Setabay Private Hard Money Lender

Thursday, March 21, 2019

The Best Options for Fix and Flip Loans

(Home flips are a very popular way to get into the real estate investment business. But the first challenge for most flippers is learning about Arizona fix and flip loans.)

There are a multitude of television shows that depict fix and flip projects as fun and simple. But the truth is that it is a very serious business that requires a good knowledge base of finance to be sure to get the best loan to meet your needs. Understanding your options for the best Arizona fix and flip loans is the first step in a successful flip.

Hard money Arizona fix and flip loans are a great option because they are a short term loan that is secured y the value of the property that you are buying. Real estate investors normally purchase a property, renovate and resell within the term of a hard money loan which is around a year at the most. But if you are only doing minor repairs, you can request that the loan term be even shorter if that is what works out best for you. The private lenders are much easier to work with and can even create a custom payment schedule in some cases.

Cash out Arizona fix and flip loans require you to own another property. In this case, you are refinancing or taking out a loan on a property that you own outright to use that equity to invest in a property to flip. This could be refinancing your current home to use that equity or you could refinance another investment property that you have to make the purchase. But the concern is that you need to complete your flip to at least break even and not risk losing both properties.

HELOC Loans

Home equity line of credit loans also require that you own a property or have a great deal of equity in a property. For this loan, you secure a line of credit against the equity in your home or another property that you own. Again, you are risking that property if you fail to sell the flip and cannot pay the HELOC payment. But with a line of credit, the line of credit is somewhat revolving. So each payment that you make provides you with more options for reusing the line of credit to make purchases for materials for the renovations or other projects.

Know Your Options

There are many options for funding a fix and flip. But only after you have researched all of your options can you determine which loan will best meet your current needs. Some short term loans will require a large balloon payment at the end of the term while others can be refinanced to extend the term if you are unable to repay the full loan amount. It is also important that borrowers understand that using the equity in one property to purchase another property represents a far greater risk than using the property being purchased as the collateral for a hard money loan. Making a solid choice for your fix and flip loan will get you off to a great start on your real estate investment project.

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.

Wednesday, March 20, 2019

Qualifications for Arizona Hard Money Loans

(If you have never used a hard money lender, then you will not understand the qualifications that are required. But following these tips can help you to secure Arizona Hard Money Loans.)

As compares to traditional loans, Arizona Hard Money Loans are very easy to qualify for. But there are certain things that a lender will look for when deciding if he or she will fund a loan and also the interest rate that will be charged for the loan. The primary concern is the value of the collateral property, but there is also some concern with regards to the experience of the borrower and knowledge of the real estate industry.

It might seem odd, but money is a major concern even when you are asking to borrow money. The lender will need to be sure that the borrower has the money to make the down payment which could be as much as 25% to 35% of the cost of the property. In the case of a commercial property purchase, the down payment could even be 40% of the cost of the property. In addition, the lender will want to know that the borrower has a cash reserve to fall back on in the event of an unforeseen issue.

Submitting the borrower's track record of successful projects is a great way to offer the lender some security in the borrower's experience and knowledge. It is important that past deals have been completed on time and on budget. This will help to keep the interest rates down as there is less possibility of a default on the loan. Being new to real estate investing will not preclude a borrower from securing a loan, but it should be expected that the lender will charge a higher interest rate and could require more documentation to demonstrate a well-conceived plan for the project.

Exit Strategy

Finally, the lender will want to see an exit strategy for the project. This is a detailed plan showing the borrowers plan for repaying the hard money loan. The short term of Arizona Hard Money Loans can make it very challenging to repay them on time. Borrowers need to have a solid plan to finish the project to make the final payment, or balloon payment, that is normally the close of a hard money loan. The exit strategy will also include contingency plans in the event of time overrun or budget overrun. Normally, it is the borrower’s cash reserve that is tapped to correct these issues.

Final Approval

Hard money loans are not as complex as they might initially appear. The lender simply wants to access the risk involved in the loan and to know that the property will have enough value to cover any outstanding balance on the loan should the borrower default. The information about work experience and past project experience is used more for determining the interest rate for the loan and the fees that will be involved in writing the loan. It is also important to understand that after completing several loans with a lender, the process can become even more streamlined and fast as you have developed a strong working relationship with the lender.

Benefits of Arizona Hard Money Loans

Understanding the benefits of Arizona Hard Money Loans will also explain why some borrowers opt for this higher cost loan. In many cases, the cost is well worth the benefits.

Arizona Hard Money Loans are short term loans that are offered by private lenders. In most cases, these loans are only for a maximum of five years, but borrowers have the ability to negotiate almost all of the terms of Arizona Hard Money Loans so it can vary. There are many benefits that borrowers enjoy when using hard money, but for the most part, the benefits can be broken down into three categories.

Speed is often times the most appealing benefit to hard money. Lenders are more focused on the value and condition of the property which is going to be the collateral for the loan than they are the borrower's personal credit. For this reason, there is far less time wasted evaluating the borrower's personal finances. The lender can have an appraisal done on the property and know exactly what it is worth. This saves a lot of time and money since there are no deep dives into banking records and past taxes.

Flexibility is another great benefit to hard money. When you work with a traditional lender, you are forced to accept the terms that the lender offers. They have processes and procedures in place, and that is the only way that they will do business. But Arizona Hard Money Lenders are willing to negotiate almost all of the terms of your loan to create an agreement that meets all of your specific needs and is also financially beneficial to the lenders. This might allow you to have a creative repayment schedule or even an option to extend or refinance the loan rather than face a large balloon payment at the end of the term.

Getting Approved

Approval is a critical benefit to many borrowers. Hard money is an asset-based form of lending which means that the approval of the loan is based far more on the value of the property than anything else. This means that a borrower with bad credit or no credit can still qualify for a loan from Arizona Hard Money Lenders. What you need to remember is that the worse your credit is, the more risk you represent to the lender. And in almost every case, the lender will want to make more money on these higher risk deals. So you will qualify for the loan but you will be paying a higher interest rate, and you might also be forced to make a larger than normal down payment.

The Benefits Are Worth The Cost

Even at a higher cost than traditional loans, Arizona Hard Money Loans are a very good option for many borrowers. When the only other choice is to pass on the opportunity to buy a great property, then a slightly higher interest rate is not such a bad option. But it is important to understand the terms of the loan and to know the total cost of the loan to be sure that you will still be able to make a profit on the property when you sell it.

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

The Drawbacks of Arizona Hard Money Loans

Nothing in the world is perfect and Arizona Hard Money Loans are no exception. But even after knowing the drawbacks, many borrowers are happy to take advantage of hard money.

Arizona Hard Money Loans are short term loans that are offered to borrowers by private lenders. These loans are often called asset-based loans or non-traditional loans. These loans are fulfilled based more on the value of the property that is being used as collateral than they are based on the creditworthiness of the borrower who is requesting the loan. And while there are many benefits to Arizona Hard Money Loans, it is important that all potential borrowers understand what the drawbacks of hard money can be.

Arizona Hard Money Loans are very popular with borrowers who have credit challenges. Knowing this, it is understandable to see why Arizona Hard Money Lenders believe that these borrowers represent a higher risk than other borrowers with good credit. And while Arizona Hard Money Lenders are willing to offer these credit-challenged borrower’s loans, they are going to demand a higher interest rate to offset the risk. Hard money loan interest rates are currently estimated at between 7% and 10%, but for a very credit challenged borrower the rate could be even higher.

Another aspect of hard money that can present a challenge for some borrowers is that the loan is only offered for a rather short term. One to three years is the typical length of a hard money loan, while some can extend to as long as 5 years. For borrowers who need more time to repay their loan, it is common to refinance another hard money loan or to move to a much longer-term traditional loan. The term length of each loan will be clearly defined in the loan documents, and it is important that borrowers be aware of the timeframe that they are agreeing to before signing the loan documents.

Finding a Lender

Another drawback to hard money can be locating a reputable lender. It is not as easy to find a hard money lender as it is to walk down the street and locate a bank. But there are many online resources that can provide references and a list of Arizona Hard Money Lenders in your area. It can also be helpful to speak to other real estate investors to learn about the lenders that they have experience working with and how easy they have been to work with.

Make Your Own Evaluation

Nothing is all good, all bad or perfect for everyone. Hard money has its benefits and drawbacks which need to be understood prior to accepting any loan. Every borrower needs to evaluate his or her options and compare the terms and total cost of all of the loan options available. From that point, you can select the loan that offers that best blend to meet your financial needs and other requirements for repayment terms and benefits. Making a well-informed choice is the best way to know that you are going to have every opportunity to be successful in your real estate investing career.

Who Should Use Arizona Hard Money Loans?

(Arizona Hard Money Loans are not right for everyone. But for real estate investors and consumers with credit challenges, hard money is a great option.)

Arizona Hard Money Loans are a short termed, asset-based loan that holds some very special benefits for the right borrower and the right projects. For the most part, the loans are used for real estate purchases because it is the real estate that becomes the collateral for the loan. A borrower could request a hard money loan for another purpose, but he or she would need to own a property outright to use as collateral for the loan. This is not unheard of but it is unusual.

In most cases, the borrower on Arizona Hard Money Loans is involved in real estate investing. New real estate investors like hard money because the value of the property is enough to secure the loan. It is also not dependent on a long credit history which is good for a younger investor who might not have a lengthy credit background. More seasoned real estate investors will also use hard money, but more for the easy qualification as much as the fast funding time. A hard money lender will normally find a loan in a few days rather than the month or two that it can take to get a loan from a traditional bank or mortgage company.

Still, other real estate investors will elect to use a hard money loan because it is far less stressful than the long loan application process required by traditional lenders. There is little sense in investing all of that time in an application when you only need the money for a few months. And many sellers will look upon the hard money loan favorably when there are multiple offers in on a single property.

The Credit Challenged

There are many people who have been turned down for a loan at a traditional bank or mortgage company. The reasons can range from bad credit to no credit, but the end result is that they can’t get traditional financing. These borrowers then turn to a non-traditional lender for hard money. In most cases, they will use the hard money for a short time until they can find a way to secure a traditional loan to pay off the hard money loan. This allows the borrower to extend the payment term to the length of a normal mortgage and often lower the monthly payment.

Why Arizona Hard Money Loans?

There are many benefits to hard money such as fast funding and the easy application process. Different borrowers have different reasons or motivations for selecting hard money. But in the end, borrowers are willing to pay more to use hard money because of the convenience that it offers to them. And even in cases where the borrower is somewhat risky, the lenders are willing to extend the loans due to the potential to earn more interest on a high-risk loan. Both the borrower and the lender are providing something that the other needs, and the loan works out to be mutually beneficial to both parties involved.

What are Arizona Private Money Lenders?

Most borrowers are not aware that Arizona Private Money Lenders are an option when seeking financing. Learning more about these lenders will provide borrowers with great options.

Arizona Private Money Lenders are non-traditional lenders who provide short-term asset-based loans for the purchase of investment properties. Hard money lender is another term for these lenders as is the more loose term of a non-traditional lender. In essence, these terms are all used for a private individual or small group of people who work together lending money to borrowers. Understanding the benefits of Arizona Hard Money Lenders services can provide a lot of options to borrowers who are not able to secure traditional loans.

One of the biggest benefits of private lending is that the loan approval is based more on the value of the property being used as collateral than it is based on the creditworthiness of the borrower. This means that Arizona Private Money Lenders are willing to grant loans to borrowers who have poor credit, no credit or who have other issues that cause them to be denied a traditional loan. This is also helpful for borrowers as they can easily determine the amount that Arizona Hard Money Lenders will loan on a property if they know the lender's loan to value ratio. This is the “magic” number that lenders use to determine how much they are comfortable lending. In most cases, Arizona Hard Money Lenders will provide borrowers with 75 – 80% of the current value of the property being purchased.

Knowing this, it is easy to understand why certain types of borrowers are a perfect fit for Arizona Hard Money Loans. Flippers who are only looking for a short term loan and short term investors are both a great fit for hard money. Longer-term investors also choose to use Arizona Hard Money Loans in some cases when time is a factor. They secure the hard money to close the deal and then they choose to refinance with a traditional loan to lower the cost of the loan and to extend the term of the loan.

Loan Terms

It is important to remember that as Arizona Private Money Lenders, these lenders do have the right and ability to set loan terms as they see fit. This can be a benefit if you are looking to customize your terms, but a drawback if you do not make yourself aware of the terms in your loan. The most common LTV is about 70-80% with an interest rate of 8-12%. The lender fees are likely to be between 1.5 points and 10 points. The typical loan is less than 5 years. The time to approve and fund can range from a day or two to just a few weeks.

Know Your Terms

The most critical aspect of any successful loan relationship is that you read and understand all of the terms of your loan. Knowing the terms will allow you to follow the agreement and avoid any penalties or late fees that could be written into the agreement by the lender.