South Dakota New Construction Loans

Bernadette wants to purchase a land lot in Sioux Falls, SD to build a duplex in order to sell it for a profit. On top of the $260,000 price of the plot, Bernadette approximates she will require around $400,000 in construction costs to finish the home. She applies for a construction loan from ABC Lending with the following terms: 1) a 12 month note at 10% interest, 2) interest-only payments made every month, 3) 3 origination points paid at closing by the borrower, and 4) a 80% loan to value (LTV) on both the lot purchase and the construction costs. They will not enforce a pre-payment penalty and they will pay out the construction costs in a few draws. The borrower will need to pay $4,400 monthly in note payments on top of $132,000 down, plus a $15,840 origination charge at closing. After deducting all costs, Bernadette will pocket a $191,360 total profit if she succeeds in his goal of a $920,000 sales price.

Douglas is a real estate investor and he decides to construct a single family home on a land lot in Rapid City, SD. To fund the transaction, he takes a construction loan from Prosper Finance Corporation with these terms:

Local Outings

After the building project is complete, if Douglas sells the property for $790,000, the final numbers will be as follows:

$790,000 sales price
- $413,000 principle (70% LTV)
- $177,000 cash paid at closing (30% on 70% LTV)
- $16,520 origination fee (4% of the $413,000 principle amount)
- $53,690 interest payments (12 months x 13% interest)
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= $129,790 net profit