Beretta Only: March 2019

Sunday, March 31, 2019

TIRED OF BEING DENIED A BANK LOAN?

If you have tried to be approved by a bank, but keep getting denied—what can you do?

Are you ready to get out there and crush it in the real estate game? The first thing you must do is be approved for the financing of your project. Your creditworthiness may be enough for financing, but it may not be—and even if it is, will you be approved for as much as you need? Regardless, there are ways you can get financing no matter your situation.

First thing you need to know is not every bank is created equal. Banks have various lending programs. They will take your information and basically see what program they have that you may qualify for. The unfortunate part of this process is that it’s common to go through the pre approval process and then guess what? They will put a big, fat denial stamp on you. You may spend a lot of time bank hopping with hope in your heart only to get stamped with the big D once again.

The next logical step is to visit a broker. A lending broker will look at your situation and match you with a variety of banks and their programs. The problem is this will not be your primary residence. Banks aren’t comfortable lending on properties that will be rehabbed and sold—fix and flips. They also are hesitant when it comes to Arizona Construction Loans. So, where does that leave you now?

ARIZONA HARD MONEY LENDERS WANT TO LOAN YOU MONEY

A hard money lender is literally a lender that is also an investor. That means they have money to loan you and on that money they expect a nice return. These are higher interest rate, short-term loans — usually between 6 months to 3 years.

These loans are asset based. That means the property you are purchasing is used as collateral. Unlike banks who focus on your credit score and your income, Arizona Hard Money Lenders are not overly concerned with your financial situation. They will look into your financial history. However, hard money underwriting is a much simpler process than that of a bank.

In fact, because of the simplistic process of underwriting borrowers can receive approvals much faster than when using a bank—typically between 24 and 48 hours. Funds are generally released in less than 2 weeks. Again, much faster than a bank. A conventional mortgage can take up to 90 days to close. This speedy process allows borrowers to capitalize on prime property without the worry of losing it to a cash buyer.

Conventional financing works for many situations—however, when an investor wants to be a game changer in the real estate business they need to have access to fast cash.

Using a hard money lender versus traditional financing has many benefits: quick access to cash, less concern of your financial state of affairs and building a personal relationship with you lender— one that can lead to lower interest rates on future endeavors.

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.

THE BEST LOANS FOR HOUSE FLIPPING

Hard money loans and bank loans are the most common financing when it comes to real estate. But, what is the best loan for fix and flip projects?

Depending on how many properties you are working with at a particular time will navigate what type of financing is necessary.

Initially, new investors go to banks for financing. Typically, they don’t look toward hard money or private money. If you are going to do this you will need to look for local portfolio lenders. These are local banks that lend their own money. These are not big banks such as Wells Fargo and Bank of America that will approve and lend on a mortgage, but later on will sell these mortgages. These are smaller, local banks that will keep the mortgage in-house. The benefits of these loans are the low interest rate. These rates run between 4% to 6.5% at any given time.

However, there are major drawbacks to these small bank loans. Initially, you will be required to put more money down. Typically, an investor will be looking at upwards of 25% down. That’s a big chunk of change. That 25% does not include all the fees that will have to be paid, as well—that is additional money required. To add on to that, the investor is left to pay for all repairs to the house. These types of loans do not cover rehabbing.

So, if the house is $100,000—the investor puts down $25,000. Let’s say the repairs are $20,000—that’s $20,000 the investor has to come up with out of their pocket. So far, that is $45,000 that an investor will have to pay on a $100,000 house. That just doesn’t make sense.

WHERE ELSE CAN I GO TO GET A LOAN?

Arizona Hard Money Lenders are an avenue that investors can choose to borrow from. This option works great for many investors. The rates from a hard money lender will definitely be more than that of a bank. Rates can run anywhere from 7.99%-15%. The great thing about Arizona Hard Money Lenders is they will lend you more money. It is common to hear of a hard money lender financing 90% of the purchase price. On that same $100,000 house that the bank only lent $75,000—a hard money lender will lend $90,000. On top of that, a hard money lender will finance the repairs on the property, unlike a bank loan. Many lenders will lend 100% of the repair costs. How that works is you get what is called “draws,” As you make the repairs, inspectors will come out—the hard money lender will study the report and then authorize the cost of the repair. Arizona Hard Money Lenders will lend on more than one property at a time. Also, Arizona Hard Money Lenders want to know they can trust an investor. Once they see a relationship forming, interest rates and points usually become more manageable.

Traditional mortgages can be a great tool for financing, however when it comes to properties that will be quickly rehabbed and sold using a bank loan just doesn’t make financial sense.

To find a hard money lender in your geographic area simply conduct a Google search and allow Google to know your location.

WHO SHOULD USE HARD MONEY?

People often associate hard money with being hard to get. However, the “hard” relates to the hard asset that is used to secure the loan.

The hard asset that is used to secure the loan is used in place of the borrower’s credit score or income—this is what traditional lenders use to determine a borrower’s eligibility. It use to be that homeowners would use these loans when they were denied conventional financing—that is not as much the case anymore. Typically, real estate investors use hard money—they can use them to fix and flip a single family home and resell the distressed property, small commercial bridge loans and construction.

WHEN TO USE AND NOT USE HARD MONEY

A lot of investors don’t use hard money with their first deal—mainly because they aren’t well-informed about the process, but also if they have friends or family that will finance them, they usually choose that path. After seeing that they can only do one deal at a time using friend’s or family’s money—and wanting to ramp up their investments they typically find a hard money lender. Many investors use Texas Hard Money Loans for distressed properties that don’t qualify for conventional financing. Many borrowers use hard money when they qualify for a conventional loan, but need to close in a short amount of time.

Texas Hard Money Loans are not ideal for a foreclosure bail out. Being in a foreclosure situation and using hard money to fix the issue at hand will probably result in getting the borrower in even deeper. Texas Hard Money Loans are not usually used for a property that a borrower is going to have as their primary residence. Most Arizona Hard Money Lenders don’t like to lend to these types of situations. And, with the higher interest rate and short terms a hard money loan isn’t ideal for a primary residence.

The rehab of property is the most ideal project for the use of hard money. Most lenders will lend a portion of both the purchase price and the construction. However, there are some lenders that do not want to deal with the hassle of the construction inspection or the uncertainty of a property. Each lender has their own niche and it is the borrower’s responsibility to research lenders to find out the best match for them.

Texas Hard Money Loansare not for everyone. However, there are many ideal situations in where hard money makes sense.

If the goal is to simply find a distressed property and fix and flip—there is no better lender than a hard money lender. This is what most lenders focus on. There are Arizona Hard Money Lenders that focus primarily on construction, small business loans and even residential bridge loans. However, if a borrower is looking for a 15-30 year mortgage, hard money is not ideal.

Saturday, March 30, 2019

THE BASICS OF HARD MONEY LENDING

An investor can use hard money for businesses, construction and fixing and flipping homes. There are potential investors that are uncomfortable with using hard money because of the higher interest rates. However, understanding the benefits of hard money can easily rid a borrower of that concern.

Firstly, what is hard money? Hard money is money that an investor is lending in order for a borrower to proceed with their project—whether that be building a spec home or fix and flipping a residential property. A hard money lender is simply an investor who is looking to lend their money in order to make a profitable return. Arizona Hard Money Lenders rates typically range from about 2 points to 7 points and interest rates anywhere from 7% to 18%—this is a large range because each hard money lender has their own terms. Rarely, will a lender work on the high end of the interest rate—borrowers will more likely see 7%-12%.

The benefit of a hard money lender is the relationship an investor can build with their lender. It is common for a borrower to start out with more points and a higher interest rate and then watch the rates fall lower as the relationship becomes stronger. Once the lender sees the money return quicker they want to keep the business going with the investor because they have learned to trust that this investor will make money for them and make it quickly. This is a win-win situation for both the hard money lender and the real estate investor.

WHERE CAN I FIND ARIZONA HARD MONEY LENDERS?

It is not difficult to find a hard money lender. However, the ones a borrower will be best off with are smaller and more relaxed. These types of lenders will be easier to get a hold of, to answer your questions and all in all just easier to work with. There are both larger firms and smaller firms (or an individual). The larger firms will require more from a potential investor—they will do credit checks, require a minimum amount down. They will be harder to work with because they have a larger scale model they are working with and a large amount of borrowers they are filtering through their system. The smaller lenders don’t have to transmit borrowers through such a large model—they are more relationship based. Building a relationship is the goal for both investor and lender.

Yes, initially looking at points and interest rates it seems working with a hard money lender will be overly expensive.

Unlike a bank, working with a hard money lender will not only allow you to build a relationship— that trust you build will begin to pay off with lower interest rates and points. Once a relationship is built many investors simply can text their lender for an authorization on a project and the stronger the relationship, the more likely the answer will be yes— versus waiting up to 90 days for a bank to authorize an application. The benefits of working with a hard money lender far outweigh the slightly higher rates a borrower will pay in the start of this business relationship.

WHAT EXACTLY IS A HARD MONEY LENDER?

You’ve probably heard the term “hard money lender.” But, what do they do? When do you need one?

Situations will arise when you just need cash quickly. There are situations when borrowers don’t qualify with traditional lenders such as a bank. Let’s say you want to purchase a house in a relatively short amount of time— in this case speed of execution is key in securing the property. Banks, and all traditional lending institutions, want some type of security to assure you will pay the loan bank. They will check your credit history, your payment history, your income and income tax returns. This gives them a personal guarantee they will be repaid in full.

Arizona Hard Money Lenders, on the other hand, are what is referred to as an asset based lender. What this means is that they care more about the actual property that the borrower is using as an asset than they do your credit history, payment history, income and tax returns.

FORMS OF HARD MONEY

There are many forms when it comes to hard money. Factors are when someone loans the borrower money against the receivables of your business. This is one way a business owner can use assets for their business’s operational costs.

Another form is the traditional hard money lender. The traditional form is when the lender is concerned with the property— whether it be a single-family home or a strip mall. It is whatever property the borrower is planning on improving.

All in all, Arizona Hard Money Lenders are concerned with the quality of the asset the borrower is using to secure the loan. A hard money lender uses property as collateral. What this means is in the case of default the property is legally taken over by the lender—who in turn, can sell the property to regain the money lost via the loan.

It is wise to choose a lender that is located in your geographic region, as Arizona Hard Money Lenders like to be able to kick the dirt on which they lend. You can find a lender in local newspapers or a simple google search. Google “asset based lenders” or “Arizona Hard Money Lenders.” You can also search “private money lenders” to find one. Also, make sure you allow google to search your location to find the lenders in your area.

There are many times a borrower will find themself in a pinch and in need of fast cash.

Arizona Hard Money Lenders typical pre-approve within minutes and secure the approval within 24-48 hours. Funds are readily available in less than two weeks. Terms and conditions vary between lenders, as they are not required to conform to traditional lending institutions strict regulations. Therefore, rates and terms can be worked out between lenders and borrowers.

SPEC HOME FINANCING WITH ARIZONA HARD MONEY LENDERS

The 2010 Dodd-Frank Act and other regulations have pretty much assured consumers that traditional lenders are not willing to provide speculative Arizona Construction Loans.

However, unlike traditional lenders, Arizona Hard money lenders are eager to finance these deals. Even though banks were encumbered with regulations due to lending practices, Arizona Hard money lenders do not have these same rules. Spec home financing is a high demand market that is left with not a lot of funding choices. Luckily, there are Arizona Hard money lenders that will gladly assist.

Spec loans provide financing for projects projected to have a high return. These loans can be used for many types of investors. These loans can finance single-family homes, residential units, manufactured homes and commercial properties.

WHAT TO CONSIDER WHEN WORKING WITH ARIZONA HARD MONEY LENDERS

First off, make sure you get to know your lenders and what practices make them comfortable. Remember, these lenders can finance projects that would be impossible to close with a traditional lender. Builders who work well with Arizona Hard Money Lenders open up a revenue stream unlike any other.

Make sure you understand the lender’s rates and fees for the spec home financing. These are short-term, higher interest rate loans. Often, these loan terms are between six and twelve months. However, these loans have been known to have terms up to 5 years. Do your homework and be fluent in your knowledge of hard money lending. The down payment requirements can be anywhere from no money down to 50 percent down—each lender is unique, just as each builder. But, keep in mind that if no money down is required, you will have to have some sweat in the game.

Find out if your lender is content with the geographic location of your project. Arizona Hard Money Lenders generally only want to work on projects that are in their location. Because of this, it is good to find a local lender. Inquire if your lender is comfortable including the lot cost in the loan, as well. Many lenders will fund both the construction costs and lot costs.

There are required items you will need when meeting with your lender: a business plan, copies of most recent tax returns, copies of bank statements and a marketing plan for your spec home. The marketing plan is important because you must prove to the lender you have a plan to sell this house that hasn’t even been built yet.

For builders, Arizona Hard Money Lenders can be not only a great link to revenue, but a life-saver.

To find a hard money lender that you can grow with is priceless. Working with a hard money lender is like building a relationship. They truly are a builder’s business partner. As you work on more projects with your lender you will most likely see your loan terms become even more favorable. Once the lender has built trust with an investor the process becomes even easier.

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