Setabay Private Hard Money Lender

Tuesday, April 16, 2019

3 Biggest Danger Zones to Avoid with Arizona Spec Home Financing

Most lenders will only offer Arizona Spec Home Financing to experienced builders, simply because being cautiously optimistic about a deal is not enough. You must have firsthand knowledge of what can go wrong and be able to pivot when you see a danger sign looming in order to have success in the industry.

1. Missing the timeline or budget. The vast majority of issues homebuilders cope with relate to missing the timeline or budget. These areas are incredibly sensitive and must be monitored throughout the project. If you realize your budget is sliding, you need to make concessions, find safe ways to cut costs, or find other ways to bring in money to complete the project, and it’s important to do this before the money is tapped out. The same is true of the timeline, though a rogue schedule may sometimes be tamed by rescheduling contractors or finding one with better availability. If either of these things aren’t addressed when they’re small, they will snowball and could result in you having to pay fees to extend your Arizona Spec Home Financing term or having to find a way to pay it off before the property is sold.

2. Having property value decrease during the build. It’s important to keep an eye on the markets before and during the build to make sure there aren’t large fluctuations. If there’s a significant dip, you may want to consider pivoting to a build-and-hold strategy until the market recovers. You could also see reductions in value if your contractors aren’t doing quality work. Obviously, the best way to avoid this is to vet your contractors carefully before hiring and then to make sure you’re upholding your end of the agreement and seeing to their needs. However, even the best people are capable of slipping up, so monitoring progress and quality of work is a must.

3. Not having an alternate exit plan. Although this was touched on a bit above, its importance cannot be underscored. The typical exit strategy is to complete the house, sell it, and pay off the loan. However, if you’re unable to follow through with this process for any reason, you’ll need to know what it will cost you to extend your loan and if you’ll qualify. Conversely, you can also look into options such as traditional loans and bridge loans, depending on what your Plan B is. In any case, know what it takes to get approved well in advance.

Know How Your Draw Schedule Works in Advance

If you haven’t used Arizona Spec Home Financing before, you’ll need to familiarize yourself with draws. Rather than giving you funding in one lump sum, loans are typically portioned out into smaller allotments available when you hit specific milestones. In an effort to reduce risk, lenders usually have the first draw come from you. That’s your down payment. Following this, you’ll get a preset amount, perhaps 10-20% of the loan, at specific points, such as when the foundation is poured or the framing goes up.

If bank eligibility is a problem and/ or you have rotten credit, consider working with a hard money lender.

Banks are wary of doing Arizona Spec Home Financing because it can be riskier than other ventures. If something goes wrong and you don’t finish the project, you’re leaving them with an unpaid bill and mess to clean up too. Because of this, denial rates are fairly high, but Arizona hard money lenders often help when banks do not, simply because they’re willing to look over your plans and experience. Plus, they put more stock in the value of your asset than they do your credit score. This opens doors for many, though you’ll still need to be mindful of the danger zones throughout your 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.

Why Do Texas Hard Money Lenders Prefer to Work with LLCs?

Some Texas Hard Money Lenders will only work with LLCs or Limited Liability Companies as opposed to consumer borrowers. The good news is this doesn’t have to be a barrier to your success; establishing an LLC is easy.

Consumer loans are subject to different regulatory guidelines than commercial loans are, so it’s quite common for Texas Hard Money Lenders to focus on just one area. By homing in on the commercial sector, it’s easier to work deals without getting caught up in governmental red tape and success rates are improved. In fact, there’s actually a huge difference in the outcome between consumer and commercial loans. Data gathered by the Federal Reserve Bank of St. Louis concludes that 3.01% of consumer mortgages default, while 2.49% of personal credit card accounts do as well. When it comes to the commercial side, defaults drop down to just 1%, so it makes fiscal sense for investors to apply their funds to an area that’s more likely to give them the return they expect.

Whether you’re doing home rehabs, working commercial projects, opening an Airbnb, or launching another type of business, operating under an LLC demonstrates that you’re a professional and makes it clear you’ll be using whatever funds you receive for business purposes.

There are also benefits to you for getting established as an LLC. The most obvious is that it limits your personal liability if something goes wrong with the business. You’ll also get to choose whether you’re taxed as a “C” corporation or an “S” corporation. As an “S,” earnings are taxed only once, whereas with a “C,” earnings are taxed before being divvied up amongst owners and upon receipt, so the right structure can minimize your tax burden as well.

Starting an LLC is Easy, But Get Advice from a Pro If You Haven’t Done It Before

You’ll need to file your LLC’s articles of organization. The paperwork is straightforward, though you’ll need to have your name and a registered agent (person who will receive all communication) selected. Fees vary by state for filing, but most range from $50 to a less than $150 for the initial filing and then have a small annual fee to maintain it. You will also likely have to publish a notice in the newspaper and obtain any necessary permits or licenses to operate. From there, it’s typically just a matter of opening up a business bank account, so you can keep your personal and business funds separate. Once you have these steps taken care of, and have your business plan ready, you should be able to approach Texas Hard Money Lenders with confidence. If you get stuck along the way, touch base with an attorney who specializes in business law or talk to an accountant about which designations are right for you.

If you can use a computer, you can start an LLC.

Most states provide the paperwork for starting an LLC online, so getting yours going is really only a matter of ticking off a few boxes once you’ve chosen a name and keeping up with the annual renewal. If you’re serious about starting a business or taking on a new project with the help of Texas Hard Money Lenders, getting an LLC set up is a simple and smart first step.

Getting Started with Real Estate Investing

You watch television, listen to your neighbors chat, and read about it— fixing and flipping properties. And from everything you see and hear it looks and sounds glamorous and like the fastest track to wealth.

Glamorous? Probably not. It takes a lot of sweat and tears to become successful in the real estate investment game. Fast track to wealth? It’s definitely a track to wealth, but how fast you get there is up to the time you have to give and how quickly you learn. The first thing as an investor you have to do is find a distressed property that you can fix up and sell for a profit. The second thing you have to do is find financing.

So, you search hard and find a perfect investment property. You have never done this before and you need a loan—so, where do you go? Duh, the bank of course. Unfortunately, after meeting with the loan officer you learn that banks frown upon lending to investment properties. It is just too large of a risk. Enter Arizona Hard Money Lender.

Arizona Hard Money Lenders are the knights in shining armor for investors.

Arizona Hard Money Lenders are not banks. They are firms or individuals that have borrowed money from other investors. They lend this money to real estate investors on short-term loans. Arizona Hard Money Lenders, unlike banks, will loan on any property—no matter how distressed it is. They are in this business with you. Arizona Hard Money Lenders can look at a shack and see a cozy fairytale cabin. They are able to see what banks can not.

Banks will require a large down payment—Arizona Hard Money Lenders lend on an LTV (loan to value) or an ARV (after repair value). The LTV ratio is calculated by dividing the amount borrowed by the appraised value of the property as a percentage. If you find a property that appraises at $200,000 and make a $20,000 down payment, you will be approved for $180,000 resulting in an LTV of 90%. An ARV estimates the future value of a distressed property after it has been repaired. If you find that same property that appraises at $200,000, but after repairs it is assessed to sell at $300,000. The Arizona Hard Money Lender approves 75% ARV—that means the loan amount would be $225,000. That leaves you with $25,000 to put towards repairs.

Each Arizona Hard Money Lender will have different terms and handle each deal differently. They are not banks that treat their customers as a number, they realize you are human. Investors have a one-on-one relationship with their lenders. Because they are private money lenders they have flexibility. What that means is they can work with you. When things come up, call them— talk with them and find a solution together.

Arizona Hard Money Lenders have gotten a bad reputation as sharks that charge outrageous interest rates and hunt down borrowers after one late payment.

In reality that couldn’t be further from the truth. Investors and Arizona Hard Money Lenders form unique relationships. No one wants the investor to succeed more than the lender because that equates repeat business for the lender and security for the borrower.

Top 3 Ways to Boost Your Eligibility for Arizona Spec Home Financing

Arizona Spec Home Financing is back in a big way, but not everyone who applies for a loan will qualify. Make your application stand out from the pack by addressing a few often-overlooked issues.

1. Have a builder with experience and a good reputation on your team. People move into spec homes from all walks of life. Some are coming from the fix-and-flip biz while others are relying on their natural skill or come from some kind of construction or repair-related background. This kind of experience does matter and will help you have a more successful outcome, but it’s not enough to get a loan. If you, personally, do not hold a contractor’s license and do not have previous projects which demonstrate your success, you aren’t going to get Arizona Spec Home Financing. Find someone to partner with on your first few projects who already has a good reputation in the industry and you’ll get more approvals.

2. Bring an appraiser on board early. It may sound strange to have a house that hasn’t even been built yet appraised, but you can get an estimated value based on your plans and similar homes in the area. An awesome appraiser can also give you tips and ideas before you build, so that you can pivot your plans to collect more cash if anything has been overlooked. Most lenders will want to see the appraisal too.

3. Be prepared to put some skin in the game. The amount of your down payment will vary based upon the lender, but most builders have to put 20-25% down.

Show Lenders You’re the Real Deal with a Detailed Plan

You’ll need to be well beyond the idea stage when you approach lenders for Arizona Spec Home Financing. It may sound like you’re putting the cart before the horse—how can you plan if you don’t know how much you can get? That’s not true when it comes to applying for loans. Your investors will want to know how you plan to spend the money, what your timeline is, and what will be going into the finished project. Be prepared with floorplans, a full materials list, and other items which showcase your budget and the scope of your plans.

If you can plan it, you can successfully fund it.

There are many forms of Arizona Spec Home Financing, though chances are you’ll be looking for Arizona Hard Money Loans for this. In these cases, you’ll need to purchase the land to build on and can then use that as your collateral for the building portion. Lenders may also allow you to use other assets as collateral. For example, if you’ve got investment properties already, you may be able to use one or more of them. Knowing which asset you’ll be leveraging can also help you identify how much money you’ll have to spend before planning. Try to keep your costs to no more than 70% of the asset you’re leveraging. Yes, you may be able to get as much as 85%, but not all lenders will go this high, so it’s important to start off with conservative estimates and go from there. The same mentality will help you immensely throughout the whole approval process.

Why Use An Arizona Hard Money Loan?

One type of loan you need to be familiar with, as a buyer or a real estate investor, is an Arizona Hard Money Loan. These are short-term, higher interest loans that can be used when traditional financing either is unavailable or won’t work for your situation.

A typical Arizona Hard Money Loan will run you anywhere form 7.99% to 15% and anywhere from 3-7 points. Points are an upfront fee of the loan amount. Unlike traditional financing Arizona Hard Money Loans are short-term loans, which make them perfect for a fix and flip. These loans generally run from 6 months to 3 years, but depending on the lender can be stretched out to five years. Because of the higher interest rate and points an Arizona Hard Money Loan, per month, will be more expensive.

So, why would anyone use an Arizona Hard Money Loan? There are many reasons an Arizona Hard Money Loan will actually make you more money. Buying a distressed home that you plan on fixing up and selling is a prime example of a reason to use these loans. Banks do not typically lend on fix and flip properties; there are many reasons for this—first and foremost, if the investment property doesn’t work out, it is much easier to walk away from an investment than it is your primary residence. Bank loan terms are longer and they have lower interest rates—this is great if you are buying the home you will reside in, but why would you take a 30 year loan out on a home you are planning on selling within a year? Also, banks will not finance repairs. That means you will have to come out of pocket for any and all repairs. Banks also will not finance until all inspections have cleared—if something needs to be fixed, you either have to bargain with the seller to fix it or it comes out of your pocket. Banks require large down payments—20-25%. An Arizona Hard Money Lender finances on ARV (after repair value) or LTV (loan to value)—either way you are not looking at anything near what a bank requires.

Reasons for Getting an Arizona Hard Money Loan Over Traditional Loans

The fix and flip example is the most popular reason investors use Arizona Hard Money Loans. There are more:

1) You have bad credit: Unlike banks, who approve based on credit scores and income—an Arizona Hard Money Lender bases approval on hard assets—the property.

2) Fast approval: Arizona Hard Money Loans can be approved within a day and financing available generally around 10 days or less. This is important to people wanting high demand properties. A seller will choose to work with hard money versus a bank—banks typically take a minimum of 30 days to close and can easily take 90 days. This quick close helps the buyer negate a lower purchase price.

3) Arizona Bridge Loan— You are selling your home, but don’t want to wait on it to sell to buy your new home. A hard money Arizona Bridge Loan can cover that—these are interest only loans, meaning you won’t pay a large payment until your house sells—when you have the money. These loans make it possible to own two homes, but pay one mortgage.

4) Obtaining financing when a bank won’t provide additional loans: Most banks cap the amount of loans to a borrower at four. Arizona Hard Money Lenders do not have to adhere to federal regulations and so there are not these types of limitations.

Working with an Arizona Hard Money Lender is A Partnership.

Arizona Hard Money Lenders want their deals to go as smoothly as possible. These lenders have flexibility that banks do not and so it is easier to work through a problem and find a solution with your lender. A reliable and experienced Arizona Hard Money Lender will always be honest in their opinion concerning a project—they want it to succeed as much as the investor.

Top 10 Cities to Invest in Real Estate with Colorado Hard Money Loans

Ever wonder where the best places to flip or hold with Colorado Hard Money Loans are? According to a new report, more people rent one-way moving vans to the Sun Belt states than anywhere else.

Penske truck rental service recently published some insider insights regarding where people throughout the United States are moving to and they have some major commonalities. All but two in the top ten are considered Sun Belt states. Technically speaking, the Sun Belt encompasses all regions south of the 36^th parallel. More concisely, it’s the states which run across the southernmost border of the United States from California through the southernmost tip of North Carolina.

This development isn’t particularly surprising because populations in the Sun Belt have been booming since the 1960s, and air conditioning is likely to thank for it. Since then, cities have built up dramatically and offer all sorts of recreational activities year-round. Although often sought out by retirees who have grown tired of snowy regions, the diverse activities and cultural hubs have made the Sun Belt states destinations for all. In short, all this means that if you apply your Colorado Hard Money Loans to homes in the Sun Belt states, you’ll have more command over the sale.

If You Can Work in One of These Ten Cities, You May Have More Successful Sales

When working with Colorado Hard Money Loans, you’ll always want to have a solid exit plan before jumping in. Knowing the cities people move to most can serve as a good starting point for research. They include:

· Atlanta, Georgia; median home value of $255,100

· Phoenix, Arizona; median home value of $239,000

· Tampa, Florida; median home value of $219,500

· Orlando, Florida; median home value of $235,300

· Denver, Colorado; median home value of $424,200

· Houston, Texas; median home value of $183,000

· Las Vegas, Nevada; median home value of $273,000

· Charlotte, North Carolina; median home value of $220,700

· Austin, Texas; median home value of $73,800

· Portland; median home value of $423,200

Beware: move-ins only account for part of the picture.

It’s important to note that the number of people moving to a region only account for a portion of the picture. Yes, populations are growing in the Sun Belt, especially in and around the cities mentioned. However, the Penske report doesn’t actually cover the housing market. There’s no research indicating how many homes are on the market nor how long houses stay listed. In some cases, your own research could turn up that an area has a surplus of homes, in which case, it may not be the best place to flip unless you’re able to bring something to the table that other sellers can’t. Furthermore, regulations will vary from city to city, meaning some may have regulations which make it harder to buy, fix, or sell. Lastly, the availability of Colorado Hard Money Loans will vary based upon a number of factors. Most lenders prefer to work a specific geographic area because they know it well, are familiar with the laws, and have seen successful investments in the area. So, at the end of the day, you’ll need to do your homework. This list may be a good starting off point if you’re not sure which region to do your flips or holds in, but you need to evaluate each region and each opportunity on its own merit.