Setabay Private Hard Money Lender

Thursday, May 23, 2019

Why Regulations Make Arizona Private Money Lenders Better Than a 203K

Banks don’t usually like to lend when a property needs serious repairs, so the government created the FHA 203(k) loan to help. However, once you know all the regulations and red tape which come with this program, you might find yourself turning to Arizona Private Money Lenders instead.

Before getting into Arizona Private Money Lenders, let’s start by breaking down the FHA 203(k) loan. This is a program overseen by the Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD). Programs like the 203(k) exist to spur development. Each one works a little differently, but the general goal is to put home ownership within reach for more people and protect consumers.

When people talk about an FHA loan, the FHA isn’t actually supplying the mortgage. They’re providing insurance, which gives lenders an added layer of security. That way, if the homeowner stops paying his mortgage, the lender isn’t out the money; the loan is insured. However, the FHA is not covering the costs associated with it. Homeowners pay an upfront fee and then have monthly fees for as long as they have the insurance. On average, it works out to a little under $100 per month.

Properties with a lot of problems, especially those with structural issues or damage to major systems—think roofs, air conditioning, electrical, and so forth—don’t generally qualify for any kind of bank loan at all. Furthermore, most programs aren’t designed to handle even basic renovations as part of a mortgage. You can only qualify for a percentage of the current value of the property.

This is why the FHA 203(k) is actually beneficial. It’s not a bad program. It lets homeowners get up to 110% of the value to the property after repairs. There are other neat little perks associated with it too, like the ability to put down less money, the potential to borrow enough to cover mortgage payments for several months, and flexible terms.

Beware: The FHA 203K is not as great as it seems

Like any financial product, the 203(k) has some pitfalls and it doesn’t work in every situation. For example, there is an “owner-occupied” stipulation, which means you can’t use the program if you’re an investor or don’t plan to live in the home more than half the time. Closing on the loan can take six months or more as well, which makes it difficult to jump on a good deal. The standard 203(k) further requires you to hire a construction consultant and licensed contractors must carry out all work. You are not allowed to do any DIY. You’ll also need good credit to qualify. It’s stipulations like these which send people in the direction of Arizona Private Money Lenders.

When you know the pitfalls, it’s easy to see which loan is right for you.

Arizona Private Money Lenders don’t have the same rules. If you’ve got rotten credit, don’t plan to live in the home, want to close in days rather than months, and plan to use your own sweat equity, alternative lending may be your best. If you’re one of the many people 203(k) falls short for, speak with an experienced broker about hard money.

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.

Wednesday, May 22, 2019

Why Texas Hard Money Lenders Help When an SBA 504 Doesn’t

Government programs can make getting funding easier for some business owners, but they don’t work in every situation. If you’ve been looking at an SBA 504 loan, but don’t qualify, Texas Hard Money Lenders can still help.

Before getting into how Texas Hard Money Lenders work, and how they can help, let’s explore the SBA 504 loan. This is one of many programs offered by the government, namely the Small Business Association (SBA), and it’s specifically designed to help business owners. The loans can only be used on fixed assets, such as buying land, construction, improving a property, purchasing equipment, and refinancing debt that was generated as the result of purchasing a fixed asset. They cannot be used toward things like rental or speculative properties, marketing expenses, materials, or held as working capital.

The way financing works under this program, the business owner typically provides 10% of the money needed, a bank provides 50%, and a community development company (CDC) provides the other 40%. CDCs are non-profit organizations certified by the SBA. There are hundreds of them throughout the country.

This loan program exists to spur economic growth and create new jobs. Ergo, your business cannot be worth more than $15 million, you cannot have earned more than an average of $5 million in either of the two years prior to your application, and the project size must be greater than your personal assets. There are further stipulations too. For example, you need to plan to occupy the space at least 51% of the time and you (as the business owner) must be a US citizen or permanent resident or the majority of your company must be held by Americans/ permanent residents. Having good credit is typically required as well.

The Regulations Associated with the SBA 504 Loan Disqualify Many Business Owners

Even though the SBA 504 loan helps many business owners, it doesn’t work for those who need cash for fix-and-flips, those who want to use their property as a rental, or those who work in specific industries, like cannabis. Furthermore, it doesn’t work for new immigrants or those hoping to invest in American land from overseas, and people with rotten credit are disqualified too. However, if an SBA 504 loan doesn’t work for you, you can still get help from Texas Hard Money Lenders.

Increase your eligibility for a loan by talking to an HML broker.

At the end of the day, Texas Hard Money Lenders don’t care if you’re an American or not. You can qualify even if you have rotten credit. It doesn’t matter if you earned $50,000 last year or $50 million. You can use the funds toward the purchase of properties you plan to rent out and toward speculative properties. Why is this? In short, they care more about the value of the property you’re purchasing and your ability to generate profit than anything else. If you’re one of the many who don’t fit in the SBA 504 box, speak with a broker about alternative lending options.

Top 4 Real Income Opportunities Arizona Hard Money Lenders Help With

Have you heard that Arizona Hard Money Lenders can help you work from home or empower you to create your dream job? They can and they do, especially if you’re interested in working in one of these top four fields.

1. Fix-and-flips. You’ve probably seen the reality TV shows about flippers and home rehabbers. What you don’t see on screen is how the funding works. Most of the time, people get the funds to purchase the property and/or cover the cost of fixing up the home from Arizona Hard Money Lenders. In this fast-paced field, you’ll purchase a home (hopefully for far less than it’s worth), repair it, and sell it, all within a matter of months. A typical project may conclude in as little as three, while more expansive ones can take six or more.

2. Buy-and-holds. With buy-and-holds, the investor purchases with the intent to keep the space and rent it out over a period of time; usually five years or more. Oftentimes, the investor picks a property that needs some help before it’s ready to be rented out. With a bit of sweat equity into it, value increases dramatically—a boon when it’s time to sell or refinance.

3. Airbnb and other vacation rentals. Although the boom caused by Airbnb may have initially been caused by people renting out extra space in their primary residence or subletting their vacation homes, the field has changed dramatically. Nowadays, people purchase homes and condos with the intent to use it as an Airbnb rental or similar. Many have entire portfolios of short-term rentals and vacation homes.

4. Commercial real estate. Got a business idea, but no cash to purchase the property? Banks can sometimes help with this, but they don’t issue a whole lot of approvals, particularly if you don’t have a strong business track record, have rotten credit, or are working in a sector like the cannabis industry. The good news is, if you’ve got a solid business plan and choose the right property, alternative lending may be the ideal solution.

There are Many Benefits to Using Alternative Lending

Curious to know why Arizona Hard Money Lenders are associated with these particular niches? As mentioned earlier, banks don’t fund all business opportunities. In fact, they provide full funding only a small fraction of the time. People also turn to alternative lending when they need to get funded very quickly or if the property they’re considering purchasing is in ill repair. Sometimes, alternative lending is ideal to get something off the ground as well. In these cases, the business owner refinances later when he or she has a proven track record and has demonstrated the concept produces a steady income stream.

If you can dream it, you can make it happen.

Many people don’t realize how many financing options are out there. They have big dreams, but then approach a bank, discover they won’t qualify, and continue the daily grind. However, if you have a dream for a better life, either as a full transition or hope to start up a side business, Texas Hard Money Lenders can get you the cash you need to get started.

How to Evaluate GRM & Cap Rate When Securing Texas Hard Money Loans

If you’re using Texas Hard Money Loans toward the purchase of a rental property, understanding GRM and cap rates is essential. Though they measure slightly different things, both can help indicate what the overall profitability of the project will be.

Securing Texas Hard Money Loans may be easier than traditional financing options, but lenders are still concerned about protecting their investments. Of course, profitability matters to you as well, which is why you should be familiar with your own GRM and cap rate numbers before getting to the financing stage.

Cap rate, which is short for “capitalization rate,” is the ratio of net income generated from a property against its purchase price. Let’s say you’re purchasing a single-family home and charging the tenants $1,000 per month to rent it. Your annual gross income is $1,000 x 12 or $12,000. For the purpose of cap rate, however, you’ll need your net income, which means subtracting all fees from the initial total. This includes everything from property management through insurance and taxes. If, for example, those fees come out to $3,000 annually, your net income is $12,000 - $3,000 or $9,000. Under this example, we’ll say you paid $100,000 for the home. To calculate cap rate, you’ll use the formula $9,000 (net income) / $100,000 (purchase price) = 0.09, which is a 9% cap rate. It’s also worth noting that if you’re operating a multi-family property with other revenue sources besides rent, such as laundry facilities, a game room, or vending machines, the revenue should be added to your income and the expenses of maintaining them should be deducted with your costs.

GRM, which is short for “gross rent multiplier,” is a straightforward formula. You simply divide the sales price by the annual gross rents. Let’s use the same numbers as before; you purchase a $100,000 home and rent it for $1,000 per month or $12,000 per year. The formula is $100,000 (sales price) / $12,000 (annual gross rent) = 8.33. It will take 8.33 years for the property to pay for itself. GRM can also be used backwards. If, for example, you know a good GRM is 5, then you can calculate how much to charge for rent or how much to try to talk down the seller when you’re striking a deal.

Learn the Benefits and Pitfalls of GRM and Cap Rates

It’s important to note that there’s no universal ideal GRM or cap rate. It’s location specific and varies based upon the type of property as well as other factors. That said, cap rates can be helpful when choosing between two properties and, if you know your area’s average GRM and cap rate, you can identify if a purchase is a good deal or not. Although you won’t always be asked for these numbers when you apply for Texas Hard Money Loans, you will likely be asked to provide rental income information and details about the costs, which ultimately gets extrapolated into these figures for the purpose of evaluating the risk of the loan.

Remember: if you’re evaluating properties, your calculations are only as good as the numbers you start with.

As the old saying goes, “garbage in, garbage out.” Particularly when you’re dealing with detailed numbers like net income, you’ll need to dig deep to ensure they’re accurate. You’ll also need to have solid comps when evaluating rental income too. Double check these numbers or have someone with experience crunch them before you apply for Texas Hard Money Loans or make offers on any given property.

Tuesday, May 21, 2019

How to Stretch Your Hard Money Loans When Marketing Properties

Most people think about how to stretch Arizona Hard Money Loans in terms of revamping a property. However, in certain niches, crafting and maximizing a marketing budget is essential too.

Realistically, not everyone who leverages Arizona Hard Money Loans for their fix-and-flip projects or spec homes will need to market that property. A few folks, either by luck or savvy locale choices, will garner interest in the property even before it’s complete simply by being present and active. Some chat up neighbors while they’re on site and others place a sign in front of the home letting people know when it will be available and who to contact. Leaving flyers outside the property for people to pick up is helpful too. However, those working in suburban and rural areas don’t have the same benefit of foot traffic and, as the value of the project goes up, the behavior of buyers changes too. Ergo, if you’re working on high-end projects, you’ll almost certainly require a marketing campaign.

The question then becomes how to market the property on a shoestring budget and how to minimize the time between finishing the project and closing on your sale. One technique is to finish the exterior of the home first. From there, you’ll be able to snap photos and get the home listed in newspapers or online ads. Mailing postcards to people in the area may be beneficial too. Oftentimes, current residents have friends and family members who would like to relocate to the area. This can also help you build up rapport with the neighbors who sometimes offer tips for future projects or request information on similar properties.

Harness the Power of Digital and Work at Home

If you’re using Arizona Hard Money Loans to fund some of your marketing efforts, free and cheap options are even better. For that, the Internet is golden. Run searches for neighborhood websites or local groups on Facebook. Maintain a list of people who have made inquiries on this and other properties and send out emails. You may also be able to purchase email lists specific to the zip code you’re working in. Once repairs are complete, you can save time and money by creating virtual tours, which let potential buyers know exactly what the property’s like without ever setting foot inside. The tour can be listed on real estate sites or, if you’re particularly tech savvy, can be placed on a dedicated website which gets updated as the project progresses to build up hype.

Get advice from real estate agents and develop a strong network.

Connecting with real estate agents, brokers, and others in the field can be beneficial too. Even those you’ve sourced your Arizona Hard Money Loans from may know of potential buyers. Consider hosting an open house or event to connect with others in the industry—not just for this single project, but as part of an ongoing strategy. Send them information about deals and customers who may need their services, and chances are they’ll do the same for you.

How to Evaluate a Trust Deed Investment Opportunity

Trust deed investment opportunities can be quite lucrative, but they’re not all created equally. Once you learn the background of the process and what these opportunities are all about, it’s easier to determine if a certain prospect fits within your level of risk tolerance and may be right for you.

When someone wants to purchase property, there are generally two ways their loan may be secured. Most of us are familiar with a mortgage. When a loan is secured with a mortgage, the borrower accepts responsibility for paying the loan via signing a promissory note. If he or she doesn’t follow through, the lender has the option of going through the judicial foreclosure process. With a deed of trust, the borrower signs a note as well, but also signs security documents which link the loan to the property being purchased. Following this, a notice of lien is recorded. If the borrower doesn’t make good on the loan, the lender does not need to go through the courts to sell off the property.

There are benefits to each. For example, with a mortgage, the lender has the option of suing the borrower after foreclosure if the auction of the property doesn’t yield enough to cover the debt. However, this method can also be time consuming and also gives the borrower a “right of redemption,” meaning he or she still has options to make good on the loan even after a foreclosure sale. The guidelines for this vary by state.

Ergo, with trust deed investments, you are the lender on a piece of real estate, and you have the right to liquidate the property without going before a judge if the borrower doesn’t make good on the loan. The process is much quicker and easier than it would be if you were offering mortgages.

With all this going on in the background, you may ask yourself why a borrower would do anything but a mortgage. Much of the time, this comes down to the speed of funding or outright inability to get bank a bank loan. Banks typically specialize in loans with longer terms as well, and they cater to a specific type of borrower.

Risk Less by Being Involved and Aware

There are many things which naturally make trust deed investment a safe bet. First and foremost, your outlay is secured by the property. In prior markets, values skyrocketed, which made almost every opportunity a safe one, no matter how much you were funding. In today’s market, values do not rise at the same rates, so you reduce risk by lending less. In most cases, it’s best to stick to funding 30-70% of the value of a property, though if you’re working with someone who has a really good track record and a wealth of experience, you may opt to do more. As an investor of real estate, you also have the option of physically examining the property as well.

Work with a successful broker to increase your returns.

Generally speaking, returns for a trust deed investments range from 9-29%, though experienced teams usually bring in around 12%. This is where working with a successful broker comes in handy, as you can determine your level of risk tolerance, and likely bring in more, or opt for safer bets. Naturally, borrowers with lower credit, those who request higher values, and those who present with other factors pay more to borrow. That increase gets paid to you, even though you have a high degree of certainty because the deal is backed by property.