Interest calculations on hard money ?

[Alexandria Harden]

I am looking into getting a hard money loan for the first time and was wondering how to calculate the interest to make sure the deal is still a good deal after there interest. Rough numbers are it’s a 2 building 10 unit in total for 340,000. Cap rate of 14%. Any advice helps.

[Erik W.]

You treat the cost of money just like any other cost.  Let's pretend the amount borrowed is $300,000 with zero points and 1% per month.  That gives you a cost of money of $3,000 per month.  If you estimate the time line of your project to take 4 months, then you multiple $3000 * 4 and get $12,000 for the cost of the money.  Add in any incidentals like if you're responsible for the costs to record the note and/or release of liens to get your total cost.

Money is as much a tool and supply as is a nail gun and a 2x4.  Just figure the cost and add it in.  The only variable will be what happens if you get the work done faster (yay, it costs less) vs. slow (boo, it costs more).  In some ways, that is similar to anything else, though, because no project works out EXACTLY as planned.  There are cost overruns, savings, etc. on materials and labor.  So you just add the money cost into your budget and leave a good "whoops" factor (10% or more) in case things don't go according to plan.