payout: $416.67

Monthly Carrying Costs until cash out refi

• Interest Expense: $416.67
• Property Taxes: $209.33
• Water/Sewer: $55.00
• Home Owners Insurance: $80
• Total: $761 

I plan to carry the monthly carry costs for 6 months while i have the property rehabbed/updated and suitable renters found. Once completely occupied, i will do a cash out refinance for the total amount of the purchase price and pay back the private money lender and all rehab costs. 

New Property Details:

• Estimated Appraised Value: $130,000
• Property Taxes: $2510 yr
• Property Insurance: $960
• Unit 1 Rental: $825
• Unit 2 Rental: $1075

Cash-Out Refinance:

• Loan amount: $80,000
• Interest Rate: 4.25%
• Term: 360 months
• Insurance: $80
• Property Tax: $209
• Month Mortgage Payment: $682.89

Monthly Property Expenses:

• Mortgage: $682.89
• Water: $60 (30 per unit)
• Sewage: $25
• Heating Oil: $200 (Estimate)
• Maintenance/Cap Ex: $190.00
• Total Monthly Expenses: $1157.89

Final Numbers:

• Total Monthly Rent: $1900
• Total Monthly Expenses: 1157.89
• Profit/Loss: +$742.11 per month / $8,905.32 yr

Am I missing anything? I pulled these numbers off of calculators i created in Excel. In order to make this deal happen i will have to pay for 6 months worth of carry costs which total $4,566. 

Property cost: $80,000

Carrying costs: $4,566

Rehab costs: $20,000

Total: $104,566 for a property potentially worth $130,000. 

Questions: 

When i do a cash out refinance, are closing costs due up front or are they rolled into the mortgage? Is any downpayment usually needed for a cash out refinance? 

[Jordan B.]

Originally posted by @JR T.:

Youd be better off with a HML than this family of loan sharks you come from. 10% per month? Also consider the value of the HMLs underwriting experince - if they wont do the loan youre probably gonna lose money on it if you do it anyway.

 Sorry, for the confusion. This would be 10% APY. So $50k compounded monthly would be $416.67 a month for interest. I would ask for a clause to be able to pay off their initial investment as early as 6 months with no penalty. So instead of paying $5,000 for a $50,000 loan for a year, i could get away with roughly $2,766 in interest if i can complete this in 6 months.