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Monday, April 15, 2019

Experts Say Market is Stable: Invest with Arizona Hard Money Loans

Changes in the housing market this year have made some wary of an impending crash, but experts say the data concludes it’s stable. You can still use Arizona Hard Money Loans to invest in properties and earn some serious cash.

Some worries about the housing market have arisen because 2018 was filled with skyrocketing values and a housing shortage, but the numbers shifted at the end of the year a bit. However, experts say this is not a cause for concern—the market is stable and expected to continue to remain strong. According to a recent AZ Central news report, “96 out of 100 top national economists don't expect a housing crash this year.” This is based on data pulled which does show changes in the market but indicates ongoing stability for the foreseeable future.

“The supply of homes for sale increased, and sales slowed during the last three months of 2018,” explained senior housing analyst Tina Tamboer in a meeting of more than 100 real estate agents just a few weeks ago. “But, nothing in the current data shows a market crash coming for Phoenix,” she said.

Her findings concur with what many already know: it’s a seller’s market. Prices aren’t necessarily climbing at the rates they were, but that’s actually a positive thing because the market can’t sustain continuous rapid climbs at that rate. The good news is, you can make money with Arizona Hard Money Loans regardless of whether it’s a buyer’s market or a seller’s market. If you haven’t worked in a seller’s market before, however, you’ll need to adapt your strategy to suit.

Learn How to Make Money with Flips in a “Seller’s Market”

People flocked to fix-and-flips when it was a buyer’s market; when homes could be picked up at a fraction of their value. This doesn’t happen quite as much in a seller’s market, so you have to be mindful how you apply your Arizona Hard Money Loans, simply because you can’t rely on value increases to line your pockets. You must find a good deal to start with and put in some sweat equity or choose the right repairs and upgrades to increase value. In addition to this, it may be beneficial to apply a unique strategy, such as working on multi-family dwellings or subdividing land in popular areas.

Be more successful with the right plan and funding.

Once you understand how the market shift changes how money is made, the next step is to identify the right source of financing for your project. Arizona Hard Money Loans work well in this climate because the initial sellers of the home likely have options. Having cash in hand works wonders to sway someone who’s eager to move or simply wants to be assured the sale won’t fall through because the buyer couldn’t get financing. It also lets the flipper move fast when a home is priced under value, so it can be grabbed before other flippers get to it.

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.

The Differences Between Arizona Hard Money Loans And Bank Financing

To be successful in real estate, there are two components you have to have: management and financing.

When speaking of financing an investor has to work towards as little money down as possible. Less money down means more profit. To understand how important this is let’s take a look at an example: You, the investor, find a property that is selling for $110,000. You have $40,000 in repairs. The after repair value (ARV), because of the large amount of repairs, will be $200,000. What this means is that this home will have $50,000 in equity minus the closing costs. After finding this property the next thing an investor must do is find financing for this deal.

Usually, the first place people think to go, when they hear financing, is the bank. Because that’s what everyone does; you need a loan, you go to the bank. However, that is a rookie mistake. A bank is going to require a minimum of a 20% down payment; that is based on the appraised value of the home or the purchase price. In this scenario we will use the purchase price of $110,000. The minimum down payment would be $22,000. The bank will not roll the closing costs into the loan—you will be responsible to pay that upfront. Let’s assume the closing costs are $5,000; that includes title, underwriting and all fees associated with your deal. The bank also will not lend you money for repairs. So, you will have to come up with that out of pocket expense, as well. So far, you are looking at $45,000 for the closing costs and repairs—and let’s not forget the down payment of $22,000. That is $67,000 you will have to come up with to flip this house. Banks also require inspections—meaning that if the property doesn’t pass all inspections, those will have to be repaired and handled before the bank will finance. Sometimes the seller will fix this, but often—especially in the cases of foreclosures, that doesn’t happen. Also, a bank can easily take 60 to 90 days to close. It is a minimum of 30 days to close. Sellers, of houses that need rehabbed, do not want to wait for 30 to 90 days. They’ll sell it to someone who has the cash.

Arizona Hard Money Loans

Arizona Hard Money Loans are short-term loans that come from a specific source meant for real estate investors. There are no inspections required. Arizona Hard Money Lenders will loan on a property in any condition—they know you are buying it to rehab and sell. Another nice thing about Arizona Hard Money Lenders—they will include the repairs in your loan. Arizona Hard Money Loans are quick-close loans. Investors typically have their money in less that 2 weeks. Sellers love working with investors using hard money for this reason alone. Hard money financing works differently. Arizona Hard Money Lenders lend on ARV (typically 70% of ARV). In this situation the ARV is $200,000. The loan amount for the property alone would be $140,000. The purchase property is $110,000. That leaves you with $30,000 extra for repairs.

Bank financing works for a primary residence—one you will live in for 30 to 40 years.

However, bank financing makes no sense for a property that will be rehabbed and sold. An investor actually loses money using a bank loan. Numbers don’t lie. Contact us for information on real estate investment loans at level4funding.com.

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 and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

How Arizona Hard Money Loans Work

Arizona Hard Money Loans work similar to conventional loans—with half the hassle and much more flexibility.

Just like a traditional bank, borrowers must apply for an Arizona Hard Money Loan. However, instead of waiting weeks, if not months, to find out if you are approved—you find out typically within a day or two. Unlike banks you are generally financed within two weeks. This is helpful for investors who have found a property and don’t want to lose it to an all cash buyer.

Like traditional loans, Arizona Hard Money Loans have an underwriting process. The good news is Arizona Hard Money Lenders do not dig deep into your financial history and the terms can be negotiated and so this underwriting process is leaps and bounds faster than a bank. Once you are pre-approved and have given the lender the information on the property an appraisal will be ordered. As long as the property meets the lender’s criteria and the borrower has purchased the necessary insurance the next step is closing and receiving the funds to purchase the property. It is a very quick process; unlike banks, where it can easily take up to 90 days to receive financing. Unfortunately, in these cases many times borrowers have lost the property due to hang ups with the bank.

How to Find The Right Arizona Hard Money Lender

If you are an investor, speak with other investors and find out which lender they work with. Word of mouth is the biggest way Arizona Hard Money Lenders receive clients. Because real estate investors are the primary clients of Arizona Hard Money Lenders, lenders work on reputation.

There are also many websites that can direct you to a lender that works in your area. Bigger Pockets and Arizona Hard Money Lender Directory are both websites where Arizona Hard Money Lenders are listed. As always, there is google; simply type your city and Arizona Hard Money Lender to find a list of lenders near you.

It is vital that you choose a lender that not only has a good reputation, but also has a solid track record. Because lenders make their own terms and requirements it is essential that you ask many questions when speaking to lenders. Find out about their origination fees (points). Do they have prepayment penalties? Ask the lender if they loan on LTV (loan-to-value) or ARV (after repair value). Depending on what your loan is for—this will make a considerable difference. Many lenders will finance the repairs of the property; find out if the lender you are speaking with does. Another question to ask is if there is someone in the office that can help you along the way—or are you alone on this venture?

Finding the right lender can turn into a future business partner.

Arizona Hard Money Loans are a win-win situation for investors and lenders. Once a borrower finds a lender they can work with there is opportunity for a long-term relationship. Finding the right lender can take your investments to an entirely new level.

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 and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Why Do Texas Hard Money Lenders Care if I Run an LLC?

You may have trouble finding Texas Hard Money Lenders to work with if you aren’t established as an LLC. In short, this is due to governmental red tape, but you do have options if it’s a sticking point in your approval process.

Whether you label yourself as an investor, entrepreneur, house flipper, or businessman, the reality is that most people just getting into investment opportunities or making money through real estate are getting into it alone. As such, it probably doesn’t matter to you, personally, what happened with the consumer market years ago, so long as you can make a profit on real estate today. However, it does impact how Texas Hard Money Lenders and other financial institutions behave now, and that means it impacts you when you apply for a loan.

It would be challenging to find someone who wasn’t impacted by the recession or at least didn’t know someone who was. The reasons for this are well cited, with all sources pointing to changes in the housing market in 2007. Prior to this, houses were selling like hotcakes and anyone could get approved. Sub-prime mortgages reigned. That is, until they didn’t. Ultimately, banks fell apart and the job market tanked. Everyday people lost their homes and more. It took years to recover and it’s certainly nothing the world wants to see again.

The government stepped in with a slew of new regulations to prevent recurrence. For the most part, these changes impact the consumer market, not commercial loans. Therein lies the issue. How do you prove that you’re borrowing for business purposes unless you’re registered as a business?

Avoiding the Pitfalls of Government Regulations is Key in Real Estate Investing

Obviously, you, as a business, probably can’t afford to jump through government hoops or slow funding. You know what you’re getting into and have a business plan for your real estate investment, which means it’s important to ensure you’re not subject to the general consumer guidelines. When it comes to the Truth in Lending Act (TILA), for example, your loan is exempt from the extra red tape if the funds are being used for business or commercial purposes. That should be a win by itself, but there are harsh penalties for Texas Hard Money Lenders and other entities that may unintentionally breach protocol. Ergo, many go by the second method to exempt loans; extending them only to “non-natural persons,” which is legalese for “businesses.” Ergo, you may not qualify unless you’re established as an LLC, partnership, or corporation.

If you can fill out basic paperwork, you can establish an LLC.

Again, not all Texas Hard Money Lenders require you to have an LLC. Some are simply satisfied knowing you’re using the funds for business. However, having an LLC has its perks—namely limiting your personal liability in the event something goes wrong. Maybe someone slips on your sidewalk or something similar occurs and you wind up in court. The LLC protects you—the person—from business-related damages. The amount to file varies by state and it can be anywhere from $50-500, but it’s little more than $100 on average. In other words, filing is cheap, and there are many benefits to it.

Fix and Flip Loans

With house flipping at its highest level since 2007, dues to rising home prices and more availability in financing, it’s a terrific time to get involved in real estate investments.

Buying and selling houses is the new fad. You will see it on television and read about it on the internet. But, why? Well, if you are an investor, it is one of the quickest ways to make a profit. And while buying, fixing and reselling property can be fruitful— it takes time, effort and money. You need money to buy the property and you also need money to rehab the property. Ahhhh… and let us not forget you need the money to cover property taxes and insurance until the property sells. So, the big question is, “where do I get all that money from?”

Back in 2005 anyone with a pulse could qualify for a mortgage through a traditional ban—however, this is 2019 and that just isn’t the case anymore. If you don’t have money saved up then house flipping will take some planning. If you are approved for a conventional mortgage you will still end up paying more than you did on your primary residence. Banks are not comfortable lending on a flip house. The bank’s main concern is they are repaid the loan. Knowing that this is an investment property that could potentially fail, leaving the borrower possibly walking away, makes the banks uneasy. Banks do not work with risky deals. However, there are lenders that want to work with risky deals because it’s how they make their money.

Arizona Hard Money Lenders and Fix and Flip Loans

Arizona Hard Money Lenders are not banks. They are individuals that lend money out to investors at a slightly higher interest rate than a traditional bank. The interest rate is higher for two reasons: they are borrowing the money from investors themselves and have to pay an interest rate and they are lending on riskier deals than banks will. Arizona Hard Money Loans have different terms than banks. Their interest rates are typically between 7.99%-15.99% plus two to five points. A point is equal to 1% of the loan amount. With a conventional mortgage a borrower will pay points at closing; with an Arizona Hard Money Loan a borrower does not have to pay the points until the Arizona fix and flip property sells.

Arizona Hard Money Lenders typically base the amount you can borrow on the property’s after-renovation-value (ARV). This means that the lender will finance the property based on what it will sell for after the repairs and renovation have been done. To give you an idea of what this looks like imagine finding a property selling for $75,000. Once it has been determined what repairs need done and a value has been assessed on the price you will sell it for, the lender will finance you for 70% of that price. So, this $75,000 home will sell for $120,000 after rehab-the Arizona Hard Money Lender will loan you $84,000. That leaves the borrower with $9,000 to use towards the rehabilitation of the property. That is $9,000 that you, the borrower, do not have to spend out of pocket. Yes, you may have to spend a small amount of money. However, it is highly likely that you may not have to spend your own money at all.

Another benefit of an Arizona Hard Money Loan is the terms are flexible. Because these are individual lenders they are not required to follow any federal requirements—they make their own. Which means all terms can be negotiated—from the interest rate to the life of the loan.

A real estate investor not wanting to spend very much of their own money on a fix and flip should seek the help of an Arizona Hard Money Lender.

Not only will a good Arizona Hard Money Lender work with you on terms, they also are not focused on your credit or income. Arizona Hard Money Loans are based on hard assets which will be the property the borrower wants to finance. Yes, these loans have higher interest rates than a conventional mortgage. However, these are typically interest only loans with a balloon payment due on the last payment.

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 and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

How to Rig Your Credit & Why Arizona Hard Money Lenders Don’t Care

Experian is rolling out a new program that could let you rig your way to a better credit score. It won’t likely impact your ability to work with Arizona hard money lenders, but there’s some chance it could actually harm your ability to get a loan with good terms with other lenders.

If you haven’t delved deeply into credit scores before, you may be surprised to learn that you don’t have a single score. You have several. There are three big credit bureaus (FICO, Experian and Equifax) which gather data related to you and financial habits, then provide some type of score to help financing companies determine whether you’re a safe borrower or not.

Each assigns you a numerical credit score using an algorithm. Most credit reporting models are based upon FICO’s model, so your credit scores will likely be similar across all three. However, each is unique and sometimes one receives different information than the others, which naturally makes the outcome different too.

When you apply for a loan, the financing company may pull a report from any of them or all three. However, with FICO, decisions are purely based upon the credit score. If a company says you need to have a 700 to qualify and you have a 699, you’ll be denied no matter the reason. With the other two, a full report containing things like open accounts and late payments is provided, so financing companies can take circumstances into account if they so choose.

Historically, there’s been nothing a person could do if he or she had rotten credit—at least not quickly. If your past was problematic or you hadn’t established credit, those were indicators you might not be a safe bet. That makes sense. You’d have to spend years building or rebuilding to get credit from a traditional finance company. Arizona hard money lenders have always been a bit different in this respect, simply because your credit score is not a major factor in the decision to lend.

If You Can Pay at Least Some of Your Bills on Time, You Can Game the System

Experian is now going to let you cherry-pick some of what appears on your report. Under the new program, Experian Boost, you’ll be able to link Experian to your bank account and it will pull data on things like phone and utility bills. Then, it will show you each bill it can count, let you know how it will impact your score, and allow you to pick which ones to include in your score. If you decide you don’t like it, you can shut it off. While this won’t undo a bad credit history, including bills you’re a good payer on can demonstrate creditworthiness and show you’ve had credit for a longer period of time, thus potentially increasing your Experian score and getting you approval with companies which prioritize Experian. Again, Arizona Hard Money Lenders won’t necessarily care about this. The majority use a FICO score and, even then, it’s the value of the asset you’re borrowing against that matters most.

Experian’s shift could spell danger for the future of lending.

As a consumer, you’re probably excited about this change because it could be an easy way to instantly improve your credit score. Therein lies the problem for financing companies and perhaps a few Arizona Hard Money Lenders who break from the norm. While Experian says this does not change its predictive abilities, there’s some chance financing companies may stop trusting Experian or require higher scores if time proves otherwise.