Setabay Private Hard Money Lender

Monday, May 6, 2019

Why New Real Estate Investors Turn to Texas Hard Money Lenders

One of the biggest hurtles a new real estate investor faces is finding that first lender who believes in his project. Texas Hard Money Lenders are one of the top lenders that those just entering the field turn to.

It can be difficult to obtain that first loan without a track record. Lenders want to see your history as a fix-and-flipper, renovator, or builder. They want to know you understand budgets, time constraints, and have the contacts to overcome the obstacles that are bound to arise. Though some Texas Hard Money Lenders have these same stringent requirements, most Texas private lenders are more apt to take on the new kid on the block and help him, much as a mentor would, through that first project.

Credit scores and lack of credit worthiness can halt the lending process. As with most ventures in life, it takes a few attempts before we get it right and a few more before we excel. In the meantime, our credit can take a hit and we can be left with little in the bank to lean on. Fortunately, Texas private lenders look at your assets and the equity you have in your property. They will determine a loan-to-value ratio and lend accordingly. First-time investors have a much better chance at getting a “yes” when the main focus is on the property.

The fix-and-flip investment model has skyrocketed. In fact, house flipping hit a six-year high in 2018. This means that investment properties are quickly snatched up once they hit the market and contingency sales are few and far between. You’ll need cash, quick. Texas Hard Money Loans can be closed in anywhere from one to two weeks, with some Texas Hard Money Lenders closing in as little as a few days. This does mean that the days when vacant properties and foreclosures were easily found has pretty much ceased to exist. In addition, due to supply and demand, housing prices have risen steadily. For those of you newbies out there, keep in mind that real estate auctions are still good places to explore.

Return on Investment

The average gross profit of a flipped house in the first quarter of 2018 was over $66,000 dollars. Not bad for a few month’s work. This led to an average 47.8 percent return on investment. Despite what may well be a very lucrative endeavor, it’s important to know your market. Areas where prices are rising fast can carry more risk. Emerging markets, on the other hand, are a fix-and-flipper's dream. The ultimate goal is to find inexpensive properties in good locations that will lead to high ROI. Many real estate investors are finding their pot-of-gold by turning to the suburbs and renovating in the up-and-coming neighborhoods. Don’t be tempted in going for that cheaper property in a low-income neighborhood where you may have problems reselling.

At Level 4 Funding, our portfolio of Texas Hard Money Lenders contains hundreds of investors that lend to first time flippers and renovators.

While it may seem almost impossible to get into your first property, know that there are opportunities out there. Call us at Level 4 Funding for a no-obligation quote. We may just have the perfect lender to get you started in the very lucrative real estate investment model.

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.

When Working on a Project, use a Arizona Bridge Loan to Complete or Initiate the Project

Bridge loans are short term in nature. These types of loans have several important purposes to those in the real estate investment industry.

The Arizona Bridge Loan is a short-term gap for a borrower before they can secure permanent financing for a project. When the permanent financing is secured, or the property sells, then the bridge loans are expected to be paid back. Utilizing a Arizona Bridge Loan is mostly used for big real estate projects of projects that require huge capital outlays at the initial, middle or completion stage of the project. On smaller projects, the Arizona Bridge Loan could be used to initiate or complete a project.

Repayment of the Arizona Bridge Loans is done when the permanent funding is secured for the project. For example, the Arizona Bridge Loan is repaid on a project when the company received the equity investments from venture capital firms. Alternatively, bridge loans are repaid once an investment has been received from a private investor. There are some institutions that require that the Arizona Bridge Loan be paid irrespective of permanent financing being secured.

Bridge loans, in most cases, do not require a high level of collateral for the funding. Collateral for a loan mostly is restricted to permanent funding. However, some lending institutions may require a lien on the assets of the project. Should the borrower default on the repayment of the loan, then the lending institution can take over the project and sell it to recoup the loan. There may be a wavier for the collateral based on the viability of the project or if the borrower can demonstrate a firm commitment that the loan will be paid from new investors.

The Structure of a Arizona Bridge Loan

The tenure of the loan is short-term in nature, the structure of the loan can be three (3) to twelve (12) months depending on when permanent funding can be expected. The term of the loan will also depend when the funds are expected to be released. For example, if permanent funding is dispersed over three (3) months then the Arizona Bridge Loan term will be structured to accommodate the permanent funding.

The cost of funds for the Arizona Bridge Loan are routinely in the range of four (4) to six (6) percent margin on the Interbank Rate, depending on the risk that lender is taking. Understand that the Arizona Bridge Loan is inherently risky, so higher rates are charged accordingly.

You should secure a Arizona Bridge Loan when you have secured a commitment for permanent funding. This permanent funding should be obtained in the short term then you proceed with securing the Arizona Bridge Loan until the permanent funding will be disbursed. If your timing is off and the permanent loan funds are not disbursed in a timely manner, then you will be forced to pay higher interest on the bridge loan, and this may jeopardize the profitability of the project. Just remember that the Arizona Bridge Loan will be paid off with the funds from the permanent funding expected. The Arizona Bridge Loan should not be secured until you are sure that the permeant funds will be disbursed, or the project may face a critical delay. There is no purpose to obtain a Arizona Bridge Loan if the funds cannot be used right away.

The Three Loan-to-Values of Arizona Hard Money Loans

Arizona Hard Money Loans are one of the more flexible options to consider when financing a real estate investment. There are three loan-to-values to consider when reaching out to a private lender.

Real estate financing looks at the Loan to Value (LTV). In other words, it is the value of the property that the loan will finance. If you have a property that is a $100,000 property and you plan on putting down $25,000 and you will be borrowing $75,000, then your LTV would be 75%. This provides the lender the knowledge that you have skin in the game. The amount of the loan is the amount the lender has financed and the lender’s LTV. While a conventional bank looks at the loan to value as-is, Arizona Hard Money Lenders look at property three different ways. The three ways to look at the LTV can either help or hurt you if you’re looking to close quickly or for the best rates.

The LTV as-is is the easiest LTV to understand and is practically identical to both Arizona Hard Money Lenders and private banks. This is based on the property’s current as-is condition without any improvements or repairs, fair market value. This valuation has no differentiation if the property needs repairs or if it is in tip top condition. The value is what the property is worth as-is right now. The value is usually determined by an appraisal. The total collateral is determined by the as-is value.

Arizona Hard Money Lenders start to excel and show their flexibility with the purchased LTV which is the first specialized Loan-to-Value. Remember the obvious when you are buying property for investment purposes: buy low and sell high. Frequently your purchase price will be lower, in most cases, than the purchase as-is value. Due to bulk sales and motivated sellers, investors can acquire properties as much as 90% as-is value. Some Arizona Hard Money Lenders may grant you a discount on Arizona Hard Money Loan rates basing them on the purchase price LTV.

ARV LTV

The After-Repair Value (ARV) specific to Arizona Hard Money Loans and fix and flippers is one of the most useful tools. This type of loan will allow you to borrow from the hard money lender the after-repair value of the property even if the amount is greater than your purchase price or current as-is property value. For example, you buy a property for $100,000, you anticipate $20,000 in rehab and renovations on the property, so you are looking to finance the $120,000. You are putting down $20,000, and the After-Repair Value is $180,000—a pretty good deal all-in-all.

At Level 4 Funding, we work with Arizona Hard Money Lenders that utilize this lending strategy. If the process sounds confusing, call us—well be happy to steer you in the right direction with the type of Arizona Hard Money Loan that best fits your needs.

You may be looking to put in as little money of your own as possible. So, you are looking for a fix and flip loan which calculates and uses the ARV LTV. At 75% of the $180,000, the ARV would be $135,000 more than the total cost to acquire the property and repairs and rehabs. So, the deal looks great. Remember that Arizona Hard Money Lenders do require that the borrowers have some skin in the game. Hard money ARV LTV can loan up to 90% of purchase price and 100% of the rehab costs.

Sunday, May 5, 2019

Six Reasons to Obtain a Bridge Loan

For those of you who have not heard the term, a Arizona Bridge Loan is a short-term loan that is used to purchase or renovate real estate property. Here are the top six reasons that investors turn to this type of loan.

Reason #1: Down payment for the purchase of a new home. If you’ve found your dream home but need a down payment until your old home sells, a Arizona Bridge Loan is a perfect solution. Reason #2: If you’re looking to make a quick offer on that foreclosed home that just went on the market, a Arizona Bridge Loan can be obtained quickly. Reason #3: A property in the up-and-coming neighborhood that’s in need of renovation has appeared on the market. Again, this type of loan can be obtained in record time.

Reason #4: The market is hot and making an offer on a home with a sales contingency will likely take you out of the running. Reason #5: You’re building a new home and can’t qualify for a traditional mortgage. Keep in mind that there are bridge loans that you can obtain from banks and others that you can obtain through hard money, private lenders. Reason #6: This is your go-to as a real estate investor for quick turn-arounds in a hot market.

Arizona Bridge loans are called such because they provide a bridge from one property to another while waiting for one to sell, refinance, or for a conventional loan to process. They are common in investment circles and are often obtained from Colorado Hard Money Lenders. When acquired though private lenders, the loan will be based on the available collateral. Repayment can be set up as interest only until the renovation or building is complete.

The Down Side of a Arizona Bridge Loan

There are a few items to be aware of when considering this type of loan. Make sure the market is such that the property will sell in the timeframe allowed by the loan’s terms. These loans have terms that range from 3 to 12 months. Because of their short-term nature, quick to fund process, and associated higher risks, these loans tend to have higher interest rates.

Colorado Hard Money Lenders carry more weight on available assets than on your credit score. They are also more apt to work with you in terms of repayment plans.

At Level 4 Funding, we work with hundreds of private investors, many of whom specialize in these types of loans. Think of these loans as one of the tools in your investment belt that can help increase your portfolio. If you’re uncertain if this type of loan is the right one for your current project, call us. We’re happy to discuss the various options that Colorado Hard Money Lenders can provide. These include specialized loans for contractors in which money is obtained in draws and interest-only payments are in place until the property is built and sold. Our lenders also specialize in the very popular fix-and-flip investment strategy.

Why Developers Turn to Arizona Hard Money Lenders

Finding the right lender to support you and your construction business is one of the keys to success. Arizona Hard Money Lenders are a popular go-to for those in this business.

Since the last construction downturn in 2008, lenders have considered construction loans a risky business proposition. Their requirements for borrowers including work history, creditworthiness, and money down are set in standards that are not negotiable. Typically, traditional lenders offer three different types of construction loans. One is a construction-to-permanent loan. In this type of loan, banks pay the builder in different stages as the construction is complete. At the end of the building process, the loan is converted to a mortgage. The second type of bank loan is a construction-only loan. These loans simply cover the costs of construction and are due in full upon completion. The third type of loan is a renovation construction loan—often used by those that are in the fix-and-flip investment model. This type of loan allows you to add the projected cost of the renovations into the mortgage, as well as the purchase price.

All of these loans are based on draws—paid at specified times during various construction phases. Banks will send an inspector to the construction site in order to ensure that the contractor has completed the phase and is on schedule. Besides monthly draws, these loans typically offer interest-only payments during the construction process. At the end of the loan term, usually as construction is complete, the full payment on the loan may be due. These loans are short-term in nature, though there is usually greater flexibility than other types of loans.

One problem contractors find with these types of loans is that they are harder to qualify for and banks will want to see a history of completed projects. Builders usually require a credit score of at least 680 percent and a down payment of at least 20 percent is required. Because of the difficulty in obtaining these loans, and the extended time to funding, contractors often turn to Arizona Hard Money Lenders.

What are the Benefits of Getting a Colorado Hard Money Loan for Construction?

Builders turn to Texas Hard Money Lenders for a variety of reasons. These include a quick approval and funding process that takes a week instead of a month. Another reason is that they are easier to qualify for. Whereas traditional lenders require specific credit scores, Arizona private lenders look at how much equity you have invested in the property with this carrying greater weight for both qualifying and amount. They will also consider additional assets. Because they are not government regulated, Texas Hard Money Lenders have greater flexibility when it comes to terms and repayment schedule.

At Level 4 Funding, we offer construction loans that are easy to qualify for with limited paperwork involved in the process.

Working with a company that has hundreds of Arizona private lenders in their rolodex, guarantees you the best chance of obtaining a construction loan, whether your first project or if you’re a seasoned veteran. There is no minimum credit score required and we offer some of the quickest funding in the industry—sometimes in as little as 24 hours. We offer interest-only payments with terms that range from 3 to 60 months. Call us for a no-obligation quote.

Four Types of Real Estate Investment Financing Including Colorado Hard Money Loans

All though there are many other options than these four types of real estate investment financing, if you are able to comprehend and understand these, there’s a good chance you will understand any real estate concepts encompassing any combination of financing options. Let’s take a look at the most common, including Colorado Hard Money Loans.

Equity Investors--Utilizing equity investors for financing of a real estate project means you will form some sort of joint venture or partnership. You will need an LLC or other entity as co-owner with your investor. The investor provides the capital and you do the deals. The drawback is, of course, that you will need to split all profits on each project. The percentages for distribution of the profits will be governed by the deal structure you negotiate at the beginning of the project. On the other hand, if the project loses money, then both you and your investor will feel the impact. If you are successful on your projects, an equity investor is the most expensive form of capital since they take half or more of the profits on the projects. Another option is forming a private investment fund. You sell shares to accredited investors with a fixed rate of return.

Bank Loans—One of the most common types of real estate financing are bank loans. This option is a very affordable one. Due to the federal government, this option also has a lot of restrictions. In the U.S., almost all bank mortgage loans are owner occupied, for single family or apartment buildings with 1 – 4 units. The financing entity is the FHA. For a fix and flip of under-valued properties, it is almost impossible to secure financing. Buy and hold will also have its’ challenges. With FHA bank mortgages, there is a limit on the number of mortgages an individual investor can attain.

Owner Financing—This is an option where the seller will be the bank. You have a down payment and the seller will carry the balance and act as the bank for the remainder of the loan. This is basically an agreement with you (buyer), and the owner of the property(seller). This type of financing can encompass almost anything (legal). If you meet the right owner, you may be able to reach an agreement where the seller forgoes monthly payments for a share of the sale of the property on a fix and flip. The owner financing is only limited by your imagination on how the financing will be structured.

Colorado Hard Money Loans

A Colorado Hard Money Loan is a loan that is issued by non-bank lenders for real estate investment. Single family fix and flip is the most common and popular type of Colorado Hard Money Loan. The target property will increase in value when the investor renovates and refinances or sells the property. Terms on these loans can be 12 months and often carry fees.

One of the most important factors when considering a hard money lender is the cost. If you find yourself bidding for a property against a cash buyer and time is of the essence, then you may want to consider using a hard money lender.

Arizona Hard Money Lenders can close quickly, your personal credit score is not considered, good if you have dings on your credit report, length on employment is not considered, and the loan is focused on the after-renovation value of the property. If you choose this option, spend time researching your options and look for a lender with good past history. And do you due diligence and compare interest rates of costs for originating the loan.