How to Obtain Commercial Loans for Construction Projects

Supply and demand are leading to lucrative deals for contractors. Find out more about commercial loans for construction projects and how to get into this profitable investment strategy.

Optimism in the housing market is increasing as the rising demand stimulates the need for additional supply. According to Realtor.com, “Prices in the residential real estate market remain at seasonal and historical peaks while for-sale inventory remains very limited.” In addition, the average price for a home, nationwide, came in at $275,000, a 10 percent jump from last year’s median price. And that is good news for construction companies. If you’re looking to delve into this lucrative business platform, there are several options when it comes to financing your next or first project.

Though the Great Recession is behind us, commercial loans for construction of new-built homes are not as easy to obtain as they once were—before the subprime mortgage crisis. If this is your first home and you do not have a finished home to act as collateral, it can be particularly difficult. Connecting with a knowledgeable and connected mortgage broker who offers several programs to meet your unique needs can help you secure the financing you need for new construction.

Construction loans are typically short-term loans with higher rates. The lender will ask to see your plan, budget, and construction timetable and you will be required to make only interest payments on your draws until the project is completed. These draws act as a line of credit and are taken at varying intervals throughout the construction process.

There are no prepayment penalties, so as soon as the construction is complete, you can pay off the commercial loan. It’s good to be aware that not all lenders will include the lot cost in the loan.

Benefits of a Hard Money Commercial Loan

In today’s market, good deals can go quickly. You may have come across an existing structure in need of a tear-down and gut renovation as compared to your quick fix and flip. It’s in an up-and-coming neighborhood and time is of the essence in which case a delay in funding could mean missing out on a unique and hard-to-come-by investment opportunity. A hard money loan can be your perfect solution because it offers the same commercial loans in record time, with funds that can be secured in as little as two days. In addition to speed, you will not need a stellar credit report in order to get funding, just collateral.

Get your project underway and funded in record time by using the expertise of a mortgage broker that funds private hard money loans.

At Level 4 Funding, we offer construction loans for up to 24 months with a monthly quick payout draw program. We can also finance the land purchase and need minimal documentation to get started. This includes a copy of your budget, plans and permits. Funds up to $50,000,000 are available with an APR starting at 9.5 percent. Call us to discuss the best program to meet your 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 Loans: Hard Money versus Soft Money

As you delve into the world of commercial loans and real estate investments, you will undoubtedly come across these two terms as they relate to the lending world. Here, then, is your foray into the land of tactile lending and what the difference is between these two types of loans.

The two terms, hard money and soft money, are used for both political contributions and in relation to lending practices. If you’re donating your hard-earned money, or easy-earned money if you’re into multiple streams of income, to a specific candidate, it’s defined as hard money. Divvying it out to a party or committee is what’s known in political circles as soft money.

Soft money loans are usually a combination of loan types—aspects of a traditional commercial loan combined with those of a hard money loan. As with a hard money loan, they are asset-backed and collateral is required. Unlike a hard money loan, your credit score is an important factor and, in most cases, needs to be above 580. Another requirement may be proof of available capital, and enough of said capital to pay three to six months of the loan payment. Soft money loans usually take longer to close than respective hard money loans.

Hard money commercial loans are often your best bet if you are in need of immediate cash or you’re working on building your credit back up and currently have a poor credit history. They can be closed in as little as two days and do not require the documentation that a lender of a soft money loan requests. Many investors use these types of loans for bridge loans (when waiting for traditional lending funds or other capital), fix and flip loans, new construction loans, and when looking to purchase rental property. They are very popular among real estate developers.

The Unique Criteria of a Hard Money Loan

A hard money commercial loan is given with a specific project or property in mind, and the loan is secured by real property. A hard money loan usually has a shorter repayment plan—anywhere from 3 to 60 months depending on the project. Lenders also offer loans to businesses in need of cash for their operations or for expansion. In these cases, they may use property, equipment, and receivables as collateral. You may also use your personal assets such as your home. The loan offer is based on the loan to value ratio (LTV) which, in many cases, is anywhere from 50 to 90 percent. An example of this calculation: Your home is worth $150,000 and a lender has given you a LTV of 80 percent. In this instance, you can borrow up to $120,000.

Many who started their first real estate project or house flipping business could not have done so without the aid of a hard money lender.

A hard money loan simply means that the loan is backed by collateral or a “hard” asset. Businesses and investors often find themselves ill-suited for a traditional loan for various reasons from the look of past years tax returns to needing money sooner than the months required obtaining a traditional loan. At Level 4 Funding, we can provide you with many options. Call us to discuss the numerous programs we have available that we can curtail to your specific 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

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