How much goes to Lender and how much goes to Real Estate Investor

[Mark Weinberg]

I would like to know how much goes to a lender and how much goes to a real estate investor on a Fix N' Flip loan.  For example, if the purchase price of the property is $300,000 plus the rehab costs are $81,550 and then the After Repair Value of the property is now $479,000, what amount goes to the lender and what amount goes to the real estate investor assuming the lender financed the purchase price and rehab costs?

[Bill B.]

In your example you’re going to split $480k minus say 10% in closing costs so $48k minus $81,550 (I love the exactness of this estimate), minus the $300k purchase price means splitting $50k. Depending on how long it take and how many you’ve done the money guy could ask for a couple points up front, say $8k, and $4k a month in interest. If the investor did all the work, finish the rehab in a month or two and found a buyer immediately then closed in 60 days he might get 1/2? But you’re really putting the money guy on a limb, I don’t know if any are going to do that skinny deal unless they trust you and you show a lot of previous deals. 

You get out towards 4 months to rehab, a couple months to find a buyer and a couple months to close they might want all the money. Then the “investor” bought a job that doesn’t pay, but that’s because he has nothing but his time at stake. Maybe if the investor put in the $80k for rehab he could ask for 1/2? 

Maybe some of the hard money guys here will weigh in on if they’d even take the deal and how much they want guaranteed.