Sunday, January 15, 2023

What Is Hard Money Lending? Everything You Need To Know

The basics of understanding what is a hard money loan represents the first step of breaking down real estate financing. Hard money loans are, after all, a real estate investor's best friend; they are the quickest path to securing a deal. Nonetheless, hard money lending can get complicated quickly, so you need to realize what you are getting into before making any decisions for yourself.

When exploring real estate hard money lending, you need to comprehend several questions: What are the pros and cons of such a strategy? When should you use private financing for real estate? Where can you find hard money lenders for real estate? The more you know about hard money, for that matter, the better. This guide should serve to lay a solid foundation for everything you need to know about one of today's greatest sources of capital.

What Is Hard Money Lending?

Many investors looking for alternative financing that doesn't involve their local bank may have heard the term "hard money." They may have even asked themselves a simple follow-up question: what is hard money lending?

Hard money lending is a short-term loan obtained from private investors or individuals at terms that may be stricter than a traditional loan. Though the terms of this creative financing option may be stricter, this form of private financing for real estate generally has more lenient criteria.

Hard Money Lending FAQs

1. The Big-Picture of Hard Money Lending

Hard money lending is another way investors can finance their real estate projects outside the traditional mortgage means. This short-term loan is secured from private investors or individuals instead of other traditional institutions like banks or credit unions.

Hard money lending is often used by investors who aim to improve or renovate a property and sell it. Given that you can usually get a loan in a matter of days (as opposed to weeks from banks), this is a fine choice for house flippers and real estate developers. This is also an option for investors who only need quick fixes to raise a property's value, then secure another loan based on the new value to pay off the Arizona hard money lender.

2. Hard Money Lending Vs. Other Lending Types

The main difference between hard money lending and other types of loans is that this financing does not focus on your credit history or income as collateral. Instead, lenders will see the property's value as the determining factor, emphasizing its after-repair value (ARV). ARV is the worth of the property once your renovations are done.

Other differences include:

Money lenders do not invest in primary residences. Owner-occupied residential properties are subject to many rules and regulations, thereby increasing the risk for lenders.

Hard money lenders do not sell loans to Freddie Mac or Fannie Mae. Often, lenders use their own money or raise it from a pool of investors. The loan amount is based on their property specialization (if there are any) and the risks they are comfortable taking.

Hard money loans phoenix are short term. You will not have the luxury of 15 to 30 years to repay your loans. Hard money loans typically needing to be repaid anywhere between 6 to 18 months.

Hard money lenders Arizona have their own lending criteria. A private lender, for example, could be your friend, family, or business associate. As such, they may not have any preset criteria before lending you money, giving you more flexibility in negotiating terms. Hard money lenders, on the other hand, come with a specific set of upfront points, interest rates, and defined durations.

3. What Are Hard Money Loans Used For?

Hard money loans can be used for a wide variety of investment types and purposes. In the real estate industry, hard money loans are commonly used to purchase residential and commercial properties. This is partial because of the approval requirements and because hard money lenders can work on the quick timeline that closing deals often demands.

Imani Francies, an investing expert with Loans.com, says that "loans of last resort or short-term bridging loans are called hard money loans. Real estate serves as collateral for a hard money loan. Due to their lack of red tape, hard money loans are ideal for wealthy investors who swiftly need funds for an investment property".

Hard money loans are also commonly used for fix and flip properties. These investors may be less worried about higher interest rates because the end goal is to sell the property for a profit once the rehab is finished. Hard money loans make a perfect fit because they can be used to purchase properties and make renovations.

The Pros And Cons Of Hard Money Loans

Hard money loans represent one of the single most advantageous funding opportunities for investors to take advantage of. If any, few sources of capital can compete on the same level as hard money and offer the same competitive edge. After all, it is hard money loans that many investors must thank for acquiring their deals in the first place. That said, hard money is not without its caveats. Loren Howard from Real Estate Bees states that "hard money loans are fast to approve and fund and can speed up the entire real estate investment process. However, they have much higher rates than a traditional loan and are not suited for non-real estate investors". Despite its superior benefits, there are downsides to hard money that warrant the consideration of every investor.

Let's look at the pros and cons of Arizona hard money so you can weigh the pros and cons yourself.

Pros

Securing financing with a hard money lending loan offers you a number of benefits, including:

Speed: The Dodd-Frank Act is a financial reform legislation enacted in the past decade. It came with new regulations on mortgage lending, which means a lot of time (often, months) is needed for an investor to close a loan. On the other hand, hard money lending is fast, as you can secure a loan in days or weeks (depending on negotiations). Time is essential, especially for large development projects, and hard money lending can help speed that process along.

Flexibility: Terms can be negotiated with hard money lending loans in Phoenix, since you are dealing directly with individual investors. Banks are not as flexible.

Collateral: With hard money financing, the property itself is your collateral for the loan. Some lenders even accept other assets, like your retirement account or residential property under your name, as a basis for starting a loan.

No "Red Tape": Getting a hard money loan for an investment property with a traditional mortgage is difficult, if not impossible. Traditional borrowers need to worry about credit score, LTV ratios, debt-to-income, and several other indicators they need to meet criteria for. However, Arizona hard money lenders function as asset-based lenders who are more concerned with the property than the borrower's credentials.

Convenience: There is something to be said for the convenience of closing with cash. Supplying a lender with bank statements, income documentation, tax returns, and leases can become overbearing and consume your focus and energy. On the other hand, hard money cuts out the middleman and causes many headaches.

Volume: Hard money lenders allow investors to leverage other people's money. That means investors could potentially fund more than one deal at a time. Traditional loans will do no such thing. You should consider a hard money loan if you want to fund multiple deals at a time.

Competitive Edge: Arizona Hard money allows investors to beat the competition, or at least those using a traditional loan. If for nothing else, sellers prefer the two things hard money offers: cash and a timely transaction.

Cons

There are, however, certain disadvantages to using hard money for real estate investments:

Cost: The convenience of hard money lending may be its primary benefit; however, it is also its main drawback. Given that hard money lenders are at higher risk than borrowers, many may demand up to 10 percentage points higher than traditional loans. Interest rates range from 10 to 15 percent. Expect other fees to also be relatively increased, including origination fees and closing costs.

Short Repayment Schedule: A shorter repayment period is the price to pay for getting a property listed on the market ASAP. This can be anywhere between 6 to 18 months. Make sure that you can sell the property and profit the soonest time possible.

Hard Money Loan Rates

Hard money loan rates are typically much higher than fixed-rate mortgage loans. Compared to the average 5.5% fixed-rate mortgage loan, a hard money loan typically falls between 8% and 18%. In addition, hard money loans may not cover the full value of the property you seek to finance. If a hard money loan does not cover the full value, you may be required to present a higher down payment on the property or find an additional source of financing to close on the deal.

When To Use Hard Money for Real Estate

Though Arizona hard money lenders will often issue loans for almost any type of property, certain types of property investments were absolutely made for hard money. Rehab projects, construction loans, and land loans were made to be financed through hard money.

For example, when flipping a house investor need access to funding for both the purchase and renovation costs. André Disselkamp from Finsurancy advises that "these projects typically happen on a quick timeline, meaning investors do not have time to wait through the process of a traditional loan approval".

This doesn't mean that other types of investments should not be financed through hard money. If you, the buyer of a property, have credit issues, or you need to act quickly on a deal before it disappears, the speed and convenience afforded by a hard money loan can be worth its weight in gold. In these cases, hard money loans can be used to purchase residential or commercial properties.

Equal Housing Opportunity. This is not a Good Faith Estimate and this is not a Guarantee to lend and should not be considered as such. Costs, rates, estimates and terms can only be determined after completion of a full application. Actual payments will vary based on your individual situation and current rates. APR for loans vary from 7.99 - 29.5% and is based on Credit Score, Down Payment, LTV, Income. Mortgage rates could change daily. To get more accurate and personalized results, please call 623 582 4444 to talk to one of our licensed mortgage experts. Terms and conditions of all loan programs are subject to change without notice. Level 4 Funding LLC, 22601 N 19th Ave Suite 112, Phoenix AZ 85027, 623-582-4444 NMLS 1018071 AZMB 0923961 This e-mail is for the exclusive use of the intended recipients, and may contain privileged and confidential information. If you are not an intended recipient, please notify the sender, delete the e-mail from your computer and do not copy or disclose it to anyone else. Your receipt of this message is not intended to waive any applicable privilege. Neither this e-mail nor any attachment's establish a client relationship, constitute an electronic signature or provide consent to contract electronically, unless expressly so stated by Dennis Dahlberg RI/CEO, Level 4 Funding LLC, in the body of this e-mail or an attachment. To the extent this message includes any tax or legal advice this message is not intended or written by the sender to be used, and cannot be used, for legal or tax purposes or advice.

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.

Saturday, January 14, 2023

How to Invest in Real Estate Investing with No Money Down

The idea of real estate investing with no money out of your own pocket is enough to pique anyone's interest. The mere potential of making a good return without having to front the money yourself is too exciting to pass on. Meanwhile, investing in real estate with no money down is made possible by several unconventional alternatives. Therefore, if you are interested in investing in real estate, but would instead use other people's money, try networking with some of the following sources:

Hard money lenders

Private money lenders
Homeowners are willing to entertain a rent-to-own strategy.
Homeowners are willing to finance the impending purchase with seller financing.
A Home Equity Line of Credit (HELOC)
A partner

HARD MONEY LENDERS

Hard money lenders are organized, semi-institutional lenders typically licensed to lend capital to real estate investors. More importantly, they represent the most profitable relationship an investor may establish in their respective field. Hard money lenders make it possible for investors to secure deals they may have had to pass on. By offering short-term, high-rate loans, Arizona hard money lenders are perhaps the best option for today's investors to turn to when they need funding to purchase a deal quickly and efficiently.

Unlike their traditional counterparts, hard money loans offer short-term solutions for borrowers who need money to fund both the acquisition and construction costs. In return for their loan, however, investors will need to pay upwards of 11 to 15 percent in interest and perhaps even an additional three to five points (a subsequent upfront percentage fee based on the original loan amount).

Hard money lenders will ask to be named on the insurance policy to secure their investment. Likewise, hard money lenders will require borrowers to give them a promissory note and a mortgage or trust deed to the property. These safety measures are implemented to mitigate risk and allow them to lend money to otherwise unproven investors.

Hard money lenders in Arizona are asset-based lenders, which means they base their decisions to loan money almost entirely on the subject property's potential. While they indeed consider borrowers' track records, the potential of the property represents their highest priority. That said, the better the property, the more likely an investor will receive a loan.

In return for meeting all the criteria by Phoenix hard money lenders, borrowers will be given quick access to funds that will most likely cover acquisition and construction costs. While their capital comes at a high price, investors are often able to receive it within as little as a few hours. The speed of implementation awarded to investors from hard money is one of the primary reasons they can acquire deals and exercise an advantage over the rest of the field.

PRIVATE LENDERS

Private money lenders are like hard money lenders in that they too are often willing to offer high-interest, short-term loans to any investor who can bring them a good deal. As their name suggests, private money lenders are not institutionalized or licensed to lend money to real estate investors. Instead, private money lenders can be anyone with enough money and a penchant for investing. Private money lenders can be anyone from a friend or family member to a business acquaintance or an investor's latest attempt at networking.

While private money lenders aren't institutionalized, they still offer investors a great way to take up real estate investing with no money out of their pockets. However, their lack of a professional structure coincides with some notable differences from their hard-money counterparts. Like hard money lenders, private money lenders will request to be named on the subject property's insurance to mitigate the risk of their investment. Private money lenders in Arizona will also want borrowers to give them a promissory note and a mortgage or trust deed to the property. That way, the faith they are placing in a borrower is secured by collateral.

The primary differences between hard money and private money are apparent in the interest rates and speed of implementation. Private money lenders in Phoenix are inclined to ask for anywhere between six to 12 percent interest. At that rate, private money lenders are usually cheaper to go through, but their capital comes at the expense of a less professional lending environment. Again, private money lenders aren't licensed to lend money and are traditionally less experienced.

RENT TO OWN

The "rent-to-own" financing strategy is yet another alternative to traditional financing. More importantly, it proposes another way to take up real estate investing with no money (at least in the traditional sense) out of your pocket. When buyers enter into a rent-to-own agreement, they effectively agree to rent a subject property for a predetermined amount of time until they can exercise an option to purchase the house from the original owner. This is also known as a lease agreement. As a result, buyers will be expected to pay "rent," but it won't coincide with the significant down payment that has prevented many people from buying a home.

Rent-to-own agreements will let prospective buyers pay rent for a predetermined amount of time (upwards of three years), after which they will be given the option to purchase the home. That's an important distinction, as not all contracts require the renter to follow through with a purchase. As Investopedia so eloquently puts it, "some contracts (lease-option contracts) give the potential buyer the right but not the obligation to purchase when the lease expires. If he or she decides not to purchase the property at the end of the lease, the offer expires."

SELLER FINANCING

Seller financing, also known as owner financing, is precisely what its title suggests: the impending buyer will finance the purchase through the person who currently owns the home. The current owner will act as the lender, effectively removing the need for any third-party lenders. As a result, borrowers (the buyers) will proceed to make payments to the seller for the duration of the loan. To that end, seller financing isn't all that different from a traditional bank loan. The owner will determine the cost, down payment, amortization, loan amount, interest, and everything else that has become synonymous with traditional underwriting.

The lack of a third party lends itself to both buyers and sellers. Selling financing is one of the easiest and most cost-effective ways to finance a deal. However, the benefits of seller financing can't be realized unless the seller owns the property "free and clear." For the seller to exercise the "seller financing" option, they must be able to carry a first mortgage, which would require them to have paid off the property already. Only once the owner has paid off their mortgage and remains in a 100 percent equity position can they act as the bank for a subsequent transaction.

Seller financing can benefit everyone involved in a deal. The owner, for example, can simultaneously sell the house, profit from interest, and limit their tax liability by taking the proceeds from the sale in incremental installments. On the other hand, buyers may negotiate more favorable terms, like zero money down.

HELOC

In addition to everything above, real estate investing with no money down is made even more possible for those who have already built-up equity in an existing home. Thanks to the home equity line of credit (HELOC), those who have already been paying down a mortgage may be able to use existing equity to facilitate an additional purchase. In its simplest form, a HELOC allows homeowners to take the first position on a loan and put their equity to work. It should be noted, however, that most banks won't let homeowners use 100 percent of their equity. To mitigate risk, it's more common for banks to lend about 70 to 75 percent of the equity one has in a home. While technically borrowing against the equity in your home, a HELOC will promote real estate investing with no money out of your pocket.

FIND A PARTNER

"No money down real estate investing" takes on a new meaning when a partner is introduced into the equation. Investors can practice real estate investing without money if they align their services with the right partner. If for nothing else, there's no reason one partner can't fund an entire deal. That said, investors who don't bring any money to the table must compensate for their financial shortcomings. In the event a partner can't help fund the deal, they should be able to bring something of equal value to the table. Perhaps they are great at networking or are expert marketers. After all, money isn't the only thing with value in the real estate investing industry.

Summary

The concept of real estate investing with no money is lost on many people. Purchasing an asset as large as a piece of real estate without any of your own money seems downright impossible. However, several alternative forms of financing, not the least of which rely on other people's money to complete a deal. The more options an investor must fund a deal, the more likely they will acquire it.

Friday, January 13, 2023

What Is Real Estate Gap Funding? Bridge Loan? Will it work?

Real estate gap funding is essentially an interim loan used to temporarily provide financing for an individual until they can secure a more permanent solution. Otherwise known as a bridge loan, gap funding is traditionally used to "bridge the gap" between the moment a borrowed money and when they can secure a long-term loan.

Due, in large part, to their short-term nature, gap loans are traditionally used by borrowers who are simultaneously waiting for long-term financing to clear and need money to cover immediate expenses. However, it's a tool for anyone who needs access to capital while waiting for a subsequent loan to transpire. As a result, more and more real estate investors are starting to take taking lending and the benefits it may provide between deals.

GAP FINANCING FOR REAL ESTATE

Most real estate investors will rely on private or hard money loans for impending deals. However, it's uncommon for most private and hard money lenders to cover the entire cost of the purchase and rehab cost example, they will only lend a percentage of the purchase price or after-repair-value (ARV)—usually somewhere around 70% of the home's value. As a result, most borrowers will need to secure additional capital; that's where gap funding comes into play.

Real estate gap funding can make up for the shortcomings of most hard money lenders. But, more importantly, gap money may cover the difference between the original hard money loan and the remaining cost obligations. That means gap funding for real estate investors may cover the rest of the acquisition costs and the expenses incurred from rehabbing, marketing, and selling the property.

It is worth noting, however, that g. However, typically coincide with more expensive rates than their private and hard money counterparts. Since gap loans are technically a second position (behind the original loan), they'll compensate for the added risk with higher rates. Additionally, gap funding lenders may require borrowers to hand over a percentage of the deal's resulting profits. While gap funding has helped countless real estate investors carry out deals, they may not otherwise have had the chance to, it must be used conservatively.

GAP FUNDING PROS

Gap funding serves a specific purpose and is best suited for investors flipping a high volume of properties. That said, there are other benefits investors will be very happy to hear:

Gap funding is tailor-made for high-volume rehabbers, as it is ideal for those who fully intend to maintain several projects simultaneously. More specifically, gap funding mitigates the risks one may encounter from a delayed sale or any instance that unexpectedly slows down the rehab process. With gap funding, the need to wait for one deal to close before starting another becomes obsolete.

Gap funding for real estate investors may cover the difference between hard money loans and the remaining acquisition costs of the subject property. As a result, gap funding makes it possible for many investors to acquire deals they otherwise wouldn't have been able to.

Gap money can help investors fund more than the acquisition of a property; it can be used for rehab costs and any costs incurred from trying to sell and market the home.

Gap funding has proven very useful for investors who want to remain in a more liquid position.

GAP FUNDING CONS

Despite how helpful gap funding has proven to be for investors, it could be more situational. While it may serve as a great source of interim financing, there are some drawbacks investors need to pay particular consideration to:

The short-term nature of gap funding could be better for investors attempting to flip a single deal. The added costs are typically meant to meet the needs of those who intend to flip a high volume of properties simultaneously. Therefore, the cost of a gap loan may not be worth the price of admission for those who won't use the funds under the right circumstances.

Due to the increased risk facing gap lenders, investors can expect to pay more interest. Typically, the rate will be 10-20% higher than traditional mortgages.

While not standard, some gap lenders will request a percentage of the proceeds from the sale of the house.

HOW TO GET A GAP LOAN

Receiving a gap loan—not unlike almost every other source of funding—will require investors to decide whether they want to pursue traditional or alternative forms of funding. If for nothing else, gap loans are made available from both institutionalized banks and private money lenders. Those who elect to borrow from a traditional bank will need to apply, much like a traditional loan. Those who would instead work with private or hard money lenders will need to attract interested investors. Since gap lending is technically riskier, investors must convince the gap lenders that their investment would be worthwhile. Unlike a hard money loan, the money received from gap lenders is more asset-based than anything else. That means the better the deal, the more likely they will lend the money.

Gap Lending And Real Estate

Gap lending and real estate investing go hand-in-hand. Better yet, gap lending is the perfect financial safety net for those who need to keep current projects going or don't want future projects to be put on hold because of current delays. Gap funding, for example, may help those who have spent all the money from their original hard money loan but still need more to complete the rehab. So instead of delaying the project and risking losing profits, investors may secure gap funding to finish renovations. Sure, the loan will come with added costs, but they are well worth the price of admission if they help see a deal through to completion.

WHEN SHOULD YOU USE GAP FUNDING?

Real estate gap funding has proven invaluable to countless investors. Quick and easy access to cash can't be underestimated, especially in a market as competitive as today. It is worth noting, however, that real estate gap funding isn't necessary for every deal. But, not unlike every other type of funding, there is a time and a place where gap funding makes sense. More specifically, gap funding should be used when:

High-end projects are more likely to realize sizable returns.
Investors want to maintain more liquidity.
There isn't enough cash on hand to close a deal.
Transitioning to a bridge loan can reduce interest payments from the initial loan.
Cash reserves are needed to complete any unfinished construction projects on the subject property.
Interest payments are building up due to the deal taking longer to close.
Investors need to keep enough cash on hand if another deal presents itself.

GAP FINANCING COSTS

Gap funding has proven to be a valuable tool for securing temporary financing. That said, the optionality awarded by gap financing doesn't come without a price; it's usually more expensive than its traditional counterparts. Interest rates on gap loans, in particular, can range from 10% to 20% (depending on creditworthiness). Outside of higher interest rates, borrowers can expect to incur the following costs:

Administration Fees
Appraisal Fees
Escrow Fees
Loan Origination Fees
Notary Fees
Title Policy Fees

SUMMARY

Gap funding has developed a reputation for supplying borrowers with immediate access to capital. It is worth noting. However, that gap funding is more than a source of money; it's a tool used by countless investors to facilitate deals they may have otherwise had to pass on. That said, gap funding isn't without its caveats; there is a right and a wrong time to use it. Therefore, it's in everyone's best interest to learn about gap lending before committing to it.

Home Renovation Expectations You Should Know

Homeownership comes with a host of responsibilities.

Chief among them is maintaining and improving your property.

When it comes time to renovate, there are a few things to make the process as smooth as possible. Level 4 Funding private hard money lender has put together a list of expectations you should have for your home renovation.
1. Know the Different Types of Elements in a Home Renovation
Any home renovation has three main elements: cosmetic, mechanical, and structural. Cosmetic renovations are strictly aesthetic and don't require any significant changes to the property. Mechanical renovations are changes that improve the functionality of your home, such as installing central air conditioning or updating the plumbing. Structural renovations are changes that impact the load-bearing structure of your home, such as adding an addition or knocking out a wall.

2. Include a Home Office in your Plans
Adding a home office to your home renovation can be a great way to create a functional and stylish space. The first step is to choose the right location for your home office. Once you have found the perfect location, it's time to plan the layout. Decide where to put your desk, chairs, and any other furniture.

When selecting furniture for your home office, it's essential to choose stylish and practical pieces. If you're looking for a way to make your home office more comfortable, try this: instead of a traditional desk and chair, set up a standing desk. This way, you'll be able to move around more while you work, and you won't have to worry about sitting in the same position for hours at a time.

Finally, add some personal touches to make your home office feel like your own. Hang some art on the walls, add a rug or throw pillows for extra comfort, and use fun and unique storage solutions to keep your space organized.

3. Choose the Experts to Do the Job
Not all contractors are created equal. When selecting who will work on your home, vet them carefully by checking references and reading online reviews. Once you've found a few candidates you're comfortable with, get bids from each before making a final decision.

4. Set a Working Schedule and Deadlines
Before work begins, sit down with your contractor and agree on a schedule and project. This will help ensure that the work is completed on time and within budget.

5. Estimate the Budget and Other Costs
In addition to the cost of materials and labor, there are other costs associated with renovating your home, such as permits, inspections, dumpster rental, and storage fees. Make sure to factor these additional costs into your budget, so there are no surprises down the road.

6 . Selecting Estimating Apps Used by Contractors
Once you've settled on a budget for your renovation, it's important to select estimating apps used by contractors so that you can track spending and avoid going over budget. Understanding the estimating apps or software your contractors will use is important. This can help you to manage expectations and ensure that your project stays on track.

There might be an app designed to help electricians calculate the labor and materials needed for a job, create and send estimates, and accept online payments. Ask about their estimating software if you're working with an electrician on a home renovation. Try this option, which will help you understand the costs involved and keep your project on budget.

7. Insure Your Home When Your Renovation Is Complete
Be sure to update your homeowners' insurance policy once the renovation is complete so that your newly renovated home is adequately
protected.

So, there you have it! Our top tips to help ensure a smooth home renovation. By being aware of the different types of elements in a renovation, setting up a dedicated workspace, choosing experienced experts, and estimating all costs upfront, you can avoid many of the common pitfalls that often lead to stressful renovations.

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

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701

Equal Housing Opportunity. This is not a Good Faith Estimate and this is not a Guarantee to lend and should not be considered as such. Costs, rates, estimates and terms can only be determined after completion of a full application. Actual payments will vary based on your individual situation and current rates. APR for loans vary from 7.99 - 29.5% and is based on Credit Score, Down Payment, LTV, Income. Mortgage rates could change daily. To get more accurate and personalized results, please call 623 582 4444 to talk to one of our licensed mortgage experts. Terms and conditions of all loan programs are subject to change without notice. Level 4 Funding LLC, 22601 N 19th Ave Suite 112, Phoenix AZ 85027, 623-582-4444 NMLS 1018071 AZMB 0923961 This e-mail is for the exclusive use of the intended recipients, and may contain privileged and confidential information. If you are not an intended recipient, please notify the sender, delete the e-mail from your computer and do not copy or disclose it to anyone else. Your receipt of this message is not intended to waive any applicable privilege. Neither this e-mail nor any attachment's establish a client relationship, constitute an electronic signature or provide consent to contract electronically, unless expressly so stated by Dennis Dahlberg RI/CEO, Level 4 Funding LLC, in the body of this e-mail or an attachment. To the extent this message includes any tax or legal advice this message is not intended or written by the sender to be used, and cannot be used, for legal or tax purposes or advice.

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.

© 2022 Level 4 Funding LLC. All Rights Reserved.
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Friday, September 16, 2022

Your Guide to How Owner-Occupied Hard Money Loans Work

Owner occupancy hard money in Arizona means a borrower will use a property as their primary home.

Lenders use this distinction because they want to know whether you'll be living in a property, renting it out, or selling for speculation "spec" purposes. Renting out properties typically carries more risks to traditional lenders, which is why they seek this information.

There also are Arizona owner-occupied business loans, where you use the loan to improve or expand your business. Traditional hard money lenders in Arizona offer both types of loans, but many borrowers needing an owner-occupied loan don't qualify for conventional loans.

For these borrowers, an owner-occupied hard money loan can be the answer. Hard money lenders make borrowing simple, based on common sense and the deal's merits. Learn how borrowers can qualify for an owner-occupied loan from Applewood Funding Group, the leading Arizona private money lender.

What is a Hard Money Loan?

Private investors, rather than banks, fund hard money loans. Typically, they offer borrowers short-term funds for time-sensitive projects such as real estate investments or house flipping. But hard money lenders such as AppleWood Funding take loans to a higher level.

Bottom of Form

Applewood Funding is a full service mortgage banking firm specializing in owner-occupied private money loans. The goal is to offer Arizona borrowers a valuable alternative to institutional financing. Applewood Funding offers quick funds for short-term projects and long-term owner-occupied consumer loans ranging from 20 to 30 years.

Arizona Hard money loans also help consolidate debt and improve credit, acquiring second, third, or fourth mortgages and cashing out on properties with equity to finance business deals and improvements.

Need assistance solving legal or estate issues? Consider an owner-occupied hard money loan for:

o Legal or divorce settlements

o Dissolving a family trust

o Settling estate inheritance issues

o Resolving probate issues

o Purchasing or refinancing properties with deferred maintenance or safety issues

o Paying off a bankruptcy

They also are an ideal option for self-employed borrowers who banks reject for not having solid credit or enough proof of income.

Applewood is one of the only Arizona hard money lenders offering borrowers owner-occupied consumer-purpose loans in addition to business-purpose loans.

Owner-Occupied Hard Money Loans

An owner-occupied hard money loan offers borrowers many finance options. While traditional lenders can provide these types of loans, the requirements are often too strict and unforgiving. In addition, many borrowers have unique situations and need unique opportunities to give them the funding they seek.

Business Purpose vs. Consumer Purpose Hard Money Loans

Why are consumer-purpose hard money loans so rare in Arizona? This is a result of the 2008 recession and the Dodd-Frank Wall Street Reform Act, signed in 2010. This act aimed to protect taxpayers and consumers from investment risks taken by banks.

After Dodd-Frank was signed, banks had to work hard to prove that borrowers understood loan risks, and they had to verify a borrower's credit history, income, and job status.

Most Arizona hard money lenders stopped offering owner-occupied consumer loans due to the new regulations, even if they continued to provide business-purpose loans. But Applewood Funding recognized this need was still very much alive.

The difference between consumer-purpose and business-purpose loans lies in how the borrower uses the loan.

Borrowers can use consumer-purpose loans for:

o Purchasing a primary residence

o Refinancing their home

o Remodeling their home

o Acquiring a second, third, or fourth mortgage

o Consolidating debt

o Operating as a bridge loan

o Settling legal, estate, or probate issues

Business-purpose loans for:

o New business start-up costs

o Purchasing or improving a property

o Operating capital

o Purchasing new equipment

o Buying out your partners

Qualifying for an Owner-Occupied Hard Money Loan

With Applewood, qualifying for an owner-occupied hard money loan is simple. First, the team will want to see a short submission story and the property address. Beyond that, deals are examined on a case-by-case basis, so requested documentation can vary but remains uncomplicated.

Our team may look at a borrower's assets and bank statements to make our decision. The process is common-sense driven, and we strive to make those fantastic deals possible for borrowers when banks have determined they are too complicated. Banks often run into seasoning issues, requiring a borrower to have six months to two years of income history. We can qualify you for a loan even if you just got a job yesterday.

Owner-Occupied Second Mortgage Hard Money Loans

Applewood Funding offers owner-occupied second mortgage hard money loans for business or consumer purposes. By using the equity in a borrower's current home. Consumer purposes of paying off high-interest debt or for legal settlements. Business purpose can be used for business growth opportunities.

o Property types include:

o Single-family or multi-family residence

o Commercial, construction, industrial, or land

o Hard Money Loans vs. Conventional Mortgages

While Arizona hard money loans are simple, straightforward, and quick, conventional mortgages from banks have many more requirements. The strict documentation required for a chance at approval includes:

High credit score

o Low debt-to-income ratio

o Proof of income and tax records

o No bankruptcies or foreclosures

There used to be more options for borrowers in the form of non-qualified mortgages, but these dried up due to COVID-19's effects on the marketplace. The ideal choice for unique borrowers is a private money loan.

Owner-Occupied Hard Money Loan Example

Hard money loans in Arizona are ideal for many Arizona borrowers and situations. The speed, flexibility, and common-sense approach can make growing businesses and families much easier and less stressful.

An Arizona hard money loan can be the best choice if a borrower is looking to purchase their first home but can't go the traditional route. And if they need to get a second mortgage to gain access to precious equity, it can be a life-changing way to get their lives back on track by redeeming their credit and cracking down on old debts. In addition, business owners can have more freedom to expand and make processes more clean and efficient.

Plus, borrowers can acquire a loan by negotiating terms directly with the lender rather than adhering to strict credit and income requirements. Applewood also offers non-owner-occupied hard money loans, which are helpful for house flippers and real estate investors.

Applewood Funding can provide:

o Same-day approvals

o Closing in as fast as seven days

o Common-sense underwriting

Our team is dedicated to using an honest, straightforward approach to all deals and building long-term relationships with our brokers and borrowers, ensuring long-term success for all involved and a lifetime of great deals. Contact us today to speak with our team about your unique situation, ask questions, and get started.

We look forward to working with you.

Tuesday, September 6, 2022

Should you use cash to purchase your fix and flip property?

The real estate investing business is full of options. One thing that makes it so great is that you can support almost any way you desire. There is no set template or blueprint you have to follow. At some point, you may have to decide on the best financing option. There are compelling arguments on both sides and no right or wrong answer. What is universal is that you always want to explore all available options. There are times when paying cash for property makes sense, and other times you should take advantage of financing. If you have capital or access to funds, here are some pros and cons of paying cash for your next property.

PROS:

You have increased cash flow. If you are purchasing a rental property with cash, one of the most apparent benefits is the increased cash flow. On a rental property with no mortgage, the only monthly housing payments are for taxes and homeowners insurance. Then, of course, there are utilities and other expenses, but the bulk of the price is in these two areas. So with a cash payment, you will have a surplus of cash left over every month. In addition, there is a handful of options with the property that you can use to grow other areas of your business.

More offers accepted have a greater chance of getting accepted. Many sellers do not want to deal with a financed offer, such as a conventional mortgage loan. A cash offer provides a sense of security between the excessive closing times and approval uncertainty. This security leads to more bids accepted on properties. Closing just one or two extra deals a year can be a real boost to your bottom line.

Instant equity. When you purchase property cash, you take ownership with instant equity. This equity gives you a series of options you would not have had otherwise. You never know what changes your business will go through down the road. Instead of waiting for appreciation, you can make the best decision, whatever the market brings. If you want to sell in a pinch, you can do so at any time. It would help if you considered the option of a second mortgage. Instant equity equals instant options.

Interest savings. Most of your monthly payment goes towards interest when you finance a property. For example, on a 30-year mortgage, the first ten years of payments are mostly allocated to the interest portion. Over the life of a loan, you end up paying hundreds of thousands more than you finance. By paying cash, you save your monthly cost on interest.

Faster closings. One of the actual benefits of paying with cash is the speed at which the transaction can close. It is not unrealistic to complete anywhere from five to seven days after you submit an offer. A fast closing helps to start the process quicker, which shortens the time you can see a return.

CONS:

Opportunity lost. Most real estate investors do not have a limitless amount of capital. To explore the next deal, they need to pull cash out of an existing one. When you pay cash, you are locked into the property until you can turn it over or until the value increases. You never know when a great opportunity will come your way. If most of your funds are unavailable, you will be upset if a better one comes. Before you make a cash offer, you need to be comfortable that your funds are tied up for the short term.

Lack of leverage. There is something to be said about the ability to use other people's money. When you pay cash for a property, you lose that leverage. You no longer have the flexibility to act when you see fit. Leveraging a purchase means using the bank's money to earn a return on your investment. For example, you can make a 15-20% down payment and own the property. When you use cash, you pay 100% of the purchase.

Exposure. Depending on how you amass your capital, you are exposed. Getting money from a private or hard money lender is one thing. When you scrape together your savings, you enter into an all-or-nothing proposition. In most cases, the reward exceeds the risk, but there will be plenty of sleepless nights. Even the slightest change can have an impact on your bottom line. When you are all in, there will be plenty of uncomfortable moments.

Even if you don't currently use cash to fund your deals, you never know when you may need to in the future. A cash offer may make more sense on the right property in the right situation than financing. It would be best if you began exploring your options, including using a hard or private money lender when your business is slow. They can be a great resource in your back pocket when things get going. If you have your capital, you should always consider using it in the best possible scenarios. Having cash or access to it can be a great option in the right situation.