Setabay Private Hard Money Lender

Wednesday, May 8, 2019

Advantages of Commercial Private Loans

Commercial private loans cover most any type of project and can be used practically without any restrictions. Would this type of funding aid you in your search for project money? Look more closely and find out.

A commercial private loan strictly speaking is defined as any business financing covered by a corporation or private firm that is not a bank. These loans are almost always set up as debt financing built through factoring, a line of credit or just basic loans. Potential lenders are not required to give up their company equity in order to be approved for this type financing.

This type of loan is designed to bridge the hole not covered by traditional banks, which have little or no flexibility in their loan structures and underwriting procedures. A private loan does not have many of the rules and regulations attached to the more conventional ones and can be more imaginative with its clients’ needs. These loans can meet almost any business financing need and still keep the percentage of risk at a low level for both the lender and the borrower.

An example of how this works can be described by this scenario. Your credit score is 600 which narrow the chance of a bank providing the money for even a very good sounding project down considerably. On the average 60 percent of most banks’ loan customers are rejected due to the strict rules covering loans. Private loan applications are approved, on the other hand, as high as 85 percent of the time. Other good things about this type of funding for your future project include the small amounts of documentation to be provided, few covenants, and a quick closing once you are approved. Better still you aren’t presented with a list of areas that you can’t use the money for once you get it.

These particular loans are particularly good for small business owners who generally have small amounts of capital, especially after they invested it all in the long list of things, material and otherwise that are required to simply start a business.

What are the harder aspects of a commercial private loan?

Yes, these loans are good, but a borrower will pay a higher interest rate than he or she would if they went to a bank. This is due to how much risk is involved—the higher the chances of no repayment by the borrower, the higher the rate of interest that will be charged. Banks don’t take a large amount of risk so their rates can be lower. Private lenders want to see that the business borrowed for is generating some revenue as well, so you will need to have proof of that.

Like any loan, learn all the requirements involved and what you will be expected to do once approved. Commercial private loans have a lot of advantages, but need to be handled as carefully so you and the borrower have the best lending experience possible. After all, you may want to work with this individual in the future—good business relationships are a real advantage.

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.

Tuesday, May 7, 2019

Does your latest project need a Arizona commercial hard money loan?

Read on and learn some of the things you need to know in order to evaluate if your latest venture would be better funded by these types of loans. You need to know the differences for starters between them and traditional lenders.

Commercial loans are taken out for everything from hotels and apartment buildings to office high-rises and hospitals. Overall most all commercial loans made through hard money are secured by real estate collateral only. The loan-to-value amount can be up to 70% of the property value with an interest rate averaging around 7.99%. Origination fees can be around 1.75. One of the best things about these loans is the absence of a prepayment penalty—if you are eager to pay off your loan early and have the funding on hand, there will no charge for it as is often found in other more conventional funding arrangements. Repayment periods can be up to 36 months, but not longer than that generally.

Two other pleasant positives are the lack of an income requirement and no minimum FICO score, two things that a bank or a mortgage company always look at first--hard and long--before going any further with an application.

Throw in the smaller amount of documentation required and the swift turnaround to closing once you are approved and things begin to look really good for your project that may not have gone so well thus far because sometimes despite meeting all the qualifications one of two small glitches will decimate your chances with conservative lenders such as the older more established banks.

If Arizona commercial hard money loans are that good, you wonder, what are the negative factors? There when you need them, yes, however, you need to study the possible disadvantages of these loans also.

The following four reasons are why this funding is often described as not the best of choices in the list of available loans:

1) Down payments: down payments are higher here, particularly when the borrower’s credit score is low. They can be up to 25 percent. Sometimes, but not often, the down payment can be in the same area as banks.

2) Fees: defined by point, fees can be two to four percent of the total loan; banks do not charge these.

3) Higher interest rates: these loans can have an interest rate ranging up to 10 percent higher than a bank or mortgage lender.

4) Shorter repayment period: unlike banks which set their payback periods up to five years, these loans are pretty well set on return payments finishing out at the end of three years.

The old expression ‘Do your homework.’ fits very well here—a would-be borrower needs to look at all the facts and familiarize themselves with both sides of Arizona commercial hard money loans (and most other things, too) before taking one out.

Use the computer to find the facts, show a trusted friend or professional your true situation and ask their advice. If you are certain you can handle this funding afterward, get out there and find the lender that best suits your situation who can help you succeed in your ambitions.

What is a trust deed investment?

Should you use this type of funding? Read further and find out how this may help you.

Positive factors include: when set up correctly, these kinds of investments can produce a well-turned current yield while running only a low risk.

Hugh single-digit returns can be earned, as high as 10%, coming along monthly.

The prospect of loss in this type investment is hedged by a safety margin, that being the difference between the total loan amount and the worth of the property. If the borrower fails to repay the money, the lender involved can take possession, sell the property to recoup funds as well as any interest attached. It is possible for an investment to have an LtV of 65%, making it very advantageous to the borrower in case of foreclosure.

What are the disadvantages of this type investment?

Negative aspects include: A trust deed investment may generate income for you, but it will not appreciate in value like a basic real estate investment of property can do.

Other areas affecting the borrower in a less than positive light include real estate values dropping sharply and quickly, a lawsuit affecting the property title, mistakes made when the property is accessed and the value being less than appraised for. These are just some of the things that could possible go wrong when investing in this type of deal.

Banks are very reluctant to do this type of investment since they want to make money off a loan—a loan that pays off in six months does nothing for them. Banks want loans that can stretch out over time, up to 30 years in a lot of instances.

Seeing that traditional investors are somewhat unwilling to take this on, a hard money loan person might be your best bet—these lenders specialize in working ‘out of the box’, catering to investors who have less than perfect credit, are self-employed, etc. These lenders charge higher interest rates than the traditional ones as well as origination fees. A bridge lender who may make loans on property in too bad a condition for conventional funding might also assist here—their interest and fees are set up to be somewhat lower than a straight out hard money loan’s would be.

Great care and in depth research needs to be done when making a trust deed investment. Make certain that that everything is in order before you make this investment, particularly that the property value assessment is correct and that all the attached legalities have been cleared. There are other points to be checked as well—knowing the overall picture is important. You cannot turn your investment back into liquid cash the next week if you have a change of mind as you could with a blue chip company or municipal bonds.

What should I do since I am really interested in Trust Deeds?

Talk to friends who are in the business; find an attorney or certified public accountant and get their views on trust deed investments. When possessed of all the facts, pro and con, then study them and make up your mind—this type investment may be just the one for you. Go after it, but keep your eyes open to all the details involved.

How to Find Colorado Hard Money Lenders

Finding the right hard money lender can help first-time and even seasoned real estate investors succeed at their chosen field. There are several factors to look for and reasons why this type of financier is good for those entering this challenging field.

A hard money lender is a private investor who lends based on collateral. Usual terms are anywhere from 6 to 12 months, although many will extend these depending on the individual circumstances. One of the benefits of this type of investor is that they are much more prone to develop a personal, though business-based, relationship. It’s a lender that you can often call for advice and, if the relationship proves beneficial for both parties, many years of lending and borrowing on various real estate projects can be expected.

So, just how do you find these private money lenders? There are several ways to track them down. Before the advent of the World Wide Web, most Texas private lenders were found through networking or introduced by friends or family. In the shrinking world that we live in now, lenders can be found in a matter of minutes with just a few minutes of browsing. This, of course, makes it more important than ever that a borrower understands the basics of lending and what to look for in a private hard money lender.

While the basic benefit of a hard money lender is considered their process of lending based on assets instead of credit, there are additional attributes to look for. If the borrower is looking to get into this lucrative business for the long haul, they will want to consider a lender that they feel comfortable with, and one that they can turn to for multiple projects. When looking online, be sure to check for reviews and don’t hesitate to request references. Lenders often specialize in certain fields, so be sure to choose one that has experience in your field whether it be the fix-and-flip model, renovating and renting, or quick turnarounds on ideal properties that require little makeover.

Property Types for Texas Hard Money Loans

Most commercial properties will fit into a private investors lending model. Just be sure, as we mentioned, to obtain a lender that specializes in your type or investment strategy. These may include multi-units, single family homes, commercial properties and even industrial properties such as warehouses or distribution centers. One area of investing that Texas private lenders use to steer clear of was properties with no buildings—just land—and mobile or manufactured homes. Fortunately, times are changing.

At Level 4 Funding, we offer construction loans, bridge loans, loans on multi-family units, as well as manufactured homes, warehouses, and distribution centers.

Because we work with hundreds of private lenders, we undoubtedly have an investor that specializes in your field. It’s not uncommon for a borrower to have several lenders to choose from. At Level 4 Funding, we are here to steer you through the process and help you make choices that are best for your real estate investment business. Call us for a no-obligation quote, or two.

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.

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.