Setabay Private Hard Money Lender

Saturday, May 18, 2019

DO YOU NEED ARIZONA SPEC HOME FINANCING?

You may have noticed the banks aren’t lending much when it comes to spec homes. So when you need a construction loan what do you do?

A spec loan means you are building on speculation. You are speculating that the property will sell once it is built. Banks are not typically comfortable with that unknown variable. There are not many alternatives when you are searching to get an Arizona construction loan. You are left with just a couple of options: individual investors and hard money loans.

A hard money lender will finance a spec home. These Arizona hard money lenders have money available and ready to loan. This is private money that belongs to a group of people that have put money in a fund to be lent toward real estate endeavors. Although, banks offer better terms and financing, when it comes to spec homes a borrower will rarely be approved.

Arizona hard money lenders are seeking projects. They will want the borrower to have the necessary permits and be close to shovel ready. Typically, they will still work with you if you are not at that point. However, to present yourself as professional it is advisable to have all permits and ready to break ground once you are approved for financing.

DO ALL HARD MONEY LENDERS FINANCE ARIZONA SPEC HOMES?

Generally speaking, most hard money lenders have a niche. Some deal mainly in fix and flips and some prefer construction loans. And there are lenders who have a niche, but will still finance outside their niche. It is advised to not only search for hard money lenders, but to research them and their past and current projects.

In a growing state such as Arizona, construction is on the rise. Arizona spec home financing is available through hard money lenders.

Arizona is a choice state to build spec homes; in particular, the Phoenix-Metro area. If you are a spec home builder and are in need of financing, please contact us at level4funding.com for more information about Arizona spec home financing

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.

DO YOU WANT TO BE RICH?

Think about the various ways you can make money. Then, think about how long it will take you to actually make that money. The one way you can make money quickly is through real estate investing.

Hopefully, you are familiar with hard money. Basically, hard money is money that belongs to wealthy investors. They want to make money off of their money, as investors do. They lend their money to real estate investors that have projects, such as fix and flip and construction, that will generate a profit. The real estate investor then pays back the loan plus interest. These are very similar in structure to a conventional loan. However, there are many perks to hard money loans, as well.

Arizona Hard money loans are asset based loans that are secured by real estate. Borrowers are not required to have spotless credit; in fact, many lenders will qualify a borrower with a 550 FICO score. These hard money lenders will typically finance 100% of the repairs as well.

HOW CAN YOU GET RICH WITH AN ARIZONA HARD MONEY LOAN?

If you want to make quick money, the fastest way is through hard money and an Arizona hard money loans is what you need to aid you. Most lenders will finance up to 75% of the property. That can be broken down into loan to value (LTV) ratios or after repair value (ARV). For this example we will use ARV.

Bob finds a property for $100,000. He doesn’t have great credit. Bob has a job, but he has only been there for six months. Basically, Bob is living paycheck to paycheck. After he finds this property he finds an Arizona hard money lender. The lender sends an appraiser to the property to asses the ARV. The appraiser estimates that after all repairs are complete the property, because of the location, the market and so on, will sell for $175,000. After further review it is discovered that Bob will need to put in about $33,000 worth of repairs.

Let’s break this down. The property itself is $100,000 and at this point that is all Bob needs. The lender will base the loan off of the ARV which is $175,000. He will lend 90% ARV. That is 90% of 175,000; which equals $157,500. Bob has been approved for $57,500 more than the property. However, he will also have fees and points that he will have to pay. Many lenders will include that in the loan. For the example we will say Bob has $2,000 in fees and 2 points on the loan. A point is basically a percentage of the original loan amount. In this case it would be 2% of 157,500, which is 3,150. With fees and points Bob owes $5,150. Subtract that from 57,500 and he has $54,350 more than the purchase price. Let us subtract the repairs which are $33,000. Bob still has $21,350 that can go to labor and materials. However, he doesn’t have to use that money because most Arizona hard money lenders will finance 100% of repairs, as well.

This is only a very quick run down of an example of using an Arizona hard money loan. The point is, you can make money as a real estate investor working with a hard money lender.

It takes a lot of blood, tears and sweat to make money in real estate. It also requires help from a lender that you trust and will work with you to make your dreams come true. However, you will never know the life you can have if you don’t take that first step.

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.

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.