Exit Strategies for Commercial Lending Involving Hard Money Loans

Commercial lending involving hard money loans provides fast and easy financing for real estate developers, investors and contractors. But In order to obtain a loan, you need an exit strategy—how you’re going to get out and pay the lender back.

Hard money loans require an exit strategy as part of the application process. As a real estate investor, it’s always best to have multiple options at your disposal. As you know, the market can be canny and changing investment strategies mid-stream is not uncommon. The most frequent way that borrower’s exit in today’s commercial lending market is by selling the property. This is particularly true in fix and flip loans where money is needed for the next investment and profits are taken quickly. If the property is a rental unit or commercial property, borrowers can refinance the property with a traditional long-term loan assuming steady cash flow from rent and an increased property value is evident.

If the inability to qualify for a loan from a traditional commercial lending institution was the reason you originally obtained a loan from a hard money lender, you may be able to fix some of the credit issues while paying interest on the hard money loan and before payoff is due. This can be accomplished by taking steps to increase your credit, making timely payments on your present loan, and minimizing your debt ratio. Hard money loans can run anywhere from 3 months to several years, so take into account the length of time you need to address these issues.

If you are not eligible for a traditional loan due to credit issues, finances, or employment history which cannot be resolved in a few years, a subprime loan may be your answer. These types of loans do not have the same requirements and offer a good exit strategy that will still offer longer terms and lower rates, though not as beneficial as a conventional loan. If this is not an option, some hard money lenders involved in commercial lending will offer to extend the loan past the originally agreed upon terms. If not feasible, you may be able to refinance with a different private money lender.

Be Honest with Yourself and Your Lender

If this is your first rendezvous into the world of commercial lending, make sure that your game plan is well-thought out and all the moving parts have been analyzed. Having a solid business plan in place with a detailed scope of work and numbers that show why you’re requesting a particular loan amount should be included. Perform due diligence when selecting your prospective property or site, know the neighborhood and research comparable sales in the market. If working with sub-contractors, have detailed and itemized contractor estimates.

It’s not only important, it’s mandatory to have an exit strategy in place in order to secure a hard money loan.

This may seem overwhelming to a first-time fix and flipper or real estate investor, but it is achievable.

Consider finding a mentor that’s been through this journey many times.

Many investors are happy to share their knowledge with you. At Level 4 Funding, we are also here to answer any questions you might have. Don’t hesitate to contact us. “There is no stupid question! Except, possibly, a question not asked.”—Christer Romson.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Dreams do Come True – Obtaining your First Commercial Real Estate Loan

Whether you’re interested in construction from the ground up, a quick fix and flip, or a long-term investment, real estate can be a very profitable investment strategy. Finding your first commercial real estate loan is often the first step in achieving this vision.

You may have been sitting on the sidelines for some time now, watching your friends purchase properties, rehab them, and then turn around and sell them for a profit. They’ve since left their 9 to 5 (or 8 to 7) jobs while maintaining a lifestyle that allows for weekends with the family and vacations in far off lands. This means of income has been growing in popularity thanks to reality TV and shows like HGTV’s Flip or Flop and Flip that House.

Keep in mind, reality TV shows are just that—TV shows. They are designed to entertain and that may require increasing the drama to the point of taking some of the reality out of those shows that claim to be “real life.” Investing in real estate requires knowing the state and federal regulations, having a deep understanding of the numbers game and accompanying budgets, and a base knowledge of the market and costs of rehab. It also requires patience.

Real estate investors often use hard money loans to fund their projects. This strategy works for several reasons including needing the funds quickly in order to acquire a property that has competing bids, insufficient income history or credit, or investors in need of a quick turn-around. They may want to take advantage of a short sale or foreclosure and do not have the time to wait around for a conventional loan.

Obtaining Your First Commercial Real Estate Loan

Obtaining your first commercial real estate loan is not as difficult as your may have been led to believe. For a hard money loan, you will need collateral and a plan that shows how you intend to pay off the loan, otherwise known as an exit strategy. In many instances, interest only payments are available for a select amount of time as you rehab your property or come up with the right tenants. Using a professional and time-tested real estate mortgage broker can help you achieve your desired outcome without having to find the many individual private money investors. They generally have a wealth of investors that they work with on a regular basis and know which ones will be suited for your type of business or project. They will have varying loan programs designed to meet specific needs.

Working with a mortgage broker gives you access to numerous private money investors and lending programs.

Your first step will be to complete a loan application. It’s important that you take the tact of full disclosure and do not leave anything to the broker’s imagination or leave out pertinent facts. They have done this countless times and can spot transgressions easily. Be up front about any potential issues you foresee. Knowing your “full story” gives them the ability to find the right investor for your project and the right commercial real estate loan for you. Mortgage brokers are professionals who have passed state and national tests and continue their education with yearly courses, and they will often know how to help you even when you think the obstacles are too immense to navigate.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Documents Required for Obtaining Commercial Loans from Hard Money Lenders

While every hard money lender for commercial loans is unique, there are often similar requirements regarding documentation. Be prepared and follow the lender’s submission guidelines.

Hard money lenders do not operate under the same restrictions that traditional lenders are under. Because of this, they are able to fund commercial loans in relative ease and with little documentation. It is a hard-asset based lending strategy that uses collateral to ensure the loan. While some lenders require certain standards regarding credit and financing, others do not. The same holds true for documentation. Each lender has different application processes and varying documents depending on the type of loan. In general, the following are documents you will want to consider in your proposal.

Because this is an asset-based loan, private lenders are interested in seeing the asset—your property, inventory or equipment. To this end, take pictures of both the inside and outside and pay particular attention to areas that you are rehabbing. If this is a fix and flip, construction from the ground up, or rehab, be sure to get bids from sub-contractors. These will be included in your budget. If a rehab or fix and flip property, your scope of work should entail all improvements you are making and under specific categories such as electrical, framing, and plumbing. Make it easy for the lender to see your vision through your descriptions and by making it detailed and thorough.

Needless to say, you will need your purchase contract. Some request property financial and income/expense statements. And others will ask for a credit report. Hard money lenders are very unique in their needs. In some instances, what you say is as important as what you bring. Lenders for commercial loans want to know that you’ve done your homework and know what you are talking about. Demonstrate that you know and understand the project explicitly and explain why it is a good investment. You will definitely need an exit strategy—how do you plan on funding their payment at the end of the loan period.

The Difference

At Level 4 Funding, we do our best to make the process of obtaining a residential or commercial loan as easy and painless for you as possible. As mortgage brokers, we are experts in our field who have been in the business for twenty plus years. We keep paper work to a minimum. For instance, for a construction loan all that is required is your budget, plans and permits.

Level 4 Funding specializes in a fast and easy approval process with flexible terms.

We understand that commercial loans are often needed sooner than the month long process traditional loans can take before funding. Our application process is fast with a usual preapproval time in 24 hours and funding that can take as little as two days. Call us with the project you have in mind and we will let you know what specific documents we require. If this is your first go-around, don’t be shy about asking any questions. We all started somewhere.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Distilling the Myths of a Hard Money Commercial Loan

For some, hard money lending is surrounded by mystique and distortion. Learn the truth about obtaining a commercial loan

from a private investor or company.

Google hard money lenders and you will see a wealth of information about this commonly used, though often misunderstood avenue for obtaining a business, residential, or commercial loan. One example is the site that suggests the “hard” in hard money lending relates to the fact that its “hard” to get, while another states that it refers to higher than average interest rates. The truth: hard means that there is collateral involved, or a “hard” asset.

It’s truly hard to imagine, but mention the term hard money lender to someone just starting to use real estate as an investment strategy and looking for their first commercial loan, and they think you’re talking about back allies and less-than-stellar dealings. I say, they’ve been watching too much of the Sopranos. Let’s make this perfectly clear: a hard money lender is not a loan shark that carries around a Louisville Slugger. A private money lender is just that, an individual, business, or group of individuals that lend money. It’s that simple. The beauty of a private money lender is that, though regulated, they do not have to go through the same bureaucratic red tape as that of a bank.

Here’s another untrue statement found among the

pages of Google search. Hard money is the last-resort loan. Really?

Well, they will have to inform all the real estate investors, contractors, house flippers and home buyers that have benefitted tremendously from a private lender. Seriously. Hard money lenders look at your collateral, the project you have in mind, and your exit strategy or your plan to pay back the personal or commercial loan. They want you to succeed as much as you want to succeed. To this end, it’s important to be direct, honest and lay it all out on the table. Your presentation should include your business plan, projection and supporting background.

When to Turn to a Hard Money Loan

Investors, contractors and home buyers use hard money loans for a variety of ventures. They use it to put a bid down on a project and have cash in hand—an important attribute in a seller’s market. Contractors use it to for monthly draws during the construction process. Business owners use it for inventory, expansion, to lease new equipment, or for operations, and home buyers take advantage of bridge loans so that they can purchase a new home without having to sell their old home first or make a contingency offer. Some use it to get started on a project while they wait for more traditional loans to come through.

Individuals who obtain hard money loans are not desperate—they are smart business people who have learned the many benefits of working with a private investor instead of a lending institution.

At Level 4 Funding, we have worked years to develop a large number of investors in our portfolio. If you can dream it, we can often fund it. Call us to determine if a hard money loan is right for you.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Determining Which Commercial Real Estate Loans are Right for you: Crowdfunding versus Hard Money Lenders

These days, two frequently used types of funding for commercial real estate loans are hard money lenders and crowdfunding.

Find out which one is right of you and what the differences are.

Whether you are looking for capital for acquisitions, development or to start from the ground up, both of these loan types, crowdfunding and hard money lenders, are viable options. As a commercial real estate investor, you may have found that traditional loans are difficult to come by in this day of increasing regulations, or you may need to start a project immediately and don’t have the time to go through the mounds of paperwork and months it takes to process. Here, then, is a look into the two loan options that many in your position are turning to.

The two investment strategies involved with crowdfunding are debt and equity investments. In the first, a backer is investing in the commercial mortgage loan while in the second they receive an equity stake in the property. Originally, an investor was required to be accredited, which meant they had a minimum net worth of $1 million or an annual income of at least $200,000. But, as of October 2015, a ruling by the SEC opened the doors to non-accredited investors which have opened up the playing field.

The problem: While there are over 100 crowdfunding sites that offer commercial real estate loans to be found on the World Wide Web, not all are created equal. Some are fly-by-the-seat-of-their-pants operations, so be sure to do due diligence when investigating this option. Points to consider when checking out the various crowdfunding sites include: transparency, accountability, high-volume, specific to real estate and pre-funding options. You will be required to submit an application which often entails information regarding the project and a background and credit check, and then you will need to attract investors. You will, in most cases, be working with multiple investors and, if you do not raise the amount requested, the campaign may be scrapped and deposits returned, depending on the platform and if pre-funding is offered. A few of the many crowdfunding sites include Peer Street, Realty Shares and Patch of Land.

Hard Money Lenders

Using a hard money lender is very different to that of crowdfunding. First, there is only one lender, or a group of investors that work together, and they will use the borrower’s real estate as collateral. In order to determine the amount, the company uses a loan-to-value ratio (LTV). This determines the value of a loan against the value of the property and is determined by dividing the amount of the loan by the appraised value or purchase price of the property. Many hard money lenders offer a loan on 65 to 75 percent of the property value. Another difference involves the application process and time to loan. A hard money lender is more concerned with the value of the project than your credit report, and time to loan is often much quicker.

A hard money lender bases the amount and acceptance of a loan on the project and the real estate’s collateral value more than on a credit report.

At level 4 funding, we provide commercial real estate loans for most commercial real estate development projects including multi-family, industrial, warehouse and office. As hard money loan mortgage brokers, we work with many investors and banks and will find the best rate and program to meet your unique needs. In addition, we fund up to 90 percent LTV, offer very competitive rates and interest only payments. If starting from the ground up, construction loans are available for up to 24 months with monthly draw programs. Funding can be available in as little as 24 hours. Call us to discuss your project and determine if we are the right company to fulfill your commercial real estate loans and development needs.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Real Estate Trends in 2017

Commercial real estate trends in 2017 are proving to be profitable for investors despite the increasing challenge of securing competitive financing. Hard money loans are an alternative that many in the industry are turning to.

In the last quarter of 2016, multifamily moved ahead of office for property investments. It took 33.7 percent of the market share as compared to office’s close second of 30.4 percent. Retail, not surprisingly, was down to 13.2 percent, having seen better days before Amazon’s online invasion.

Multifamily’s number one spot is due, in part, to the increasing demand leading to lower vacancy rates and rent growth. The concern among some investors is whether the market can sustain its current rate of growth and at what point will growth become over-construction. Cities, in particular are seeing a multifamily construction boom. Because this potential oversupply is limited to dense urban developments, other markets do not seem to be at risk for over construction at this time. Commercial Lenders are taking location into account, favoring areas that are growing and showing strong employment opportunities.

Commercial real estate investors are finding securing competitive financing more challenging. Banks appear to be scaling back on high-leverage loans and borrowers are needing to work harder and have a track record and solid investment strategy in place. The inevitable rise in interest rates has caused a hesitancy to lock in rates and, according to an article in National Real Estate Investor, “Bank lenders—the traditional source of construction capital—are offering smaller loans compared to the cost of development, when they offer to lend at all.” The bottom line: With new regulations and capital requirements, commercial lenders are not as apt to make commercial real estate construction loans. This is when savvy investors turn to alternative lending for funding their projects.

Hard Money Lending

An experienced mortgage broker specializing in hard money loans will have hundreds of commercial real estate investors that they work with on a regular basis. Programs include multifamily building loans for rehab or new construction as well as bridge loans. These loans are asset-based and do not require extensive documentation. Collateral takes precedence over credit scores. Funding options include construction loans for up to 24 months with monthly draw programs, bridge loans that are designed to bridge the gap between final closing or long-term financing which are short-term 3 to 12 month loans, and longer term commercial loans that can be extended for up to five years.

If you believe you have the perfect opportunity to get into the growing segment of multifamily rentals,

don’t let lack of capital hold you back.

At Level 4 Funding we have the experience and the contacts to help you develop your real estate portfolio. We are licensed mortgage brokers and originators with extensive experience in commercial lending who believe in developing long-term relationships with our clients. We don’t want to just help you with this one investment, but with building your business to the level that it exceeds your wildest dreams.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Real Estate Loan Options

There are various types of commercial real estate loans that will help you get into this burgeoning sector of investment strategies. Learn about bridge loans, joint venture and hard money loans.

Commercial property is, simply put, property that produces income. It can be just about anything including, but not limited to, industrial, office, hospitality, medical and amusement. According to Statista, the value of total commercial construction starts in the United States amounted to 18.66 billion U.S. dollars—and that was just the first half of 2017. Yet only 8 percent of Americans own investment properties and only 7 percent of those investors put down more than 50 percent when purchasing properties. Here are just a few of the many ways you can access lenders in order to obtain your commercial real estate loan.

A bridge loan supplies needed cash, allowing an investor to keep their current asset while purchasing the next. It is commonly used to finance initial construction or put money down on a project while awaiting more traditional forms of lending. These are short-term loans, usually 3 to 12 months that provide immediate cash flow. Hard money lenders usually offer these types of “fast cash” loans. Hard money loans are also short-term loans, though they can often be extended for up to 5 years. They require collateral and lenders are more concerned with the value of the property than with the borrower’s credit score. They do require a business plan and an exit strategy.

Joint venture financing is, in essence, taking on a partner for a specific project. In this type of commercial real estate loan, parties share in costs, profits and losses. This type of loan can be complicated and requires understanding in the following areas: the type of entity the joint venture will be such as an LLC, the responsibilities of each party in the day-to-day operations, the equity stake each partner holds and an exit strategy. It’s important to understand that, ultimately, you are taking on a partner who will have a say in the development of your—and your investor’s—project.

Compatibility issues as well as differing opinions have derailed many a joint venture, making it important to establish trust and good lines of communication in the early stages. Many choose this option when expanding into new territory, and smaller projects may undertake a joint venture agreement in order to participate in larger projects and have access to their now partner’s technology or resources.

How to Determine the Best Commercial Real Estate Loan for Your Business

If you need a partner for their expertise and resources, a joint venture may be your best option. Make sure they compliment your skills and experience and have a good track record. If you need immediate funds to get your project started while you wait the month or more for traditional funding, a bridge loan may be your answer. For those real estate investors that require immediate financing, have a strategic business plan and exit plan in place, and for others looking to do a quick flip, a hard money loan may be your best choice. This is also a good alternative for those with credit issues.

“Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did.”

—Mark Twain

If you’d like help determining the best type of loan for your next or first project, call us at Level 4 Funding. We are happy to share our years of experience and the knowledge we’ve gained in order to help you get stated in this type of investment strategy.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage