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Friday, January 11, 2019

Loans for flipping houses: 3 Basic Rules

When it comes to flips there's a couple of common sense secrets,: you need to find the right property at a low cost, you need to have a budget in place for renovations, and you need to ensure the property resells ASAP. But some overlook these simple rules because an opportunity arises that seems just too good to miss, out on, but there’s a few things you should always do before taking out Arizona Fix and Flip Loans

Before you can take out a loan, you need to find a property right? You might eye that up and coming downtown area, but so is everyone else and all those earnest offers are pushing up prices on even the most distressed properties.

To find the right sort of house to take out a loan on you might need to get creative. If you know a listing agent, for example, you might find a home that isn't even listed yet, just a few blocks away from that highly competitive neighborhood going for around 75 thousand.

What a great price, so you should make an offer right away before the competition catches on?

Before you take out Arizona Fix and Flip Loans you need to determine your maximum allowable offer

If you've found a property you want to flip, and say its beyond reasonably priced should you go ahead and make an offer?

No matter how low the list price, don't just make an offer. You first need to evaluate the sales price of properties that match your vision (comps you know?) to get a sense of how much money you could make in the end. Remember that property listed at 75, you find a property with a similar number of bedrooms, and it just sold for 250, 250-75= a decent profit. Make a full offer right?

Wrong, because you need to account for rehab costs.

Walk through the property with a contractor, "I think replacing those cabinets will cost 2 thousand, the sink 3," Get an estimate for every feature you see that needs improvement. Say your contractor estimates the repairs at 145 and you know you'll only qualify for 200 in financing, if you went ahead and took out a loan, and made that full offer at 75 you wouldn't have had enough money to finish your project.

The maximum offer you could make on this deal would be 55 thousand if you use this formula:

• max loan amount-rehab costs= MAO so,

200 (max financing available)-145 (rehab costs)= 55 thousand.

Don't put in an offer until you know MAO, no matter how low the list price is.

With Arizona Fix and Flip Loans project needs to equal loan term, having a timeline helps you avoid the danger of default

Fix and flip financing is short term, the loan is intended to be paid off in a few months and there’s usually a balloon payment at the end. Any delays that keep you from actually listing the property are a severe problem. So before taking out a loan, you need to have a schedule in place. Have a time and date for when work needs to be done on every feature you intend to upgrade.

For example, "that kitchen sink needs to go in by the third," because that kitchen sink needs to be ordered five weeks in advance. If you don't have a timeline, you could default waiting for the kitchen sink to arrive.

So heres three rules:

• Get creative when it comes to finding potential flips.

• Don't put in an offer until you know your maximum allowable offer

• Have a time and date for every feature that needs to be repaired.

The first rule ensures your project is profitable, the second rule ensures you actually have enough money to complete your project and the last one ensures you will be able to pay back your loan before it comes due.

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.

Arizona Rental Property Loans: Advice for first time investors

Want to get into the rental property business, but don't have a couple hundred thousand dollars lying around? First-time borrowers of Arizona Rental Property Loans, may go to banks only to get denied time and time again, others may go hat and hand to family members, but what if I told you there was a better way?

First-time real estate investors often turn to banks to finance their first purchase because banks offer the cheapest loans.

Getting a mortgage on a rental property from a bank is a bit like running an obstacle course. Applicants jump over increasingly high hurdles when it comes to documentation and eligibility. The process can take months and even after all that rigamarole, your application still gets denied.

Certain borrowers might never qualify when it comes to bank financing:

People with credit issues, or self-employed people without a fixed income. You might want to get into the rental business to improve your financial situation or increase your income, but it is for those same reasons you might never qualify, so where can you turn?

First-time borrowers might be tempted to get Arizona Rental Property Loans from friends and family

If you are just getting into the rental business, it doesn't seem likely that you are in touch with a big circle of real estate investors.So you might consider financing your first deal with the help of friends and family members.

"Yeah Uncle Joe, do you have 300,000 you could lend me?"

Well if Uncle Joe just happens to have a cold 300 K in cash lying on his coffee table, you risk many awful Thanksgiving dinners if things go south and you aren't able to pay him back. Terrible meals that are full of cold stares as everyone chews their food in awkward silence.

But the real disadvantage with getting money from private individuals is that finding people with hundreds of thousands of dollars lying around is not easy.

Given everything we've learned, sometimes it helps to make a list of pros and cons.

Bank financing:

• Pro- low-interest rate

• Con- you might never qualify.

Private investors

• Pro- easy to qualify; if a person trusts you they'll probably give you the money

• Con- you may never find enough money to buy the property in the first place.

What if there was a source of financing that combined the best of both worlds? A place that had the money of a bank, but someplace you could actually qualify?

Arizona Hard Money Lenders could be the right help for first-time rental property investors

With hard money, eligibility comes down to the value of the property your borrowing against, your job, your credit and other hold ups from the bank are not an issue. You can qualify.

Also, these people are professional lenders which means, unlike Uncle Joe, they have the money to close your deal. But there is a catch, yes there's always a catch.

Some claim hard money is too expensive. It is expensive there’s no denying that. But hard money gives first-time rental property owners the money they need to get their foot in the door. The strategy with hard money and rental properties is usually as follows: take out a hard money loan, secure a tenant, get a steady income to improve your credit score and then refinance to a long-term bank loan.

If you rely on a bank to get your first investment loan you might never qualify, if you rely on money from friends and family, you might never get the money needed to close.

With hard money you might actually stand a chance of becoming a real estate investor.

Arizona Hard Money Loans: Why Short term isn’t always better

One of the biggest gripes most house flippers have in the case of hard money is that it is expensive. When it comes to Arizona Hard Money Loans, a shorter loan with smaller monthly payments is your best bet right? Well not always.

If you are in the flipping game, you want a short-term loan with monthly payments, right? A 340 K loan for 14 percent interest, well that will cost you about 4 thousand in monthly interest payments alone. Who wants that kind of obligation for longer than say six months?

Some advice when it comes to Arizona Hard Money Loans: never underestimate the scope of work involved

Say a rehab investors been in the business for a little under a year and while combing through the local listings he

spots a deal that is too good to pass up. The list price is 50 K and houses in the area usually go for 300. He doesn't need a calculator to spot the potential.

At such a steep discount, the house is a wreck. Inspection reveals only the frame of the house is worthy of being salvaged. But our investor remembers from previous deals, "a short-term loan means greater profits," and so sticking to his guns he takes out a six month 190 K loan at 11 percent with interest-only payments.

With his money in hand the work proceeds, rotten clapboard falls until the house is nothing but sticks. Then the floors removed, and he comes to find the house is tilting because the foundation has sunk. Our poor investor has to build a new house from scratch to rectify the issues with the foundation. Should take six months right? His contractor gives him no assurances.

But he has to see the project through because how else is he going to pay back that 190,000 if he doesn't sell the house?

The clock ticks down, work continues at a furious pace, but six months is just not enough time. Our investor can only pray that his lender will understand his difficulties and give him a bit more time before asking him to pay back the remaining 190 K in principle.

While long term Arizona Hard Money Loans might be more expensive they might be the help thats right for you

What went wrong?

The investor was naive. First, he let numbers tell him to get in on the deal, the lure of 100s of thousands in potential profit blinded him to the scope of work involved. Because he underestimated the extent of work required, he assumed an interest only short term hard money loan was right for him.

He might have paid more for a long-term hard money deal, but he would have had two things that are invaluable in the case of difficult flips: time and flexibility. A long-term hard money deal might be more expensive on the surface, but it might give you the time you need to finish your project.

If you sense a property might need a lot of work, you don't want to live under the threat of a looming balloon payment ready to pop at any moment.

Thursday, January 10, 2019

Arizona Fix and Flips Loans: Advice for Renovations

Use the proceeds of Arizona Fix and Flip Loans sparingly. Fix and flip financing is expensive, so avoid committing to projects that hinder resale of your home at all costs because you need to pay off your loan as soon as possible.

Just because you add something to a flip doesn't mean that something adds value. Keep your rehab projects as simple as possible, ensure that the result appeals to a wide range of buyers, and that you'll finish your rehab before your loan comes due.

If you don't keep the scope of your rehab as narrow as possible, disaster might be right around the corner.

With Arizona Fix and Flip Loans risk less by not wasting your money on the following:

• Fixed use rooms: Say a flipper has a property located in the yuppie section of town, the area's teeming with young professionals. The investor thinks adding an office would be nice. They spend about five grand on built-in desks and shelving. The room becomes a beautiful configuration of fixed geometry. The efficient and fixed storages solutions should appeal to buyers in the area, right? Well, not exactly. Most buyers gripe about the fact that they can't use the room as a bedroom, "we plan to have children, we can't have them bouncing their heads off of all these hard edges." Given the lack of an extra bedroom our flipper has to sell the home at a discount, the office didn’t add value. In fact it made his home harder to sell.

• Extensive reconfigurations: Say a rehabber wants to play architect. Her property has a generous section of vacant space at the end of the hallway. "Master bathroom? Everyone wants a master bathroom, right?" Images of dollar signs flash through her eyes, This reconfiguration will add 20 K to her total loan amount, but bullheaded she charges forward, knocking down various walls, diverting sewer lines, weeks and weeks pass, but things stay on schedule. But the ponderous city inspector has a problem, "the pipes you've installed are a centimeter too small. “Now to even list her home, she'll have to rip the walls apart again and start from scratch.so Its unlikely she will resell the house before her loan comes due.

She will have to pay back that loan, even though her property isn’t listed yet. The likely outcome is she will default.

Use Arizona Fix and Flip Loans on the most basic

renovations possible, to avoid the danger of default.

Are office conversions and luxurious master bathrooms inherently dangerous in and of themselves? Of course not. But do yourself a favor and follow a few basic rules when it comes to rehabs:

• Don't convert a room for a fixed use: Offices aren't inherently bad, but if you add built-in desks, or features that redefine the use of a room you narrow the number of potential buyers. Not only are such conversions expensive they rarely return much value when it comes to the resale value.

• Renovate only as necessary: So, a master ensuite is an essential convenience every buyer expects right? Not always. Updating existing bathrooms is one thing, but reconfiguring an entire layout, installing new plumbing and creating a new bathroom from scratch is quite another. Such an endeavor not only costs a pretty penny, but it also takes a long time, and it will probably add only a few extra thousand to the list price.

In short, avoid seemingly nice features might put off buyers and additional time-intensive projects will keep you from listing your home and thus paying back your loan.

So don't undertake renovations that restrict potential buyers, or projects that hinder your ability to list your house.

Arizona Fix and Flip Loans: Why you need to look past the property line

With Arizona Fix and Flip Loans, you don't want to borrow against a house won't sell in the end. Why don't you consider factors outside the house before you put in an offer? Looking past the front yard for things that could doom your project from the start.

No matter how good a deal might seem, and no matter how attractive the result of your rehab project, certain homes will only sell after pigs take flight. Location, location and location, yes this cardinal rule of real-estate holds for flips as well, but its more like location, location, and properties in specific areas will never sell.

Loans for Flipping Houses should never be taken out for certain types of properties:

• Properties next to ugly sights: Say a house flipper combs through the listings, and there's a foreclosed home listed at, only 75 thousand, He's looked over the description and seen some photos of the interior, the project should be short work. But when he pulls up, the looming sight of a half-naked woman proudly presenting a vodka bottle between her breasts blocks out the sun. Something the description didn't mention: the house has an east facing exposure to a garish billboard. No matter, he will go forward as the profit projections are just too good to pass up. After work he finishes work, trodding couples argue as husbands sneak glances up at the luminous sight, they never even look at the house. No one puts in a bid at his asking price so our flipper has to sell off the property at a steep discount.

• Properties next to deranged neighbors: Another flipper finds a prospective property that is selling for only 75 K when they regular price in the area is 300. Before putting in an offer, she visits the location only to discover something smells, a strange spectacled woman dressed in sackcloth has been emptying her litter boxes into the backyard of the house. Well, 225 in resale profits it seems to be deal is just too good to pass up. Our investor calls the police and the neighbor is promptly cited. Yes, the litter box disposal activities stop but now our investors made an enemy. After work on the house is done, and buyers begin to show up, the woman is dancing, menacingly half naked on the front lawn. She calls the police again, but the woman is not doing anything illegal, she's just humming spinning in circles, which isn't against the law.

Will the house sell? Well unless the neighbor is involuntarily committed, it seems unlikely.

With Arizona Fix and Flip Loans look beyond the

property line and try to find features that make a house unsellable before you apply.

If your browsing the internet and find a deal that seems too good to be true, it probably is. No property description is going to list features like "right next to scenic high-tension wires, neon billboards or demented neighbors." You can avoid all this risk by doing s+omething straightforward, walking through a house, even talking to the neighbors before committing to a project.

Commercial Arizona Fix and Flip Loans: How to Evaluate a Property

Before taking out Arizona Fix and Flip Loans on commercial properties, you need to get a sense of what a property might be worth after you've fixed it up. Welcome to the obscure and confusing world of commercial property valuations. This article will endeavor to explain in the simplest possible terms why you can't just rely on comps when it comes to commercial flips

If you are in the flipping game hopefully you know everything, there is to know about comps. You look for properties with similar features, see what they sold for and badda-bing you have a sense of a property’s potential.

Commercial property valuations are the subject of MBA dissertations, meaning they aren't simple. In the end, comparable sales won't give you a real sense of what a commercial property might be worth.

You might be prospecting through various listings and come across two apartments to flip, a 4-unit apartment building selling for 75 and a 5 unit one selling for 150. Conventional wisdom says one unit won't make much of a difference in the end, so the one listed at 75 is a better deal, right?

How to look beyond the comps before taking out Arizona Fix and Flip Loans

Commercial properties are valued based on the income generated, you can't just rely on comps; income must be accounted for to assess a property accurately. So how do you do that?

Using income to evaluate a property is done per the following formula:

Net Operating income/cap rate

What is a cap rate one may ask? Annual income/property value. But who determines the cap rate? No one knows precisely, owner set rents and therefore income and the market set the value of a property.

For the sake of illustration, let's say the cap rate for both properties is 7.7%, and the average rent in the area is 1,500 per unit. You may walk through and get the same estimate when it comes to repairs on both properties, 450 thousand.

The four-unit apartment still looks pretty attractive, but hold on let's use the formula:

4 unit building can earn, 72 K a year

72,000 /.077= 935,064-450= you'd earn 335 thousand dollars given the rehab. Well, that's good, and you might be asking yourself how much difference can a single apartment make?

The 5 unit building can earn, 90 K a year

90,000/.077= 1,168,831, you'd earn about 568,831 dollars on this deal basically an extra 200,000 dollars because of one apartment. Had you relied on conventional fix-n-flip wisdom, i.e., That a bedroom only adds so much value or that a lower sales price is always better, you would have missed out on 200 K in returns.

Use the income approach to get a sense of how much money you

can make before taking a commercial Arizona Fix and Flip Loans

Reality isn't as clear-cut as the examples above, but the message is clear, you can't evaluate the potential of a commercial flip based on comps.

Getting a sense of how much income a property can generate gives you a sense of its potential, use formula, NOI/cap rate. Set the NOI based on the average monthly rent that you could charge per unit and use the prevailing market cap rate. Perform these evaluations before you take out a loan. That one piddly apartment unit could result in 100's of thousands of extra dollars in returns on your next commercial flip.