South Dakota Bridge Loans

Sidney closes on a $150,000 renovation project in Rapid City, SD, using a bridge loan from Blue Mountain Funding Company. The lender agrees to make a note with a 60% loan-to-value (LTV) so they are willing to extend $90,000 on the property. The parameters of the note also include a three percent origination fee that will be paid at closing and a 18 month, interest only note with a 12% rate of interest.

According to the parameters of the loan, Sidney will have to pay a $2,700 origination fee plus 40% of the purchase price, or $60,000, based on the 60% LTV. The monthly interest only payments will then be $900 to the lender. At the expiration of the note, he sells the renovated property for $202,500. After deducting the $16,200 in interest expenses ($900 times 18 months), the $2,700 origination fee, the $90,000 principle amount on the note, and the $60,000 he contributed to closing, he will make a total profit of $33,600 ($202,500 sales price minus $168,900 in total costs). This amount would then be reduced by any building costs paid by the borrow.

Helen finds a duplex in Rapid City, SD to remodel and re-sell. Because she does not have enough cash to buy the property outright, she takes a bridge loan from Easy Brook Finance Company with the following parameters:

$150,000 purchase price
65% loan-to-value (LTV)
6 month term
8% rate of interest
1% origination fee

Helen plans to sell the property when the note expires for $195,000. If she achieves this goal, the deal numbers will be as follows:

$195,000 sales price
- $97,500 note principle (65% LTV)
- $52,500 cash paid at closing (35% on 65% LTV)
- $975 origination points (1% of the $97,500 principle)
- $3,900 interest payments (6 months x 8% interest)
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= $40,125 total profit (does not include taxes or renovation costs)