Setabay Private Hard Money Lender

Monday, May 13, 2019

Why a Trust Deed Investment is a Better Bet than Stocks

Stock prices rise and fall like a balloon drifting on the speculations of Wall Street analysts. Do you want to invest in speculation or something you can touch and feel like real estate? Well thanks to trust deeds, you can build your financial future on a solid foundation instead of the shifting sands of the stock market. Learn the many ways a trust deed investment can outperform stocks.

Now we all know what stocks are, but what exactly are trust deeds? They sound like an inscrutable legal document, typed up in the dusky backroom of some lawyers office. But really, trust deeds are quite simple.

Think of trust deeds as mortgages, where you as an investor act as the bank. A trust deed is a loan that you give to a real-estate developer, and in exchange for your investment, the developer pays you back both interest and principal.

You might think it's wise to invest in the stock market but think again. The value of a stock is founded on speculation and hot air. A single vague news story can send a stock price plummeting.

In contrast, trust deeds are secured by real-estate. Real-estate has an inherent value, and that value rarely declines.

Here are just a few more reasons why you should think twice before you invest in stocks.

Here's how stocks fall short in comparison to a trust deed investment

• No guaranteed yield- The dividend a stock pays can change, or eliminated whenever a company chooses. Also, remember the dividends paid by stocks are usually paltry and rarely stray into the double digits.

• No guaranteed return on your initial investment- Whatever money you put into stocks, you have no assurance that you're going to get your money back. If you buy 100 K in Tesla stock, the value of that stock could plummet to five bucks in the blink of an eye.

• No right to recourse- You can’t foreclose on a company if the price of its stock falls. You won’t be able to force Elon Musk to liquidate his art collection so you can get back the 99,995 dollars you lost by investing in him.

Here's what a trust deed investment can offer you that a stock can’t

• Guaranteed yield- Unlike a board of directors, a trust deed borrower can’t just decide to stop making interest payments. In addition, you might earn a monthly return of 10 percent or more from a trust deed, which is far more than most stocks can offer you.

• Guaranteed return on your initial investment- Remember trust deeds are loans. Once a borrower signs onto a trust deed they’re obligated to pay you back, in full. Can any stock promise you that?

• Right to recourse- A borrower might be under contract to pay you back, and keep up with interest payments, but what if they don’t? Well, the answer is simple; you foreclose and liquidate the borrower's property allowing you to recoup most of your initial investment. If you lose money on a stock market, your loss complete and irreversible.

In short, trust deeds offer guarantees, guaranteed interest payments, guaranteed repayment of your initial investment and guaranteed protections.

Stocks are speculation; trust deeds are investments. So don’t waste money speculating on the stock market, instead invest in trust deeds.

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.

Arizona spec home financing: A Brief Guide to Speculating

Many spec home builders might spend all their time speculating, and continue to speculate long after they’ve begun their projects. Learn how you can avoid these pitfalls when it comes to Arizona spec home financing.

Many first-time spec builders are tempted to, well speculate. They might buy a piece of land in the middle of the desert hoping one day to build a house there. They might plan to construct a postmodern citadel, with floor to ceiling windows, in the middle of a working-class neighborhood.

Worse they might continue to speculate well into their project, deciding against a particular set of finishes, or deciding to shift a window over three-quarters of an inch because they prefer a slightly different view.

When it comes to building spec homes, you can’t afford to speculate this way.

Here's some things you shouldn’t do with spec-home financing

• Buy Undeveloped land- You might finance the purchase of an undeveloped patch of wilderness. Spending hundreds of thousands of dollars expecting the city to come through and lay the groundwork for roads and utilities. But this might never happen, so what you’ll end up with is a useless patch of dirt and a loan you can’t pay back.

• Build Extravagant Homes-You might consider an area up and coming, and given rising home prices you might use financing to construct an extravagant home to appeal to these stylish new buyers. But if your home is listed well beyond the average price for homes in the area, the house won’t sell. The only ones moving into your home will be spiders, who aren’t going to pay back your loan.

• Changing plans- Spec financing is given out in draws; you only get so much money each month. If you spend additional funds one month to make changes, you won’t have enough money the next month to keep work going. What you’ll end up with is a half-finished home, which you can’t sell and again a loan that you can't pay back.

Follow these steps before you apply for Arizona spec home financing.

1. Find a developed parcel of land- The land you purchase needs to be connected to electricity, plumbing and road networks. Only finance the purchase of developed land. Don’t waste your money buying acres of wilderness.

2. Plan your project based on market realities- Keep your plans in line with homes nearby, because whatever features you add need to be in line with homes in the area. After your plans are in place hook up with realtors, do extensive online searches about the value of homes close to your chosen lot and find out how quickly homes in the area are selling. This data will give you a sense of whether your finished home will pay back your initial loan and how quickly you’ll be able to pay it back.

3. Develop a detailed plan and stick to it- Establish a specific schedule for how work will proceed on your project and don’t change your plans halfway through.

Following these tips will prevent you from spending thousands on useless dirt, building a home that won't sell and from running out of money in the middle of your project.

Make a plan in line with the realities of the market, and stick to that plan no matter what, because, if you want to succeed in the spec business, you need to be realistic and decisive.

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.

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?