Setabay Private Hard Money Lender

Thursday, December 6, 2018

Yes, 100 LTV Arizona Hard Money Lenders Do Exist

There aren't many, but there are lenders out there who will do 100 LTV loans. Here, we'll define LTV loans in plain English, give you some examples, and tell you how to secure one.

For those of you who are scratching their heads and wondering what LTV means, let's spell it out as plainly as possible. LTV is loan-to-value ratio and it's calculated by taking the size of the loan and dividing it by the property's value. For instance, if the appraised value of the property in question is $100,000 and the loan amount is $75,000, you have a loan-to-value ratio of 75. If you're buying a home, the LTV is based on the home's sale price, except in cases where it's appraised for less than the sale price.

Lenders use LTV calculations as one of the factors in determining eligibility for a loan. Typically, lenders want a low loan-to-value ratio because it means there's less risk involved. Many banks and credit unions set an unmovable upper limit for LTV — if it's above, say, 80, they won't even consider it.

However, there are some places that will go up to 100 LTV. VA loans are backed by the U.S. Department of Veterans Affairs and USDA loans are guaranteed by the U.S. Department of Agriculture, so those are two ways to get a 100 LTV loan. By the same token, FHA loans can do up to 96.5 percent because they are insured by the Federal Housing Administration.

Using Arizona private money lenders for 100 LTV loans

In addition to the above sources, some Arizona Hard Money Lenders are willing to do 100 LTV loans. This is because the money comes from private sources and borrowers generally put up collateral to secure the loan. Arizona Hard Money Lenders can also be more flexible and get you funding faster than a bank or credit union, so many people prefer this type of loan.

Finding an Arizona Private Lender who will do 100 LTV loans

Finding a lender who will do 100 LTV Arizona Hard Money Loans can seem like finding a mythical bigfoot in the woods. But don't worry, they do exist and it's not as hard as you may think to find one. Here at Setabay, we sit down and chat with potential borrowers and take into account their dreams, desires, and individual situation to determine if it's a good fit for both of us. If you're interested, give us a call today!

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

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 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

How to secure an Arizona Hard Money Loan

If you're interested in securing an Arizona Hard Money Loan, you might be curious about how to do it. Here, we'll detail the requirements and the process to give you a clear picture of how it works.

If you've been bitten by the real estate bug and can't wait to invest in a commercial property or a fix-and-flip, you've probably checked out traditional loans at banks and credit unions. This is the traditional route for securing funding for real estate, but it might not be the best route for you.

Banks, and to a lesser degree, credit unions, need their borrowers to fit into a very narrow box to qualify for a loan. They'll look at the borrower's history. If a short sale, foreclosure, or bankruptcy pops up, that's curtains. They'll look at the borrower's credit score and anything less than their predetermined figure will mean disqualification. They'll also take a look at the borrower's bank statements and assets, and anything below their threshold will get denied.

A hard money lender will have requirements also, but their requirements will differ in significant ways. They'll look at credit scores, bank accounts, and history, but those things will only be a small part of the equation. More important is the collateral you put up and the plans you have for the money. Arizona Hard Money Lenders have much more flexibility than banks and can consider each case individually.

The process of getting a Arizona Hard Money Loan

Getting a Arizona Hard Money Loan is faster and easier than going through a bank or credit union. Here's how the process will typically go: you'll fill out some paperwork, provide some documents for verification, and you'll know whether you've been approved in as little as two days. Then, without the complex underwriting and red tape that banks have to wade through, you can have the money in your account in as little as a week or two.

Finding a hard money lender near you

If all of this sounds like a way to help fund your real estate investments, it's because it may be. If banks and credit unions have said "no" to your dream, or you need money quickly, a Arizona Hard Money Loan might be perfect for you. Finding a reputable hard money lender in Arizona is simple — Setabay has decades of experience lending hard money, so we've seen it all. Give us a call today and we can talk about making your real estate dreams come true.

Dispelling the Myths About Arizona Hard Money Lenders

We'll admit it — Arizona Hard Money Lenders don't exactly have the best reputation. But is that bad rap fair or unfair? Let's look at some of the myths surrounding Arizona Hard Money Loans.

When you hear the term "hard money lender" you might picture a loan shark or a shady smooth talker who's looking to separate you from your hard-earned money. In fact, some people still think of these types of loans as predatory. There are a few reasons for that, but the main reason they've developed a bad rap is that in the old days there were lenders who took advantage of people.

Some unscrupulous lenders would find borrowers in desperate situations, make them put up their property as collateral and set up terms that were nearly impossible to pay back. Their sole intention was to have the borrower default on the loan so they could seize their property.

These days, though, thanks in part to the passing of the Dodd-Frank Act, predatory and scam-like practices like these are incredibly rare. In today's climate, we've gotten back to what Arizona Hard Money Loans were always meant to be — loans that filled a void the banks weren't occupying.

How are Arizona Hard Money Loans meant to work?

Banks want everyone who borrows their money to fall into a very specific category. They'll set strict guidelines, asking you to have nearly a perfect credit score, a healthy bank account, and blemish-free past. Not everyone fits into their restrictive box and that's where Arizona Hard Money Loans come in. With Arizona Hard Money Loans, you put up collateral, you typically pay higher interest rates, and your terms are very short. As a result, lenders of this type are more concerned with the collateral and your plans — whether its renovations, commercial property, or a fix-and-flip — than your financial situation.

Finding the right hard money lender for your needs

Now that you know what Arizona Hard Money Loans are all about, you might be thinking that getting one is a good move for you, especially if you've been told "no" at banks and credit unions. So what are your next steps? We recommend calling, chatting, texting, or sitting down with a hard money lender in Arizona. He or she will be able to listen to your investment plans, look at your situation, and help you figure out the best way to get the funding you need.

Bridge Loans: The Help that's right for You?

Bridge loans allow investors and developers the opportunity get their unrealized projects off the drawing board and into reality. These loans allow investors to take advantage of opportunities when funding is unavailable, for reasons of bad credit, speculative projects, or if the investment property is in poor condition or suffering due to low occupancy.

Bridge financing acts as a bridge between a properties initial purchase and its eventual refinancing or resale. If a borrowers financial profile doesn't meet the bank's criteria, they'll face consistent denial. Loan officers might shudder at a project that seems particularly speculative, say demolishing a building to make way for a new development or if a property suffers under low occupancy or poor condition, in these cases conventional lenders are not going to risk getting involved.

The Benefits of Bridge Loans really shine in situations like the following

• Bad Credit: Say a developer took a hit on their last project. Work got stalled, and all at once his lender called his loan, and let us assume he defaulted. Now the site sits vacant, and his financial situation prevents him from getting another loan. He approaches a bridge lender and says "I only have a little work left here I just need a bit more money," after receiving bridge financing work on his development finishes, the banks are well pleased with all the extra income he's earning. Finally, he's able to refinance to a long-term mortgage, which pays off his bridge loan and allows him to enjoy a steady stream of income from his shiny new development.

• Speculation: Our developer sees a derelict factory in a blighted industrial area, where the local university will be building their new campus. Our developer is pretty convinced he can develop low-cost apartments in place of the factory and make a boatload. But the bank considers the area, and says no, as they can't see his vision. With bridge financing, our developer can build his apartments. They quickly reach almost full occupancy after the new campus opens allowing our developer to sell off the new complex, paying off his loan and earning him a tidy profit.

• Neglected property: An unscrupulous landlord has been nickel and diming his tenants for years, disgruntled renters have been steadily moving out, and the landlord seeing the apartments as being more trouble than their worth, puts the property on the market. Our buyer is convinced that with a few improvements and more reasonable management the property can quickly turn to full occupancy. But the bank considers the current state of the property and denies him his loan. With the help of bridge lender, our buyer manages to purchase the property, makes a few small improvements and under his patient care, the complex achieves near 90 percent occupancy. Just a few necessary improvements, and a little competence on his part and our investor can refinance, allowing him to earn a generous income from the once god-forsaken apartment complex.

In short, bridge loans can help your dreams come true

Without the help of bridge financing, none of the developers mentioned above would have ever seen their projects move. Bridge lenders are willing to speculate on a properties potential, looking beyond a borrower's poor financial situation, a projects seemingly speculative nature or a properties derelict condition.

Wednesday, December 5, 2018

Loans For Flipping Houses: Why you should avoid the Bank

Many are enticed to get into the flipping business, either by reality television or the prospect of tidy profits. But few people just getting into the business have cash in their pocket to buy and remodel a house on their own, and most need financing. If you are new to the flipping business learn why banks and every other financing method out there is less than ideal in the case of fix and flip loans.

Some new to the flipping business might leverage the equity in their home, refinancing their personal residence to embark on their first flipping project. Is putting your actual house on the line to flip another house a good idea? I'll leave that for you to decide.

Another strategy is to take out a small conventional loan to purchase the house, and then take out an unsecured loan to cover the cost of remodeling. This strategy is basically like getting a credit card to pay for your flipping project, and paying bills with a credit card is never a sound financial strategy. So why not just go to your friendly neighborhood bank?

A conventional loan will always fall short when it comes to fix and flip loans

Many novice real estate investors are lured to banks by the prospect of lower interest rates. But conventional lenders fall short in almost every respect the case of flips. First, the tedious application process could cause you to miss out on the best investment opportunities, as foreclosures and short sales move quickly and traditional lenders simply can't keep up. If the property you have in mind is anything less than live-able condition, your application will be denied outright. But there's a bigger reason to avoid going to the bank to finance flips

Without exception, even if a bank miraculously finances your flip, the loan will not cover the cost of your renovations. Ever. Banks give loans as a percentage of a properties current value, your bank loan might cover 90 percent of a 50,000 dollar shack and this loan will get you that shack but nothing more. If you want to remodel the home thereafter you will need to take out another loan.

So home equity, unsecured loans, and even banks fall short when it comes to financing flips, but not all hope is lost.

Hard money loans remain the best way to finance house flips

A cursory search of the term ‘hard money' might make you balk at the double-digit interest rates offered by these lenders. Understand that those double-digit interest payments don't amount to much as your plan should be to sell the property within a few months.

What sets hard money apart in the case of flips is that these loans are given as a percentage of the properties value after it's been repaired. Unlike with a bank loan, with hard money not only can you get enough money to purchase a distressed home, but you also get the money you need to improve it.

This factor sets hard money apart from other types of financing, be it bank loans, unsecured loans or equity loans. Home equity loans put your house at risk, unsecured loans are expensive, and bank loans will not cover the full cost of a flipping project. If you want to get into the flipping business, your best bet is, and likely always will be hard money.

Construction Loans: The Benefits of Short to Permanent Financing

Construction loans are a confusing issue, a Frankenstein of sorts among real estate financing, as they usually comes in the form of two loans in one, the first covers the cost of construction while the other loan is a long-term, conventional type mortgage. You risk less when you have refinancing built as part of your loan package.

Let us call the ideal form of construction financing "short to perm."

You have the option to get a loan that purely covers the cost of construction, but a short to perm loan with refinancing is better. Many articles on the internet cite vague, if not trivial benefits in the case of short to perm loans. Some of these benefits include you only need to pay closing costs once, which results in lower loan fees. Some talk up the fact that with refinancing built into your loan package your interest rate is locked in.

These are all nice benefits when it comes to short to perm loans. But it's safe to say loan fees are a minor expense in the context of a construction project. Also if you think about it, how likely are interest rates going to go up drastically throughout a 6-month construction project? Barring an economic meltdown it is unlikely that this is going to happen.

The real advantage of having refinancing built into your loan package is that it protects you from risk should your project face an unexpected disaster, after construction finishes.

Singular construction loans may cover the cost of construction, but what if things don't go quite according to plan?

Say a developer gets a single short-term construction loan, he aims to construct a post-modern apartment building complete with a pool a gym, a sauna, and all sorts of other yuppie amenities. The initial monthly rent offered is pretty high as a result of all these features. After construction ends, potential tenants fret over the 2,000 dollar initial rent, but this is the absolute lowest rent he can offer to break even and maintain all those shiny amenities.

Before his loan comes due his beautiful apartment complex lingers at roughly 15 percent occupancy, and bank after bank denies him the opportunity to refinance for this reason. The initial lender who financed his construction calls his loan, and he'll have to pay the full balance himself, and we can only hope this didn't ruin him.

Risk less in the case of construction loans by having refinancing worked out ahead of time

If our developer had refinancing worked into his initial loan, his project would still suffer as a result of low occupancy, and yes he'd still have a loan to pay. But by securing refinancing ahead of time, he would have time to maneuver and secure more tenants. Instead, he had to make a massive balloon payment to pay off his construction loan, without much in the way of additional money coming in.

In short, the main benefit of a short-term construction loan with refinancing built is that it assures you that you'll be covered if things don't work out according to plan.