Setabay Private Hard Money Lender

Saturday, January 12, 2019

Top 3 Tips for Working with Hard Money Lenders in 2019

The financial landscape is always changing. Learn what Hard Money Lenders in Arizona are looking for in 2019 to improve your chances of getting successfully funded.

1. Have some skin in the game. Before the market burst, you could sometimes get funded without putting any of your own money into a project. This is rarely true these days. While you can get up to 90% LTV, which may well cover everything you need it to, plan on having some of your own cash set aside for emergencies. At the very least, it’ll provide reassurance that you can see your project through if unforeseen circumstances creep up.

2. Bring experience and knowledge to the table. If you’re working with Hard Money Lenders in Arizona to fund your real estate projects, you have to prove that you know what you’re doing. The market is still great for fix-and-flips, fix-and-holds, and new construction, but your experience and knowledge will determine the outcome of the project. If you’re lacking in either, you may need to find a partner whose skills complement yours before you can take on a project.

3. Work out a solid plan in advance. Your plan should include a comprehensive timeline, each task you plan to complete, all costs you’ll incur, market research, and more. If you aren’t a specialist in any given area, be it contracting or appraisals, bring on an expert to help you plan or to review what you’ve established. It’s a smart thing to do regardless, simply because it eliminates a whole lot of costly variables, but it’ll help you get approved for financing too. You’ll also need to nail down your exit plan before approaching anyone for financing. That’s pretty straightforward if you’re doing fix-and-flips, but you may need to explore several options and crunch more numbers if you’re doing new construction or fix-and-holds.

You Can Still Get Funded with Rotten Credit!

One of the biggest questions people ask is whether Hard Money Lenders in Arizona are still willing to work with people who have bad credit. The answer is YES. Absolutely. You’re more than the sum of a credit score. If you’re bringing a great deal to the table and you’ve got what it takes to see it through, rotten credit will not hold you back. Just make sure you’re addressing the three points outlined above and are choosing projects with a lower loan-to-value rate to improve the options you’re offered.

Work with a broker who’s as eager as you are.

Experienced brokers, particularly those who work with private money, always know several Hard Money Lenders in Arizona who are looking to fund deals. They can help you find someone who understands the nuances of your business and will find the best terms available. Moreover, they understand the value of what you’re doing and want you to come back to them for your next project, so they’ll work even harder than most to make sure you’re not just getting an approval, but a great deal too.

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.

Arizona Hard Money Lenders: How to find the Real Deal

Arizona Hard Money Lenders are the go-to source of financing in the flipping business, for plenty of reasons. While the days of pay-day loans and NINJA mortgages are long past, alternative financing, including hard money, remains largely unregulated. Are the waters of fix and flip funding teeming with loan sharks? No, but it is in your best interest to learn some classic signs of bad actors.

In the end, your lender will make money from your down payment, interest payments, and loan closing costs. An unscrupulous lender will give you money, as your loss, in the end, is their gain.

Before signing on the dotted line, try to get a read on your lender. Look out for a few things, how open are they when it comes to discussing your deal regarding fees, pre-payment penalties, your own projections and the amount of money they're willing to give you?

A lenders willingness to discuss these issues tells you how interested they are in your success.

Unscrupulous Arizona Hard Money Lenders shy away from discussing fees and pre-payment penalties.

Is your lender vague about closing costs or third-party fees? You might be ready to make an offer on a house, and then all at once, the lender might demand thousands in undisclosed fees before they give you the money you need.

Ideally, your hard money provider will spell out fees in black and white before the process even gets started telling you the specifically how much money you'll need to close your deal. Along the lines of transparency, they should be up front when it comes to pre-payment penalties. Don't just look at the interest rate offered, just because a lender might offer 8 percent, you may end up paying 8 percent interest on a 12-month loan even after you've paid it off in 4.

Risk less when it comes to Arizona Hard Money Lenders by finding a lender who has a stake in your success

You want a lender who seems interested in your deal, do they smile and nod as you discuss your projected resale value or do they offer real insight into your projections?

How much flexibility do they have in the amount of financing they are willing to give you, and how much of a down payment you might need? If you find a lender who is asking you for a lot of money up front and isn't willing to offer you the funding you need what are they offering you?

A high-interest loan that doesn't help you, with a steep down payment while, your lender gets legal title to your property if things go south. Does that seem like a fair deal?

The depth of the conversation your lender has with you about your own projections indicates they are actually interested in your project. In addition, a lenders willingness to enter into fair negotiations with you when it comes to loan amount, fees and down payment is one indication they actually want to help you.

You want your lender to be an actual partner in your project, not just a source of capital. Having a lender who is interested in your success, increases your chances of success.

In short, a Hard money provider should be:

• Transparent: Disclose third-party costs, closing costs and pre-payment penalties up front, long before you have any papers to sign.

• Interested in you: should offer insight about your numbers, and not just agree with you when it comes to your profit projections.

• Flexible: Willing to negotiate with you and give you a loan that will cover most of the costs of your project.

All of these attributes are signs that your lender has a genuine interest in your success.

Rental Property Loans in Arizona for the Young Adult

Being young does not always mean that you are living day to day. Learning about Rental Property Loans in Arizona could change your life.

Many finance experts say that your first major real estate purchase should be a rental property. As a younger person, that might seem like a crazy thought. But in reality, it’s not a bad idea. You are young, you have very few bills and you are not accustomed to a large home with all of the creature comforts that you will have acquired in a decade or so. So why not keep living small for a few years and begin to grow your wealth?

You definitely need a place to live, but what if you could live in a portion of the property? Rental Property Loans in Arizona for multi-tenant homes is a great way to live affordably and let your tenant pay your mortgage. Rather than live in the spacious three bedroom main level of the home, you could live in the one bedroom apartment over the garage or in the lower level while a family pays all but a small piece of your mortgage. And all the while, you are building equity in the property. In a few years, with a great deal of your mortgage paid by tenants, you could move into the larger unit or even buy a home for yourself and begin to rent out the one bedroom as well.

Your first question is how to get financed for Rental Property Loans in Arizona if you are a younger person? The answer is as simple as two words. The secret is the down payment. If you can pay 25% or even 30% down on a property, then you will be able to get financed as long as you have a good credit rating and a steady job. The lender will see instant equity in the deal and know that the property represents solid collateral for the loan.

Getting The Down Payment

Most young investors don’t have 50k or 60k sitting in a savings account to make the down payment on a $200,000 rental property. But there are several ways to get the money if you are dedicated to your plan and want to have a tenant paying your mortgage. The most obvious method is a second income. This could be a part-time job, a second job or even a side gig that will make you some extra money. The secret is to never touch the money. Just put it away in an account and act like it is not real. In just a year or two, you could save enough to become a property owner and a landlord. Not only will you be saving your second income, but with less free time, you will be saving on entertainment expenses like moves and eating out as well.

Stay Smart

Even after you have saved enough to make the down payment, you could still keep working and saving to begin the process all over again. In the space of a single decade, you could obtain four Rental Property Loans in Arizona and own four properties which are bringing in money each month. And the best part is that you only made the down payment on each property and then a tenant paid the rest of the mortgage for you. By the age of 35, you could be well on your way to owning multiple rental properties which are over getting close to being paid off.

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
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 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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Red Flags on Arizona Hard Money Loans

Not all Arizona Hard Money Loans are the same. You need to be aware of a few red flags that can indicate that the loan or the lender is less legitimate.

Arizona Hard Money Loans are considered non-traditional loans only because they are funded by a private lender. There is no other reason for the term and it does not indicate anything about the legitimacy of the loan or the lender who is offering the loan. But many borrowers are unfamiliar with Arizona Hard Money Loans and because of their ignorance, they believe that these loans are in some way shady or less than desirable or legitimate. But it is also important to note that as with any industry, hard money has a few bad apples in the bunch. Knowing the red flags to look out for can save you the time and frustration of dealing with one of the few but bad lenders.

Not being forthcoming where documentation is concerned is never a good sign in any business. If a lender refuses to provide you with a complete set of loan documents to have them reviewed by a legal professional, then you should be concerned. Even though you are working with a private lender and not a traditional bank or mortgage company, the loan agreement is a legally binding document. And as such, you should have the right to have it reviewed prior to signing it. If the lender will not provide a set of documents then there is likely something less than legitimate in the documents and you should find a new lender.

A lesser red flag but one which should still get some attention is a less than helpful or responsive lender. If no one returns your calls or emails requesting information, then you should expect the same treatment after you sign the contract. This can mean that you could face slow funding or have no way to get a response on an issue or concern during the life of the loan. This poor customer service is all that you should expect if you continue to deal with an unresponsive lender.

Failure To Disclose

The terms of Arizona Hard Money Loans can vary a great deal because the lender is a private entity and not a traditional lender. For this reason, it is critical that you request a complete list of all fees and charges that you will incur for using the lender’s money. If the lender is not willing to provide this information in writing then you need to seek a new lender. It is very likely that the lender will charge you hidden fees which will greatly increase your costs and his or her profit.

Follow Your Instinct

Most importantly, you need to follow your instinct as you begin to deal with any lender. If you feel unusually pressured to sign or to sign a contract very quickly, then there could be hidden fees that the lender is trying to slip past you. If you feel unappreciated, and that the lender in inattentive, then seek a better lender with a higher level of service. Finding the right lender is critical to every flipper and ever purchase.

Non-traditional Loans to Flip Houses in Arizona

Flipping houses is a unique business and it requires some specific services. Loans To Flip Houses in Arizona offer investors the speed and short-term needed to turn a great profit.

Flipping houses is a process that has become very popular in the last decade. But this newer type of real estate investment deal needs a rather unique type of financing as compared to the traditional mortgages that most homeowners use. Loans To Flip Houses in Arizona need to meet the time frame and other terms that flippers rely on to make their deal profitable. So most flippers elect to use non-traditional finance options.

Hard Money Loans To Flip Houses in Arizona are short-term loans which are funded based on the value of the property and not the creditworthiness of the borrower. These privately funded loans are often called asset-based loans because the property being purchased is the collateral for the loan. Borrowers like that these loans can be approved quickly and that the funding is also much faster than a bank or mortgage company. But all of this convenience comes at a higher interest rate than a traditional loan.

Cash out refinance loans are another option that is available to homeowners who have equity in their personal residence. Most lenders require about 30% to 40% equity in the home and a credit score of about 650. The interest rates are fairly reasonable at up to about 6% but you will need to pay closing cost which will increase your total cost on the loan. In addition, the time frame can be as long as 45 days to get the refi completed and the cash in your hands.

Save The Fees

Another option that many homeowners choose is a home equity line of credit. The beauty of this option is that you can have the application and approval process completed long before you are ready to purchase a property, which allows you to make a fast offer and know that the money is in place to close the deal. In addition, there are no closing fees associated with a line of credit. It is open but costs you nothing until you decide to use the money. Then you begin to pay the interest once you use the money. An added benefit is that the interest you are paying on the HELOC could be tax deductible which will save you even more money in the long run.

Picking The Best Loans To Flip Houses in Arizona

Having many options is always good but it is especially important when you are flipping houses. The most critical factor in a flip is staying on budget to turn a profit. So acquiring a loan affordably allows you to invest more in the renovations to increase your earning potential. A smart flipper will always compare the total cost of all potential loans before selecting the best lender and the best overall loan cost for each deal. Knowing your options, how each loan works and how much it will cost are all factors that will have a huge impact on your success and profitability.

100 LTV Commercial Real Estate Financing: How to use Gap financing

100 LTV commercial real estate financing is possible, but if you want to flip a property, it may not do you much good. A loan for the full purchase price of a commercial property won't cover the cost of renovations. If you want to flip a commercial property and you don't want to spend a dime of your own money, consider gap financing.

The concept is pretty simple, the less of your own money you spend, the higher your profits. If you are in the rehab business, you'll need a way to ‘bridge the gap' between a 100 LTV loan and the cost of actually rehabbing your property.

Gap funding is like taking out a second mortgage on an unfinished rehab project. Which is risky for both sides in this equation. Whoever gives you gap funding is playing second fiddle, if you default they get paid back after your first lender, which means they might never recover the money they give you.

For this reason, gap funding will likely you cost 5-8 percent more than your initial 100 LTV loan. Given this added expense who would want a gap financing in the first place?

100 LTV commercial real-estate financing combined with gap financing might seem expensive, but sometimes its worth it.

A hypothetical developer is eying a vacant strip mall, right in the center of an up and coming shopping district. The property is a steal, listed at 300 thousand which is pretty cheap for a strip mall. His hard money provider doesn't shy away, offering him the full 300 thousand to purchase the property, at a standard interest rate of 14 %.

But the interiors are scarred black from a recent fire, and every unit will have to be gutted and equipped with new walls, electrical, the works. All this will cost him a pretty penny, 300 thousand, essentially the cost of constructing a whole new building.

Our developer doesn't have 300 thousand dollars just lying around, but the cost of gap financing seems painful at 24 % interest. Our developer gets in touch with a great contractor and together they work out a plan to complete work in 4 months

So he bites the bullet and takes on a gap loan. Let us assume everything goes according to plan.

In four months, the once blackened interiors are sparkling, full of marble appointments and glowing fluorescent lights. The chic location of the property means it resells for a cool 1.2 million.

He's carried the loan for four months; basic interest calculations put the cost of both his loans at 623,754 minus the 1.2 million selling price, well 576 grand is nothing to sneeze at, his profits more than make up for the expense of his gap loan.

Our developer might have got 100 LTV commercial real estate financing, but gap funding let him get the best of both worlds.

He had the full purchase price covered, and the cost of the rehab covered as well.

What did this hypothetical developer do to make the most of gap funding? The first thing was he had a plan, that was clear which enabled him to finish the work as soon as possible. By working as fast as possible, our developer minimized the expense of both loans.

Not only was he able to fully finance the purchase of the property, but he also didn't spend any money on the repairs, all of this allowed him to earn a half million in profit. Without gap financing, he'd have made 300 thousand dollars less.

Who doesn't want to spend anything and earn half a million dollars? If your initial loan on your next investment property falls a bit short, don't let the expense of gap financing scare you. Gap funding is perfect for, confident and experienced real-estate investors who can complete a project quickly.