Setabay Private Hard Money Lender

Friday, May 17, 2019

HARD MONEY 101

To truly understand everything you need to know about hard money loans speak to a local hard money lender. This article will brief you on all important aspects of the hard money loan process in order to arm you with enough knowledge to begin your investment journey.

LOAN TERMS

The first thing a potential investor needs to know is that working with hard money lenders versus banks will not only speed your closing dates up, it will allow you much more opportunity to work with sellers due to the no hassle, quick closing.

Hard money terms are typically from six to 36 months. The loan rates range from 7.5% to 15% and the points to close on the loan are generally from 3% to 10%. Hard money lenders have their own unique underwriting process that is not as rigid as conventional lender’s underwriting process. Rates and terms of loans will fluctuate throughout the year and each lender will have their own set rates and terms.

QUALIFICATIONS AND APPLICATION

Because the underwriting is more flexible than traditional lenders, such as banks and credit unions, they are not forced to key in on an investor’s credit score and financial history. The hard money lender’s focus is primarily on the property which is the hard asset that is being used as collateral.

Typically, lenders use the following qualifications.

1) Three months of personal bank statements

2) FICO score of 550

3) List of any investment experience if applicable

4) Purchase contract for property

5) W-2’s from the last 3 years

Investors with experience will typically receive lower interest rates due to their proven track record. The longer an investor is in the game the more money they can make and save.

Hard money lenders typically have a standard application process. It doesn’t vary too much from lender to lender. Usually, the borrower will fill out an online application and provide required documents. It is a very simple process and much less paperwork is required than when applying for a bank loan. The borrower is contacted within 48 hours to discuss rates and terms of the loan.

Each hard money lender has their own minimums and maximums of loan amounts. These amounts are based on the borrower’s qualifications and the property. Most lenders will loan on as little as $50,000 and up to 5 million. Unlike conventional loans the FHA doesn’t set terms and limits. The private lender sets their own terms, limits and loan amounts.

When learning about how hard money works the information is vast.

Hard money lending rates can range from 7%-15%. These loans are interest-only through the life of the loan, requiring a balloon payment at the end of the loan. There are usually no early payment penalties. And, loans close typically within two weeks. Speak to a local hard money lender to find out more information or contact us at level4funding.com.

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.

Thursday, May 16, 2019

DO I FIND AN ARIZONA HARD MONEY LENDER?

You have all your ducks in a row. You have gathered all your paper work. You even have some ideas on properties. Now, what? How do you find an Arizona hard money lenders.

There are things to be done before you find a hard money lender. You don’t just wake up one morning and say, “I am going to be a real estate investor. I better go find a lender today!” No, you gather financial documents, you look at properties, you come up with some type of business plan and then you find a hard money lender that will work with you. And, this may take some time. There are three key areas where you can find hard money lenders.

THREE PLACES TO FIND HARD MONEY LENDERS

The first one is your personal network. Yes, that seems a little obvious. Many people are scared to use their own inner circle because they are embarrassed. They feel like people will think they are a little crazy. Asking your inner circle of friends and family for private money are the best people to ask first. Don’t be scared. When you are honest and vulnerable with people doors seem to open. Be honest with your friends and family about gaining private money. Sometimes, your friends and family may not be able to assist you but they may know someone else who would be able to. It’s okay to be vulnerable and admit you don’t really know everything, but you want to learn.

Another great place to find an Arizona hard money lenders is local real estate meet ups. How do you find one? Look on meetup.com and search REIA (real estate investing association). Every major city has a REIA. Even smaller cities and towns have these associations. This is a place where you can meet people in all walks of the real estate game— and you will meet lenders that have money to invest. Make sure you get their contact information and follow up with them by inviting them to dinner or drinks. These meetings are typically free and if not free the cost is relatively low.

The final way you can get out there and find funding is the internet. There are so many private lenders out there and a speedy way to find them is online. One of the best online forums to use for real estate is LinkedIn. Set up your LinkedIn profile and list yourself as a real estate investor. You aren’t required to have participated in any projects to call yourself an investor. If this is what you want to do, you have to start somewhere. When you are on LinkedIn search for local private lenders, private money investors and hard money lenders. There are hundreds of investors to be found. Send them messages. Let them know what you want to do.

Finding a lender is the most important part of being a real estate investor.

You can borrow money from anyone. However, to be successful you want to find an investor that works best with you and your way of doing business. If you are searching for a lender, please contact us at level4funding.com

GET 100% HARD MONEY FINANCING FOR FIX AND FLIPS

How does getting 100% financing for your real estate fix and flip sound?

There is a way to leverage credit which will equate being successful in the world of real estate. First rule of success is it takes money to make money. However, it can be someone else’s money. In fact, the key is it should not take your money. It takes you having access to the money and understanding strategy. OPM stands for Other People’s Money. It is what you should use to become a successful real estate investor. The second rule of success is—credit is the gateway to wealth and investment strategies are the key to that gate.

When it comes to hard money lenders it is simple to find a lender that will lend up to 75% of the purchase price and 100% of the rehab amount. What makes that difficult is when the borrower doesn’t have that 25% or so to put on a down payment. This is what deters people from investing in fix and flips. There is something called gap funding. Gap funding is the amount needed to fund the operations or future development of a business or project that is not provided by cash. In this case, the project would be the down payment that is not being financed through the loan for the property.

I NEED A DOWNPAYMENT FOR MY FIX AND FLIP—CAN GAP FUNDING HELP?

Gap funding can be covered by investments from venture capital, through angel investors and through loans. Basically, gap funding is a way to use other people’s money and make it work for your particular situation. If your project looks profitable it is highly likely that a gap investor will work with you on your project.

There are three main structures to gap financing. The first is annualized interest and it works like any typical loan you may receive. There are interest rates and there are monthly payments. This “loan” can be structured in such a way this the interest accrues and it is paid when the loan is paid off.

Flat return is the second structure. This is a flat percentage return on the investment. This is very simple. For example, if you had gap funding of $10,000 and a 20% flat return you would pay back $12,000.

The third structure of gap financing is participation. This is when the investor of the gap financing participates in the project as a partner. You would determine the percentage of the investor’s participation and they would receive that amount. If you chose to include the investor with 50% participation at the end they would receive 50% of the profit.

Gap funding is a brilliant way to use OTP.

By using gap funding you can buy properties regardless of the financing you receive from your lender. Using gap funding you will simultaneously have two loans out on one property. However, this is a simple way to gain financing when you need to come up with your own money for a down payment. Gap funding can help you create 100% financing of your fix and flip.

HOW CAN ARIZONA HARD MONEY HELP?

We have all made bad decisions in our lives; and the majority of these decisions most likely were finance related. And, unfortunately many times this will affect your credit. Does that mean you are destined to live paycheck to paycheck? Does it mean you will always be working your finger to the bone for someone else?

No, it does not. What is does in fact mean is that getting to the top may pose a harder challenge as your peers without credit issues. It means you will have to think outside the box. You may be forced to take a different path to success than you originally envisioned yourself taking. So, to reach your dreams you need three things: a dream, a good work ethic and money. Well, the first two sound relatively easy, but the third? That’s the wall many of us face when trying to build our dreams.

Do you want to buy a house? Have you thought about joining the real estate investing game? Or, do you want to start your own brick and mortar business? All of these ventures require a lot of money; which requires financing. So, where do you go? The bank! Oh, wait a bank won’t finance you. Right there is where the vast majority of dreamers give up. They give up and settle for mediocre jobs and live paycheck to paycheck. However, you don’t have give up. A hard money lender can help you.

ALL ABOUT ARIZONA HARD MONEY

You may have heard of Arizona hard money lenders. They are also referred to as private money lenders. They are organizations or individuals that are willing to loan their money to projects that they believe will make them a profit. They are simply investors. However, they invest using the real estate to back the loan instead of the borrower’s credit. Your loan amount will be based on the value of the property used as collateral.

Let’s take a fix and flip as an example. A borrower finds a home that is in need of a little TLC. They buy the property, rehab it and sell it for much more than the original purchase price. Even with outstanding credit most real estate investors use hard money for these projects for a variety of reasons. Borrowers receive approval and funding in less than two weeks. Approval is very easy; there won’t be hundreds of documents to find and send in only to be asked to send more verification and proof of assets, taxes and so on. And, these are short-term loans that typically do not carry early payment penalties.

You may be asking yourself, “how does this work?” It’s surprisingly simple. Let us go back to that fix and flip. You find that house that needs some love. It’s purchase price is $100,000. You contact a hard money lender that will advise you on what they need from you. One thing they will need is an appraisal to determine the ARV (After Repair Value). The ARV is what the loan amount will be based off. After the appraiser looks at the home they determine after the rehab the house will be worth $175,000. Your hard money lender will typically finance up to 70% ARV. In this case the amount would be $122,500. That is $22,500 more than the purchase price. You will keep that amount to rehab the property. Now, there is a chance that you will require more than $22,500. Good news! Your hard money lender will finance more for repairs.

Many people have a bad association with the term hard money lender.

These are just regular people that have money that are willing to look past your financial situation in order to make both you and themselves a profit.

Wednesday, May 15, 2019

DOES ARIZONA COMMERCIAL HARD MONEY WORK?

It is very possible to finance commercial real estate when conventional banks deny financing. This article will arm you with the knowledge necessary to gain financing through a hard money lender.

The first thing a borrower must understand is exactly what a Arizona commercial hard money loan is. It is a non-conventional loan. There are many specific situations in where conventional lenders will not finance due to the strict government regulations. A hard money loan is an asset based loan that is secured by the equity of the property. It is called hard money because it is secured by a hard asset— real estate

There are so many situations where it makes great financial sense to purchase property, but either because of the government regulations or poor credit a traditional loan cannot be approved. For example; there is a fourplex and the asking purchase price is $200,000. It is in pretty bad shape and will require quite a bit of rehab. There are two units vacant; which makes the occupancy rate 50%. It has been appraised and after repairs the assessor firmly believes the value will increase to $400,000. However, a traditional lender will not approve this loan because the fourplex is not producing enough income. A hard money lender, however will view it very differently. A hard money lender will always take a pragmatic approach and ask themselves, “does this make sense?” If it makes financial sense the lender will finance the project and put little emphasis on the borrower’s financial history.

GETTING A ARIZONA COMMERCIAL HARD MONEY LOAN

In this situation typically the hard money lender will finance between 60% to 70% of the purchase price and 100% of fees and rehab costs. Let’s take this $200,000 fourplex at 70% of the purchase price. The borrower will be approved for a minimum of $140,000 and 100% of any repairs and fees. This may leave the borrower needing additional financing through other sources or using their own cash. In this case the borrower would need approximately $60,000. Once the fourplex is completely rehabbed the borrower has choices: rent out the fourplex at 100% occupancy and stabilize the investment and find more conventional financing or sell the property making a nice profit.

Hard money is not suitable for long-term financing. Typically, an investor uses the funds to either flip the property or to stabilize the profit in the property and gain more traditional financing. Using a hard money lender aids an investor in obtaining the property because of the quick available financing.

If a bank says, no-a hard money lender can still say, yes.

Because of the rigid guidelines set on conventional lending institutions it is much harder to get approved for a conventional commercial loan. Hard money lenders have much more flexibility and do not have to adhere to all the strict regulations their conventional counterparts are required.

EVERYTHING YOU NEED TO KNOW ABOUT ARIZONA HARD MONEY LENDERS

Arizona hard money lenders have more freedom than conventional lending institutions. They are not regulated in the same capacity as banks and credit unions are. When determining if you would benefit from a hard money loan you need be aware of all the pros and cons.

Arizona hard money lenders take a practical approach to lending. They base their approval decisions on the property and the proposed deal. The borrower’s financial history is much less relevant to their decision. Assessing the property consists of looking at the value of comparable properties in the same area. These are called comps. After estimating the after repair value (ARV) they will typically finance 60 -75% of the ARV.

Most hard money loans are given to real estate investors working on a fix and flip property. The general loan structure makes it ideal for an investor that has 25-30% of the loan as a down payment. However, working with the right hard money lender in the right situation may determine that the borrower needs less of a down payment; and possibly no money down at all.

STEPS TO GETTING STARTED WITH AN ARIZONA HARD MONEY LOAN

Many investors prefer to work with a hard money lender over a conventional lender due to the relatively simple process. Working with a conventional lender is a much longer process and can very possibly stop an investor from ever getting started on their project. Banks that go through Fannie Mae or Freddie Mac approve loans based on completely different criteria. They will run through a borrower’s financial history with a fine-tooth comb. Banks look at everything from credit score to debt-to-income ratio to the borrower’s collateral.

A hard money loan typically takes 24 to 48 hours for approval and financing with two weeks. This is a lifesaver to investors who are competing with all-cash buyers. Traditional banks take anywhere from 30-90 days to close on a loan. Waiting thirty days for your money can easily result in a lost deal. Both real estate developers and investors choose hard money because the market does not wait on anyone. If an opportunity presents itself, an investor or developer needs money as soon as possible.

Hard money loans have higher interest rates than conventional financing. These rates typically run anywhere from 7.5% to 15%. Hard money loans do impose a higher interest rate than a conventional loan. However, these are short-term loans; generally 12 month to 3 years terms. These loans are interest only loans with a balloon payment due at the end of the loan term. Hard money loans typically do not impose an early payment penalty.

Hard money loans are the best choice for real estate investors and developers.

Hard money loans can work in any situation. However, for investors and developers who need fast cash and an easy application there is no quicker or simpler way to fund your project. Hard money loans can benefit many different situations. Please contact us to see if a hard money loan can work for you at level4funding.com