Setabay Private Hard Money Lender

Wednesday, April 17, 2019

Can You Use Owner Occupied Arizona Hard Money Loans on Your Own Home?

When it comes to residential owner occupied Arizona Hard Money Loans, you’re expected to use the space as your primary dwelling. The catch-22 is that there are few lenders who will provide funds under these circumstances, so you may have to explore other options.

There are financial products for virtually every circumstance, which is a good thing because that means you can usually find some type of financing regardless of your situation. However, identifying which product is right isn’t always easy, and if you’re a home owner exploring your financing options, getting to the core of how owner occupied Arizona Hard Money Loans work is essential.

This type of financing is provided by private lenders; individuals and sometimes institutions rather than big banks or credit unions. In most cases, it’s packaged as a commercial or business solution. In other words, the property cannot be your primary residence. Lots of people who work in real estate investing, such as home flippers or landlords use it, but in this case, it’s a “non-owner occupied” solution.

When you, as the homeowner, plans to live in house more than half the time, you must seek out the “owner occupied” variety. Few lenders provide this option because government regulations change the way the financing is handled. Furthermore, the market already has many options for this. There are traditional mortgages and alternative financing options to suit this type of need, and they’re generally more cost-effective.

Why Do People Look to Private Lenders to Finance Their Personal Homes?

The reality is, banks are totally geared toward homeownership and there are even federal programs designed to get people into houses they can share with their families. For banks, there’s little risk involved in extending this kind of financing, especially when the borrower has good credit and reliable income. Yet, there’s obviously a gap here. Sometimes, people don’t qualify for a traditional mortgage. It’s situations like these where people start looking toward owner occupied Arizona Hard Money Loans, but opportunities to secure them are few and far between.

Other times, all a person’s money is tied up in equity in their current home. If you want to move, but don’t have the funds for your next down payment and moving expenses, it makes sense to tap into your equity before your current home is sold. Moreover, if you already have one home as a primary residence, you aren’t going to qualify for programs that require the new home to be your primary residence. That makes banks wary. They become concerned that you’ll default on your non-primary residence, and so your funding options evaporate. It’s situations like these that short-term financing from a private lender can be a huge help. That said, these solutions are technically not “owner occupied,” as you don’t actually plan to live in the residence. That’s actually a good thing because it means you’ve got more options in the private lending space than you otherwise might have.

Seek advice from a broker in the private lending space to find the right solution for your needs.

Whether you’re looking for owner occupied Arizona Hard Money Loans, a loan for a property that will not be your primary residence, or funding to help you bridge a gap between the sale of an old home and the purchase of a new one, there are options. The best way to uncover which financial product is right for your situation and needs is to chat with a seasoned broker who knows the space well and can help you find the best one.

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.

Top 4 Tips to Get Your Texas Hard Money Loans to Close Faster

One of the biggest benefits to using Texas Hard Money Loans is that they can get cash in your hands quickly. To keep the process moving smoothly, come to the table prepared.

1. Establish a main point of contact. Most lenders will pair you up with someone, be it an account manager, broker, or assistant. It’s important to develop a relationship with this person and ensure the lines of communication are open, so they can follow up with you as needed and keep you informed of the progress. If you aren’t given a main point of contact, find out who you should be keeping in touch with.

2. Find out what documents you’ll need in advance and have them ready to go. Each lender will have a different set of requirements for approving Texas Hard Money Loans, but you’ll typically need to supply details on the property, an appraisal, an outline of your plans, a budget, a timeline, and documents related to your business and financials. Oftentimes, the team cannot even begin processing an application until after everything is submitted, so delays in getting the paperwork to the finance team will naturally slow the approval process.

3. Don’t overwhelm your finance team with unnecessary paperwork. It can be tempting to send in everything you have related to your project, but your lending team will have its own processing methods and if extra things are sent in, that simply makes it harder for them to find what they need in your stack of papers.

4. Be prepared to supply additional details. If something is missing or is unclear, the team will need a prompt response from you in order to continue moving forward. Ergo, if you had a stack of papers you held back from the initial submittal, keep them close at hand just in case they’re needed.

Demonstrate Eligibility Early and Have Cash in Hand in Days

Traditional bank loans have regulatory red tape that slows the approval process, dragging the funding out for a month or more. This isn’t true with Texas Hard Money Loans. If your initial application is comprehensive and you supply all requested documents promptly, you can literally close on your financing in a matter of days.

When you work with a good team, they’re there when you need them.

The process will be different depending on where you’re sourcing your Texas Hard Money Loans from, but an experienced funding team works like a well-oiled machine. That’s part of the reason they’re able to stay in business. By taking care of you promptly, they’re not only creating a happy customer who will return for later deals, they’re freeing themselves up to complete other deals. They do this day in and day out, so it’s a smooth and straightforward process. Follow their lead, stay connected with them, and you’ll close faster than you ever thought possible.

Can You Really Use Texas Hard Money Loans to Flip Hoarder Houses?

Hoarder houses can be such a disaster that it’s difficult to assess what needs to be done before it’s cleared, but that doesn’t mean they’re not good investment properties. You can use Texas Hard Money Loans to fund the deals as long as you’ve prepared a solid plan.

Under ordinary circumstances, you’ll have a good idea of the amount of work necessary to complete any fix-and-flip. While you should budget for unforeseen expenses because just about every house has an oddity, chances are your whole project won’t be derailed by a surprise finding. Hoarder houses are different. They can be packed solid with debris from floor to ceiling, totally obscuring the condition of the property.

The medical community is still trying to establish what happens in the minds or hoarders. Initially, hoarding was believed to be an offshoot of obsessive-compulsive disorder, but scans show these individuals have abnormally high brain activity when they’re faced with a decision to throw something away, even when they know it’s junk. This stimulates them to the point where they’re paralyzed from making a decision, and so their clutter grows. Their isolation and depression tends to as well.

Adding to the challenges, there are often infestations and animals kept in the homes. The hoarder, genuinely unable to make the decision to so much as toss a piece of junk mail, cannot manage these issues either. Ergo, the homes are not only packed with debris, but are also unsanitary and unhealthy. It’s no wonder that when TV shows depict the big clean-out, the crews going in wear hazmat suits.

Risk Less by Planning for a Complete Teardown

Part of getting Texas Hard Money Loans involves demonstrating your plan for the property, but if you can’t even see the walls, it’s impossible to determine the condition they’re in. They could have holes, mold, damage from infestation, and more. In other words, the only way you can be sure you’re going to have success with the project is to plan for a worst-case scenario; tearing everything inside the home down. Other costs worth factoring in are pest control and professional junk removal. The latter is beneficial because these people do removals every day. They have the equipment, materials, and expertise to get it done quickly and cost-effectively, as opposed to your regular contractor who may or may not have ever worked on a hoarder home before. It’s worthwhile to get estimates from more than one company for this.

Set Your Expectations Based on Real Numbers to Be Successful

Anytime you apply for Texas Hard Money Loans, you have to demonstrate that your plans make fiscal sense. That’s a given. When it comes to hoarder houses, you need to work backwards, starting with what the finished property will be worth, then subtract all your expenses (remember, you’re going down to the studs and there will be additional costs too), remove a portion for yourself, and then determine what price the property is worth. This is one situation where it may be incredibly difficult not to make an emotional decision, particularly if you’re negotiating a price with the hoarder, but it’s important to focus on the numbers. Only then can you put Texas Hard Money Loans good work by giving this person the chance to walk away and start over, help the neighborhood, and invest in your future too.

How Texas Private Money Lenders and Flippers Calculate ARV

Most Texas Private Money Lenders who finance fix-and-flips want to know what your after-repair value, or ARV, will be. It’s important to know how to calculate it and what the final number means to your financing and profit.

In the fix-and-flip business, you’ll hear a lot about LTV and ARV. LTV stands for loan-to-value. It’s the amount you’re requesting from your Texas Private Money Lenders in relation to the current value of the property. For example, if you’re purchasing a property worth $200,000 and requesting $100,000, your LTV is 50%, though it’s sometimes represented as 50 LTV.

ARV, or after-repair value, is more concerned with what the property will be worth after you’ve finished repairs and the home goes on the market. You’ll calculate this by adding the purchase price to the value of renovations. For example, if you pay $100,000 for a home and the repairs and upgrades you make will increase value by $50,000, your after-repair value is $150,000. This gets taken a step further in lending, particularly as it pertains to the total amount of your loan. Most will not provide loans that are higher than 70% of what the home will be worth. This is represented as 70 ARV or 70% ARV. If you’re new to flipping or the deal is riskier than others, expect to receive much less than 70% ARV.

It’s also worth noting that getting an accurate ARV usually requires bringing an appraiser on board. Those who attempt to go it alone are likely to find the process time-consuming and tedious and will probably produce an inaccurate ARV. Furthermore, many Texas Private Money Lenders don’t use ARV because it’s not a guarantee. Instead, LTV will be used.

Get Advice from an Appraiser When Calculating ARV

How much value does a Jacuzzi tub in the master bedroom add? What about a farmhouse sink in the kitchen, a built-in in the living room, or ceramic tile throughout? The reality is, most people cannot answer these questions off the top of their head and research may be inconclusive or steer you the wrong way. It takes many flips to gain a grasp of value, so you’ll want to work with an appraiser to help determine how much value your upgrades and repairs are adding. Your appraiser will also tell you what the property is truly worth before the repairs, which is the other big component of ARV. You can’t rely on Zillow or similar for this because the services know nothing about the condition of the property.

Your flips will be more successful if you use the 70% rule

Even when the Texas Private Money Lenders you work with don’t use ARV to calculate loan terms, the concept is still worth keeping in your toolkit, particularly as it pertains to the 70% rule. In short, this guideline involves subtracting your repair costs from the total expected sales price, and then capping your bid on the property at 70% of what’s left. For example, if your home will sell for $150,000 after putting $50,000 into it, you don’t want to spend more than $70,000 on the purchase of the property. (150,000- 50,000 = 100,000; 100,000 x 70% = 70,000) The formula is often considered the gold standard of flips because it ensures you have money to cover expenses and will make a solid profit, even if you run into minor issues on the flip, but it isn’t the end-all. You’ll want to consider any fees, permitting costs, appraisal costs, and so forth as well, as this paints a better picture of the value of your work and what you’ll really earn when your project concludes.

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

If you’ve worked with Texas Hard Money Lenders before, you know how they operate, but if you’re applying for a loan the first time, it can be difficult to know what to expect. Arm yourself with the information you need to spot a bad deal, so you can have a successful venture.

Outright scams are incredibly rare when it comes to Texas Hard Money Lenders. The only news-worthy case in recent history involves investors who believed they were funding deals and unfortunately lost $1.2 billion, according to a Mortgage Professional America report. On the borrower side of things, similar events are largely unheard of, but the story highlights a major point. When you’re borrowing from Texas Hard Money Lenders, you’re usually being funded by private individuals. The regulations regarding the loans are different compared to what you’d find with a traditional business loan and the approval process is unique too. How can someone with little experience stay protected in uncharted waters?

For starters, it pays to watch for offers that promise way more than others are doing. For example, ultra-low interest rates can signify there are hidden fees or a promise that the group will fund any deal should raise red flags. Realistically, no investor could fund all deals because not every borrower is a safe bet.

Secondly, serious investors are going to investigate you and your proposals. More often than not, people turn to alternative funding because a bank loan isn’t going to cut it, so investors must be incredibly diligent about checking into things before funding. If they don’t personally check out a property or business site or send someone out whom they trust prior to approving, that’s also a red flag. They should be going over your application with a fine-toothed comb too. If you have a broker helping you through this process, you might not notice any hitches because he or she will likely catch anything before an application is submitted, but it’s something to be aware of if you’re going it alone.

If You Can Run a Web Search, You Can Identify the Real Deal

Thankfully, it’s usually easy to tell who’s legit and who’s not. Authentic Texas Hard Money Lenders will have an established web presence going back many years. Anyone who isn’t doing business on the up-and-up can’t keep using the same name because it will get tarnished fast. While every company that’s been in business for an extended period of time will likely have a couple negative remarks purely because they’re coming in contact with the general public, you should be able to identify an overall trend in the business reputation.

A reputable financing team will find a win-win solution.

Whether you’re working with a broker or directly with your investors, the aim is always to cultivate lasting relationships. When you’re successful, they’re successful, so they want to fund your deal and have you come back again. Even if a team cannot help you this time, they will still treat you with respect with the hopes that they can help you the next time.

How to Pay Less to Arizona Private Money Lenders for Their Cash

Obviously, it’s important to develop a good relationship with any Arizona Private Money Lenders you work with, but you also want to keep your fees as low as possible too. Use these tried-and-true methods to reduce your costs when you go for your next loan.

Before getting into how to reduce fees, it’s important to understand what types of fees Arizona Private Money Lenders charge. To begin with, each loan will have an interest rate and points. The interest rate is straightforward. You’ll pay a percentage of the loan to borrow the cash, just as you would with any other loan. However, in this case, you’ll probably make interest-only payments until the term ends, and then you’ll pay the principal.

In addition to this, you’ll also see points, which are common with this form of lending and also with traditional mortgages. These are sometimes called “up front points” because you pay them with your closing costs. Each point is equal to 1% of your loan. Generally speaking, the riskier it is for an investor to finance you, the more points your loan will have. However, other things may come into play too, like what region you’re operating in and how much competition there is for the investor.

After points and interest, additional fees will vary based upon the investor. Although not all will charge these fees, a few common ones include an underwriting fee, processing fee, and doc prep fee. You may see referral fees and loan servicing fees as well.

You’ll want to watch for fees which could emerge later in the deal too. For example, it’s common to see late fees, foreclosure fees, and renewal fees listed on the paperwork. Although you may never have to pay these fees, provided you make your payments on time and can pay off the balance of the loan before the term is up, it’s a good idea to be aware of what you could be charged should issues arise.

When You Create a Win-Win Solution, Your Fees Will Be Less

One of the biggest things you can do to keep your costs low is to reduce risk for your Arizona Private Money Lenders. Bear in mind, this is an industry that’s not particularly concerned with your credit, but with how solid the deal, itself, looks. Than means keeping the loan-to-value (LTV) low. You can do this by putting more of your own money into the project or by finding a screaming deal on a property. There’s also reduced risk when financing people who are experienced in the biz. If you’re a flipper, expect to pay more the first few times or bring someone who has several successful flips on board. The same is true if you’re in construction, doing fix-and-holds, or are in virtually any industry.

Talk with a few companies, so you’ll know the real deal when you see it.

On a final note, some companies simply price themselves more competitively. Gather rates from a couple different companies and be sure to ask which fees are part of their packages. That way, you can compare apples to apples—you won’t think you’re paying lower rates just because the interest is lower or there are fewer points, but can tally up the whole cost to borrow money. From there, it’ll be easier to identify which Arizona Private Money Lenders have the best rates overall, so you can keep more money in your pockets.