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Saturday, January 5, 2019

WHY USE A COMMERCIAL HARD MONEY LOAN

Do you own a commercial property? Is your company losing money? Do you have less than perfect credit? Good news! You can still obtain an Arizona commercial hard money loan.

Astute business people know when their business is losing money they have to intervene before their business fails. Sometimes though, they don’t have the credit to take out a loan with a traditional commercial real estate loan. They may not have a significant amount of assets either. Fortunately the property they already have—their business—is usually enough for a Arizona Hard Money Lender.

Banks won’t touch a risky commercial loan—Arizona Hard Money Lenders will. This is why the interest is a bit higher when you take a loan through a Arizona Hard Money Lender. They are taking a large risk. Typically, Arizona Hard Money Lenders will charge anywhere from 9%-13%—whereas, a bank will charge closer to 7%.

Hard money commercial lenders primarily use the property as the security of the loan. In the chance that the borrower defaults on the loan that property can be foreclosed upon and the lender can sell the collateral. This is not what the lender wants to happen, but a loan has to be secured in some fashion.

Most commercial hard money loans are short-term loans—ranging from one to three years. The majority of the loan life is around one year. However, Arizona Hard Money Lenders have the flexibility to negotiate—unlike traditional banking institutions.

WHAT TO BE AWARE OF WHEN GETTING A COMMERCIAL HARD MONEY LOAN

As you research lenders there are a few things to pay close attention to in your contract. Be cautious of exit fees. An exit fee is a large fee that is charged to the borrower when the loan is paid off. Make sure the lender won’t charge a prepayment penalty—these are also known as prepays. These penalties arise when the borrower pays the loan off too early.

Also watch for high dollar late fees on the balloon payment. The balloon payment is a large payment due at the end of the loan. Instead of making the same monthly payment in hard money loans, you pay only the interest until the end of the loan. On the final payment date you will pay the loan in full. This is how Arizona Hard Money Lenders work, however make sure the last payment is one you can afford and are prepared to make. Some lenders will include an enormous late charge on the balloon payment—be sure you are clear about any late charge amounts with your lender.

Most lenders will pre approve you within minutes and fund you within two weeks.

Hard money loans aren’t just for business owners losing money or with bad credit. Commercial hard money loans can be an excellent option for your business growth. Your collateral can be just as valuable as your credit as you grow your business into a successful and profitable endeavor.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Friday, January 4, 2019

ELIGIBILITY OF ARIZONA SPEC HOME FINANCING

With a spec homes, builders don’t have clients, as custom home builders do. They are building a home with the intent to either sell it before or after it is finished. Builders require financing to purchase the materials and pay their crews—and many need the loan for the land, as well

There are many steps to Arizona spec home financing. First, have a marketing plan for your project. This plan should include the price you plan on selling your property, who your target audience will be—for example ‘over 50.’ The plan needs to include how your target audience will know the house is on the market. Will you be attending local real estate events? Will you hire a realtor? The bottom line is lenders want to feel confident you will be able to sell the home once it is built.

Another aspect of obtaining Arizona spec home financing is gathering all the financial documents necessary. This will include you bank account statements, all sources of income and the last 3 years of your federal and sate tax returns. If you are planning on working with a traditional bank, plan on much more documentation and a squeaky clean credit check with no bankruptcies. Generally, banks will want to see a successful track record.

WHY BANKS ARE NOT THE BEST CHOICE FOR ARIZONA SPEC HOME FINANCING

Will a bank lend to a borrower looking for Arizona spec home financing? The answer is, ‘sometimes.’ However, as stated above, a builder will face many challenges—and if this is one of their first spec homes, the answer is probably, ‘no.’ Even with perfect credit banks are much too weary to lend on these types of loans for newbies.

Hard money loans are an investor’s best friend. You can receive a same day approval. Unlike banks that can take weeks to even give you the approval needed to move forward with their very lengthy process. If you already own the land you will be building on, that work as your collateral for a Arizona Hard Money Lender—along with the property. As banks frown upon first-time builders, a Arizona Hard Money Lender will be objective and look at it strictly as “does this make sense?” With a hard money loan you can receive higher loan amounts of your spec home financing than a bank will offer. For first time builders or builders with marks on their credit report, spec loan financing will allow them to get the job done.

Construction spending is rising to its highest level in years.

There is a higher demand for new homes right now. This leads builders to search for quicker and more reliable funding than traditional bank lending. Arizona Hard Money Lenders can generally lend up to 90% and depending on the project they may fund 100%of the construction costs—as long as your project makes sense.

DIFFERENCES IN OWNER OCCUPIED AND ARIZONA NON-OWNER OCCUPIED LOANS

There are differences in mortgages when discussing owner occupied and Arizona non-owner occupied loans.

An owner occupied property is the property that is your primary residence—it is what you call home. A property can have up to four units, and as long as you live in one of them—that qualifies the property as an owner occupied property. If you have a second property outside of the county you live in that is a vacation home— that can qualify as an owner occupied property. This is all determined at the time you apply for a mortgage.

A mortgage that you take out on a property that is not your primary residence is defined as a non-owner occupied property. For example, any homes you buy that you rent out to generate income would be considered non-owner occupied property.

THINGS TO CONSIDER WITH OWNER OCCUPIED AND ARIZONA NON-OWNER OCCUPIED LOANS

Owner occupied properties are traditionally financed through a conventional mortgage—as long as income and credit requirements have been met. These loans usually have terms from 20-30 years and qualify for refinancing throughout the life of the loan. Depending on the borrower’s credit the interest rate can range from 3.75% to 5.5%—these rates change periodically. Most mortgages are on a fixed rate—meaning the payments and interest never change. Borrower’s typically give up to a 20% down payment, as well.

However, when taking out an owner occupied mortgage many borrowers use private money—or hard money—lenders. Because banks have strict requirements on mortgages there can be various issues even on owner occupied properties being financed with a conventional mortgage. With a hard money loan a borrower can skip the hassle of waiting on financing approval for a property that most likely will not be approved. Arizona Hard Money Lenders base the loan decision on the property as collateral. These loans make owning multiple rental properties possible. Unlike the banks who typically don’t allow more than 4 properties, a borrower can borrow for as many properties as needed as long as the collateral is there to back the loan. Banks also have higher credit requirements for property loans—a minimum of 620.

Arizona Hard Money Lenders will typically require proof of the last 3 months of income, last 3 years tax returns, along with proof of the collateral that will be backing the loan. The amount of the loan is determined by the borrower’s income, credit and will be weighed most heavily on the real estate that will be securing the loan.

Typically, Arizona hard money loans are an easy transition into a conventional mortgage. If that is part of your plan make sure to discuss this with your lender.

Yes, hard money loans have higher interest rates than traditional bank loans—but what they don’t have is lengthy approval processes and limits on owning property. If real estate investing is a career you are considering transitioning into make sure to check out a local Arizona Hard Money Lender.

Qualifying for Fix and Flip Loans in Arizona

Fix and Flip Loans in Arizona have grown in popularity as that segment of the real estate market grew. But borrowers must understand that the qualifications are different from most other loans.

The real estate market has been greatly influenced but the popularity of some fix and flip television shows. For many years, property rehabs were a small segment of the industry. But now that certain shows have presented this business as a get rich quick plan or a glamorous career, there are huge numbers of people trying their hand at fixers uppers and also needing Fix and Flip Loans in Arizona .

Most new flippers are eager to apply for Fix and Flip Loans in Arizona because they have heard that the process is fast and easy. But that is about all that they really think they know and need to know about the process. The truth is that no hard money lender is in business to lose money, so there are additional criteria that borrowers must meet to secure Fix and Flip Loans in Arizona .

The first big misconception that most borrowers have is that their credit score will have no impact on their ability to secure a loan. And while a great credit score is not critical to getting the loan, a terrible credit score will certainly cost you. A bad score is likely to increase your interest rate quite a bit, and also could lead to the lender offering you less money than you requested for the loan. As a rule, most Hard Money Lenders in Arizona are only going to be willing to work with a borrower who has a 550 credit score or better, and some will only work with 600 or more.

Experience is Critical

In addition to a certain amount of creditworthiness, lenders want to know that a borrower for a fix and flip loan has some experience in the flipping industry. The project house is the collateral for the loan, and an inexperienced flipper can destroy the value of the property and then run out of money to fix it making the collateral pretty worthless to the lender. Two or three months of bank statements will also show the lender that you have maintained a respectable balance, and are not trying to work on a shoestring budget.

Proof of the Deal

Hard Money Lenders in Arizona do not have a huge staff of subordinates who are filling their days with paperwork and loan document creation. The lenders want to know that you are seeking funding for a legitimate deal that you are working on. So they ask that you show the purchase contract from the seller and also the contractor bid that you have gotten for the work that will be done to the property. These not only show that the deal is legit, but they also show that you know what you are doing and are ready to proceed with the project once the loan is funded. Though fix and flip deals are not really as cool as they look on television, they can be a great way to make some money in the real estate industry if you are willing to do some work and make it happen.

ARIZONA FIX AND FLIP LOANS

Fix and flipping houses can provide great income—whether you are flipping part-time or full-time. Is what they say true—it takes money to make money?

How much money does an investor need to fix and flip a house using a hard money loan? Each lender has different terms and conditions. Some lenders will finance the purchase and renovation with no money down—others will approve up to 75% of LTV. Usually, it is experienced investors that are approved for 100% financing.

A Arizona Hard Money Lender wants to make sure the fix and flip will be profitable. Be prepared to have 20% of the purchase price for repairs and down payments—there are lenders that require less, but it’s better to be prepared.

Occasionally, a Arizona Hard Money Lender will finance 100% with a new investor if the borrower agrees to share 50% of the profit. This is a smart business move for someone new to fix and flips.

BENEFITS OF A FIX AND FLIP LOAN

Banks are very reserved the it comes to fix and flip loans. It’s too risky for most lenders which leaves entrepreneurs lost on where to get financed. Most fix and flip loans are hard money loans. These are short-term, higher interest loans. They are asset-based loans that are backed by the property. One of the main challenges, when dealing with a bank, is the time it takes to close then loan. There are extensive loan applications to fill out, then you wait while they review your application—most likely you will need to give additional information and fill out additional forms and documentation. This process typically takes around 60 days—sometimes up to 90 days. Unlike banks, Arizona Hard Money Lenders can pre approve a fix and flip loan within 2 to 3 days.

Traditional lenders decisions are based off your ability to repay the loan—they figure this by calculating a debt to income ratio. A debt to income ratio is how much you make each month compared to monthly loan payments. Your credit score weighs heavily on the decision, as well. Banks look at your credit score to gain an understanding of your commitment to pay back debts. Arizona Hard Money Lenders look at your financial history, but because these are asset-based loans they are looking at the property as collateral. In the chance of a borrower defaulting on a loan, the lender can foreclose on the property and sell it for repayment.

Banks prefer to make loans on property that is in good condition. For example, traditional lenders require having mold inspections conducted. You will need to have any problems fixed before being approved because if not, the value of the property decreases tremendously. However, a Arizona Hard Money Lender expects that the fix and flip will not be up to par, which is why the renovations of the property will be included in the loan. Lenders often allow interest only payments for the life of the loan and rarely have a prepayment penalty.

House flipping can provide a generous income and potential to change your career.

Arizona Hard Money Lenders are the best source for fix and flip loans. They require less paperwork, will give you a decision within a few days and are flexible with their loan terms.

Documents Needed For Fix and Flip Loans in Arizona

Fix and Flip Loans in Arizona are much less complicated than a traditional loan. But there are still certain documents that you should have prepared when submitting a loan request.

Fix and Flip Loans in Arizona have a reputation as being much easier and faster to secure because they are being processed by a hard money lender rather than a traditional bank or lender. But the Hard Money Lenders in Arizona are still in business to make money and will want to see some documents to know that the deal is legitimate and that you have the knowledge and ability to complete the project. Having the appropriate documents ready for your lender will demonstrate professionalism and can be a great help in creating a successful long-term working relationship.

Most Hard Money Lenders in Arizona are going to charge a small fee of a few hundred dollars to process your application. This might be a fee that is waived after you have worked on several projects together but that is up to each lender. You will also need to provide proof of your credit score, which should be at least 550. A better credit score is likely to land you a better interest rate. In addition, the lender will want to see a few months of personal bank statements to see that you are responsible with your money and are paying your bills.

Fix and Flip Loans in Arizona represent a greater risk than many Hard money loans in Colorado because the property is likely to see a lot of demolition before it is improved. Lenders like to know that the borrower has experience in the industry and will be able to complete the project on time and on budget. To put the lender's mind at ease, this is a great time to submit a resume of sorts to demonstrate your level of experience. Creating a document to include your previous real estate purchases and fix and flip projects will always work in your favor.

Scope Of Work

Some fix and flip projects are very basic while others can be very in-depth. Creating a document to illustrate the scope of work that you are proposing for the project will assure the lender that you have a legitimate plan and also that you have a plan of action to improve the property and the property value. The scope of work can also be helpful when determining the length of time needed for the loan and the potential for an increase in the property value.