Setabay Private Hard Money Lender

Sunday, May 12, 2019

Arizona Hard Money Loans: Why you need more Debt

When it comes to Arizona Hard Money Loans, you want more debt, not less. Having more debt might not sound like good financial advice, but in the case of fix and flips, it is.

The best-laid plans of fixers and flippers often go awry.

Line by line you might have your project priced out down to the very nails you plan to use to install the kitchen cabinets. Your schedule might have a minute by minute breakdown of how work will proceed, “On April 16th, from 10:10-10:15, remove the carpet in the second bedroom, from 10:15-10:35 install new carpet,”

Maybe your plan probably won't be this detailed. But you might do a lot of homework and think you might only need so much financing, but if you do run out of funding…

It's going to be hard to get other Arizona Hard Money Lenders on board with your project if things go wrong

If you run out of money and you need more financing here's why it might be impossible to qualify:

• Title issues- If you run out of funding, a second lender will be second in line if you happen to default, which is far too risky for most lenders. So most hard money providers stipulate that they need to have clear title to a property.

• Title insurance issues- Title insurance issues will likely prevent a new lender from coming on board halfway through your project. Potential contractor liens prevent secondary lenders from qualifying for title insurance. Without title insurance, it will be nearly impossible for a second lender to get paid back if you happen to default.

• Negative stigma- You might have crossed every t, and dotted every i before you began work, but in spite of all that careful planning, you still ran out of money. Any potential lender isn't going to look at your detailed plan they'll look at the result you've produced so far. If you run out of money in the middle of your project, your results speak for themselves, and they say one thing: you're incompetent.

So let's see what could happen if you don’t apply for extra funding ahead of time.

With flips and Arizona Hard Money Loans, if you apply for too little, you won't be able to take care of unexpected difficulties.

Here are two common things you could face in any flip regardless of how thorough your plans were:

• Unexpected structural issues-Budget in hand you might go to your construction site and one of your contractors might tell you that the roof timbers are teeming with termites and the entire roof is going to need to be replaced before you can sell the house. The cost of replacing the roof is ten thousand dollars over your initial loan amount. Hat in hand you go asking lender after lender for more funding, but after your meetings, none of them ever call you back. Weeks go by, your home is unfinished, and your initial loan comes due. Obviously, you won't be able to make that final payment.

• Lazy contractors-Your contractors might sit around smoking cigarettes and listening to the radio, whenever you happen to leave the worksite. So in spite of your perfectly planned schedule, nothing is getting finished on time. So you bring in new contractors. But then all at once, your former contractors take out a lien against your property for work they never finished. So, now before you can sell your home, you need to pay them. You go to a lender, but your deal falls through because of the outstanding contractor lien. The final balloon payment comes due, and you're still unable to resell your home, and you default

What can you do to avoid these disasters? It’s simple don’t run out of money. Before starting a flip always apply for more financing than you think you might need.

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.

Commercial Arizona Hard Money Lenders: The right help for your startup?

You might have started your business a few months back, and you might need extra funding to grow your startup. Yet time and time again the bank rejects your application. If this is you, learn how commercial Arizona Hard Money Lenders can help bring your start-up business to the next level.

Banks want businesses to have established credit scores and several years of documented cashflows. These requirements present quite a conundrum for startups.

If you can’t get credit from the bank how are you supposed to build a business credit score? If you opened your doors six months ago, how can you give the bank years of income and expense statements?

Startups can’t meet these requirements from conventional lenders.

So many startups rely on alternative financing, and there's one type that of financing that stands out when it comes to helping start-ups capture those breakthrough business opportunities.

Its a type of financing known as hard money.

Commercial Arizona Hard Money Lenders can be the help your startup needs.

Hard money is a loan secured by a hard asset. What matters to these lenders is the underlying value of your business property. If in the event of default, selling off your store-front will cover the cost of your loan, then you can qualify for hard money.

Here’s just some of the ways hard money can help startups:

• Credit score and cash flow aren't a concern- When it comes to these lenders, the most important consideration is collateral, not your businesses credit score and you don’t need years of financial documentation to qualify.

• Fast application process- With hard money the application process takes about a week. Usually, all that's needed is a quick appraisal. So when a breakthrough opportunity presents itself, you won't miss out, waiting for your loan to get approved.

• No restrictions on the use of funds- When it comes to hard money there’s no fine print concerning how you can spend the proceeds of your loan. You can use hard money financing to buy discounted inventory, create new signage for your store or anything else your heart desires, but don't get carried away. Hard money is meant to be paid off quickly, so it’s best used for short term opportunities that will generate a significant return in a matter of months.

You should use hard money for things like investing in equipment that will exponentially increase the pace at which you can do business, buying inventory that you know you can sell off quickly or moving to a location where you know there's far more foot traffic.

You shouldn’t use hard money to finance your ten-year marketing plan or any other long-term investment. But, hard money offers startups the ability to take advantage of these and other opportunity, which is something regular banks can’t offer.

Commercial Arizona Hard Money Lenders are flexible, accessible and fast, the kind of financing startups need.

Hard money helps startups capture fast-moving, short term opportunities, which means it could be precisely the type financing your startup needs to capture that big break and really take your business to the next level.

Using Arizona Hard Money Loans to Flip Commercial Properties without the Fix

If you use Arizona Hard Money Loans to flip commercial properties, you might not have to spend a nickel on a single nail to raise its resale value. Learn how you can use commercial property valuations to your advantage so that you can flip without the fix.

You’ve probably used hard money to flip residential properties. You secure an undervalued home, pouring months of blood sweat and tears into your project and then you resell it at a higher value. Residential flips take a lot of work because you can only add value, by improving or adding amenities. But flipping commercial properties is different. If you can raise rents on a commercial property, you can increase its resale value without doing any rehab.

You can use Arizona Hard Money Loans to flip commercial properties without the fix.

Commercial buyers don’t care about bathroom fixtures or paint colors; the one thing they care about is income. Consider how commercial properties are valued based on cap rate, where:

• property value= income/cap rate

So, if you can boost the revenue generated by a commercial property, then you can resell it for a higher value, and this might not take any rehab. If you don’t believe such a thing is possible, consider the following examples of rehab free commercial flips:

• Raising rent’s rehab free: Say there's a ten unit apartment building where the monthly rent is 750 dollars, for simplicities sake let’s assume a cap rate of 10 percent:

• 90,000 income/10% cap rate= the value of the property is 900,000 dollars. But let's say average rents in the area are 800 dollars, raising rents by a mere fifty dollars will allow you to earn a profit without doing any rehab work:

• 96,000 income/10% cap rate= resale value of 960,000 dollars. So, in this case, you’d earn 60,000 dollars without even lifting a finger.

• Adding tenants rehab free: let's assume that same ten unit apartment building is only half occupied, the rents and the cap rate are the same:750 dollars a month and 10 percent:

• 45,000 income/10% cap rate= property value of 450,000.Let's say the recent expansion of the university affords you the chance to bring in well even two extra tenants on board, under a four-year lease:

• 63,000 income/10% cap rate= resale value of 630,000 dollars. Once again without all the blood sweat and tears of a renovation, you’ve earned 130 K in income.

If you want to use Arizona Hard Money Loans to flip commercial properties look for these types of properties:

Given the above examples, you should use hard money financing to scout out locations in up and coming areas that are suffering from low occupancy, or find properties where rents are well below the average for the neighborhood.

The above examples are relatively conservative. Because, in reality, you might need to do rehab some work to justify rent increases or to attract new tenants. Nevertheless, given the way commercial properties are valued, it is possible to flip commercial properties without the fix.

Saturday, May 11, 2019

Bad Credit Commercial Mortgage Lenders: Conduit Lenders vs.Hard Money

If your business's credit score has suffered from lagging sales due to a poor location, you’ve probably considered moving. You've likely looked into all sorts of bad credit commercial mortgage lenders, including conduit lenders and hard money. Learn why hard money might be a better option.

Hard money is any loan secured by the value of a hard asset. When it comes to qualifying the main factor these lenders consider is, “if this borrower defaults will I make my money back by reselling their property?”If the answer is yes, you can get a hard money mortgage, even if your business has gone through financial difficulties.

Conduit loans, on the other hand, are individual mortgages which are bundled into securities which are then sold off on wall street as something called “commercial mortgage-backed securities.” These lenders give loans to bad credit borrowers because the main thing they care about is, “how long can I keep this person making interest payments?”

When compared to conduit loans, hard money might seem far more expensive-but once you sign on to a conduit loan, getting out of it is next to impossible.

When it comes to bad credit commercial mortgage lenders, conduit lenders might offer lower rates, but there are strings attached.

Conduit loans are a bit like a loveless marriage, in that getting out of them is both messy and expensive.

If you want to get out of a conduit loan early, you’ll end up paying a premium so that the folks on wall street can continue to collect interest payments on your mortgage. If you want to pay off a conduit loan early, yield maintenance comes into play, and if you want to refinance, you’ll have to go through defeasance. In both instances, you give your lender money so they can buy treasuries so that they can continue to pay dividends to their investors.

Depending on the size of your loan, the costs of yield maintenance and defeasance could easily exceed a hundred thousand dollars. So if your business is facing short term financial difficulties don’t get sucked in by the low rates conduit lenders offer. Getting out of these deals once you’ve signed onto them could prove to be an expensive nightmare.

When it comes to bad credit commercial mortgage lenders, hard money is the better option.

Hard money providers encourage you to pay them back early.

So in the world of hard money, there is no such thing as yield maintenance or defeasance. If your sales are suffering because of a lousy location, hard money can help you secure a new storefront. As your sales pick up after a few months and your financial situation improves you can then refinance to a regular commercial mortgage. No strings attached.

So don’t marry a wall street bureaucrat for the next 30 years because your business is suffering due to short term financial difficulties. Hard money might charge more in the short term, but in the long run, it offers you something conduit lenders can’t: financial freedom, and who can put a price on that?

100 LTV Arizona Hard Money Loans: Tips to improve your eligibility

With 100 LTV Arizona Hard Money Loans, you won’t have to make a down payment on your next investment property. Some articles claim these deals are just too good to be true- but they’re wrong. Getting a 100 LTV deal is all about how you approach the subject with your lender, learn some talking points to follow to improve your chance of qualifying.

It’s hard enough getting a stranger to pay for your morning coffee, and with a 100 LTV loan your basically asking a stranger to buy your next investment property.

How on earth are you going to do that?

It all comes down to how you broach the subject with a potential lender. The first point that unless these it's being offered up front, don’t stumble into a lender’s office, asking for 100 LTV financing.

If you do that you could raise some red flags in your lender's mind.

What Arizona Hard Money Lenders might think if you ask for a 100 LTV loan right off the bat

• You're not committed- Money talks. If you ask a lender to cover the full cost of your next investment property you're basically saying to them:“I don’t really believe in my project enough to spend my own money on it.” So, your lender might ask themselves, “what's to keep this person from skipping town if something goes wrong, leaving me to foreclose on their unfinished building site?”

• You don't have money-By asking for 100 percent financing your lender could easily assume that you don’t have any money of your own. So, your lender might ask them, “If they don’t have any savings, how on earth will they keep up with payments if something goes wrong?”

• You lack experience- 100 LTV financing is so rare, that asking for it up front might make your lender think you’ve never closed a hard money deal before. So, your lender might ask themselves “If they’ve never done a hard money deal before, do they know what they're talking about?"

To close these types of deals, you need to answer these questions before your lender asks them, either to themselves or to you directly.

Follow these talking points to improve your eligibility for 100 LTV Arizona Hard Money Loans

• Prove your commitment- You could start the conversation by saying something like: “On this next deal, rehab’s going to be pretty extensive, so I’d rather use my money on rehab,” or something along these lines. The point is you need to thoughtfully explain the reasons why you’d like your lender to pay for the full cost of purchasing your property and assure them that you do intend to invest some of your own money in your project. Giving them such assurances will prove that you're committed to your project.

• Prove you have money- Then you could take out some documents, things like savings statements, tax returns, anything to prove your financially solvent. Point to these documents and say, “as you can see here I do have resources, so if something goes wrong I can carry the loan.” Prove to your lender that you're not asking for free money, just because you have no money of your own.

• Prove you have experience- Continue the conversation by saying, “I know I'm asking a lot of you, but I’ve done a lot of similar projects in the past. Here's how much money I’ve made on those deals,“ talking up your track record proves to a potential lender that you know what you're talking about and that you can bring your project across the finish line.

The above isn’t a word for word script. But if you carefully bring up the prospect of 100 percent financing, prove your commitment, financial solvency, and experience you'll be well on your way to closing that coveted 100 LTV hard money deal.

Arizona Hard Money Lenders: The Best way to Finance 1031 exchanges

Did you know you could pay nothing in taxes on the profits from your next real estate deal, and that you won’t go to jail? Such a thing is possible thanks to a provision known as 1031. Learn what 1031 is, the rules you need to follow and why Arizona Hard Money Lenders are your best bet when it comes to fueling the costs of 1031 exchanges.

What is a 1031 exchange? In IRS parlance it's also known as a like exchange. You roll the profits from one deal into another and use them to buy your next investment property. With 1031 exchanges you can defer paying capital gains taxes- indefinitely.

But of course there are some rules you need to follow with 1031 exchanges:

1. Your next investment property must be of equal or greater value: So you can’t earn 1 million in profits on one deal, spend 50 K on the next and then jet off to the Bahamas tax-free.

2. You need to hold onto the property for over a year:- Your property needs to be held for an “investment purpose.” No one knows how to define what it means to hold a property for an "investment purpose," but the basic requirement is you need to hold onto the property for 13 months or longer.

3. You need to close on your next investment property within 135 days: So if you need financing to settle a 1031 exchange, you’ll need to get your loan approved within that deadline.

Considering that deadline, going to a conventional bank to finance a 1031 exchange could put you at risk of incurring a massive tax bill.

Why you need to avoid the bank and use Arizona Hard Money Lenders to finance 1031 exchanges

135 days might seem like a long enough time to close a deal, but in the world of bank bureaucracy, 135 days is nothing. Even if you have perfect credit, it's going to take at least 30 days for the bank to approve your loan and that's in the best case scenario.

On average it takes 90 days for a commercial loan to get final approval from a conventional bank. That's 90 days after you’ve spent a few weeks finding your next investment property and gathering up the reams of paperwork that the bank requires. Weeks into this process, the bank could reject your application for some inexplicable reason. Which means you’ll have to start the application process over at another bank.

You don’t have that much time to waste with 1031 exchanges. Say you earned a million dollars on your last deal, then going to a conventional bank could cost you 200 K or more in taxes. However, if you go the hard money route instead, you take all such risk out of the equation.

Hard money deals usually only require an appraisal, meaning they can close within a week. After you get hard money, you secure your next investment property, apply for conventional bank financing, and refinance once the bank approves your loan.

With hard money, if something goes wrong with your application at the bank, you’ll still have your investment property under contract. Meaning you won't have to risk incurring a substantial tax penalty to complete 1031 exchange.

Arizona Hard Money Lenders can give you peace of mind when it comes to 1031 exchanges.

Don’t risk paying hundreds of thousands of dollars in taxes due to the nightmare of bank bureaucracy. If you need financing to close a 1031 exchange go the hard money instead.