Setabay Private Hard Money Lender

Saturday, May 18, 2019

QUESTIONS ABOUT HARD MONEY LOANS ANSWERED

There are so many questions a first time real estate investor has when first stepping into the arena with a hard money lender. Below are some frequently asked questions.

WHAT EXACTLY IS A HARD MONEY LOAN: A hard money loan is an asset based loan. The lender will use the borrower’s real estate as collateral. These loans are offered by private lenders who can regulate their own loan terms and rates. These are fast closing loans, making it possible for investors to compete with all cash buyers.

ARE HARD MONEY LOANS SAFE: Unlike government and bank loans, hard money loans are not backed by the government. What this means is hard money lenders are not required to follow the same protocol as conventional lenders. However, there are many reputable lenders nationwide. It is important to research your lender before doing business with them.

WHAT IS A FLOATING RATE: A floating rate is an interest rate that is not fixed (a fixed interest rate never changes). A floating rate is adjustable and moves with the market; meaning sometimes it goes up and sometimes it goes down.

HOW DO POINTS WORK ON A HARD MONEY LOAN: The points on a hard money loan—or any loan—are the fees the lender will charge the borrower for providing the loan. Basically, each point is equal to a percentage of the loan. For example, 2 points on a $100,000 loan would be 2% of 100,000 which would equal $2,000.

WHAT ARE THE RATES AND TERMS ON HARD MONEY LOANS: Because each lender is different they will each have different rates and terms of the loan. However, generally hard money lending rates range between 7% and 15%. The terms are usually 6 months to 3 years. Points can be anywhere between 2-10. Typically, the borrower will receive funding in 2 weeks or less.

WHAT TYPES OF PROPERTIES ARE FUNDED BY HARD MONEY LENDERS:

Hard money can fund many different types of properties. However, these loans are usually for investors that fix and flip properties and investment properties that long-term investors fix and flip and then rent—long—term buy-and-hold investors.

Because of the freedom and flexibility hard money lenders have, they are able to help investors and regular people in all types of situations.

This article was a very brief overview of hard money lending. If you would like to learn more about hard money loans and real estate investing, find a local hard money lender and make a appointment.

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.

Friday, May 17, 2019

ARIZONA HARD MONEY LOANS ARE BIGGER THAN EVER

What are the benefits of a hard money loan and when does it make sense to use one?

In the mortgage lending world there are different types of loans. There are conventional loans, government loans—such as FHA, portfolio loans and then there are hard money loans. Hard money loans are made by private lenders. Unlike bank loans that are created through institutional lenders such as Chase or Bank of America, these are made by private individuals or groups of individuals. These loans are pulled together and financed through private lenders—wealthy lenders. These individuals pull their money together to create a mortgage fund. From that they will lend to consumers or businesses for residential and commercial purposes. From there they will sell the mortgage trust deeds to investors.

The idea behind Arizona hard money loans is that people who can not get access to conventional loans will seek hard money loans to get financial help. These loans have a great purpose in society and have helped people from all professions and walks of life. Hard money loans can help save businesses and homes. These loans can also be used as short-term loans for real estate investors in fix and flip properties.

WHAT HAPPENS AFTER YOU GET A HARD MONEY LOAN

Arizona hard money loans are short-term loans. After a borrower receives a hard money loan a variety of things can happen. The property can be flipped, sold or the borrower can refinance into a permeant mortgage. Typically, the main purpose for a hard money loan is for an investor to purchase and rehab property and then sell it for a profit. These investors usually take out a Texas hard money loan with a term of 6 months to a year.

Credit scores really don’t matter when it comes to hard money loans. Most lenders don’t even verify your income. What these lenders care about is the equity in the property. Typically, lenders will finance about 60%-75% of the loan value. What that means is if the property is worth a million dollars, they will lend around $600,000 to $750,000 on a purchase or a refinance. This means that the borrower will need to find other financial means for the down payment. However, a refinance would not require money down because there is equity in your property. For example, you own a two million dollar strip mall and it was paid off free and clear, a hard money lender could get you cashed out for up to 75% of the two million dollars. This money can be used for anything the lender is in need of.

Hard money lenders will work with you. These loans can be interest only. Hard money loans fluctuate between about 7%-15% depending on the borrower, the lender and the situation—the collateral, the type of real estate and the location of the property.

Arizona Hard money loans are generally used for real estate investing. However, investing is not the only use of hard money.

Hard money lenders do not follow the same guidelines as conventional lending institutions. Therefore, they have more flexibility with their underwriting process. If you have bad credit, no credit, have found yourself in a tricky financial situation or just need cash quickly find a local hard money lender.

UNDERSTANDING THE HARD MONEY LOAN PROCESS

Maybe you have played with the idea of becoming a real estate investor. Understanding the process of getting a Texas hard money lenders is the first step in becoming an investor.

All hard money lenders are different. They all have different requirements and niches. Some will loan a percentage based on purchase price, while others will loan on the after repair value (ARV). When you meet with the lender they will give you a breakdown of your fees and their terms. They will explain the loan points, the closing costs, which will include notary fees, escrow fees and any document fees and the interest amount you will be responsible for paying.

An example of this may be a loan of 75% ARV, with 5 points, $750 in document fees and a 12 month interest only loan that includes a balloon payment loan at 9% due at the end of the loan. What that looks like for the borrower on a property that has a purchase price of $100,000 and an ARV of $175,000 is the lender financing 75% of $175,000 which is $131,250. To get the loan you will pay the loan points and document fees. However, many lenders will wrap those fees into the loan.

THE BREAKDOWN OF THE HARD MONEY LENDING PROCESS

The first step a potential investor will do is pre-qualify. Speak to the lender and find out what the requirements of you will be. Then, after you pre-qualify go property hunting. Find a great deal and work at getting it under contract. Once you are approved for a Texas hard money loan you will be funded in less than 10 days. Sellers love to work with hard money because there are rarely any hangups or pulling out of deals.

After you have found the right property, contact the hard money lender and give them the information concerning the purchase price, the repairs and hopefully an ARV. However, you may need to find an appraiser to give you an accurate ARV. Your hard money lender will help you in finding an appraiser. Following this, your lender will most likely request escrow documents and verify paperwork. Typically, you will hear from the lender on approval status in less than 48 hours. And, the next step is closing the loan.

In many ways a Texas hard money loan is very similar to a conventional loan.

The lender still puts the loan amount into escrow. The title company still issues checks. If the buyer is getting excess funds from the loan that check will be issued. All paperwork has to be completed and in order and funds have to be allotted to the correct individuals. The big difference is the time. While conventional loans can take up to 90 days to close, it is rare to see a Texas hard money loan take longer than 14 days to close. Qualifying for a Texas hard money loan is much less stressful and easier than qualifying for a conventional loan. This is a simple, quick and effective way to finance real estate projects.

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.

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.