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Saturday, January 12, 2019

Arizona Hard Money Lenders: How to find the Real Deal

Arizona Hard Money Lenders are the go-to source of financing in the flipping business, for plenty of reasons. While the days of pay-day loans and NINJA mortgages are long past, alternative financing, including hard money, remains largely unregulated. Are the waters of fix and flip funding teeming with loan sharks? No, but it is in your best interest to learn some classic signs of bad actors.

In the end, your lender will make money from your down payment, interest payments, and loan closing costs. An unscrupulous lender will give you money, as your loss, in the end, is their gain.

Before signing on the dotted line, try to get a read on your lender. Look out for a few things, how open are they when it comes to discussing your deal regarding fees, pre-payment penalties, your own projections and the amount of money they're willing to give you?

A lenders willingness to discuss these issues tells you how interested they are in your success.

Unscrupulous Arizona Hard Money Lenders shy away from discussing fees and pre-payment penalties.

Is your lender vague about closing costs or third-party fees? You might be ready to make an offer on a house, and then all at once, the lender might demand thousands in undisclosed fees before they give you the money you need.

Ideally, your hard money provider will spell out fees in black and white before the process even gets started telling you the specifically how much money you'll need to close your deal. Along the lines of transparency, they should be up front when it comes to pre-payment penalties. Don't just look at the interest rate offered, just because a lender might offer 8 percent, you may end up paying 8 percent interest on a 12-month loan even after you've paid it off in 4.

Risk less when it comes to Arizona Hard Money Lenders by finding a lender who has a stake in your success

You want a lender who seems interested in your deal, do they smile and nod as you discuss your projected resale value or do they offer real insight into your projections?

How much flexibility do they have in the amount of financing they are willing to give you, and how much of a down payment you might need? If you find a lender who is asking you for a lot of money up front and isn't willing to offer you the funding you need what are they offering you?

A high-interest loan that doesn't help you, with a steep down payment while, your lender gets legal title to your property if things go south. Does that seem like a fair deal?

The depth of the conversation your lender has with you about your own projections indicates they are actually interested in your project. In addition, a lenders willingness to enter into fair negotiations with you when it comes to loan amount, fees and down payment is one indication they actually want to help you.

You want your lender to be an actual partner in your project, not just a source of capital. Having a lender who is interested in your success, increases your chances of success.

In short, a Hard money provider should be:

• Transparent: Disclose third-party costs, closing costs and pre-payment penalties up front, long before you have any papers to sign.

• Interested in you: should offer insight about your numbers, and not just agree with you when it comes to your profit projections.

• Flexible: Willing to negotiate with you and give you a loan that will cover most of the costs of your project.

All of these attributes are signs that your lender has a genuine interest in your success.

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.

100 LTV Commercial Real Estate Financing: How to use Gap financing

100 LTV commercial real estate financing is possible, but if you want to flip a property, it may not do you much good. A loan for the full purchase price of a commercial property won't cover the cost of renovations. If you want to flip a commercial property and you don't want to spend a dime of your own money, consider gap financing.

The concept is pretty simple, the less of your own money you spend, the higher your profits. If you are in the rehab business, you'll need a way to ‘bridge the gap' between a 100 LTV loan and the cost of actually rehabbing your property.

Gap funding is like taking out a second mortgage on an unfinished rehab project. Which is risky for both sides in this equation. Whoever gives you gap funding is playing second fiddle, if you default they get paid back after your first lender, which means they might never recover the money they give you.

For this reason, gap funding will likely you cost 5-8 percent more than your initial 100 LTV loan. Given this added expense who would want a gap financing in the first place?

100 LTV commercial real-estate financing combined with gap financing might seem expensive, but sometimes its worth it.

A hypothetical developer is eying a vacant strip mall, right in the center of an up and coming shopping district. The property is a steal, listed at 300 thousand which is pretty cheap for a strip mall. His hard money provider doesn't shy away, offering him the full 300 thousand to purchase the property, at a standard interest rate of 14 %.

But the interiors are scarred black from a recent fire, and every unit will have to be gutted and equipped with new walls, electrical, the works. All this will cost him a pretty penny, 300 thousand, essentially the cost of constructing a whole new building.

Our developer doesn't have 300 thousand dollars just lying around, but the cost of gap financing seems painful at 24 % interest. Our developer gets in touch with a great contractor and together they work out a plan to complete work in 4 months

So he bites the bullet and takes on a gap loan. Let us assume everything goes according to plan.

In four months, the once blackened interiors are sparkling, full of marble appointments and glowing fluorescent lights. The chic location of the property means it resells for a cool 1.2 million.

He's carried the loan for four months; basic interest calculations put the cost of both his loans at 623,754 minus the 1.2 million selling price, well 576 grand is nothing to sneeze at, his profits more than make up for the expense of his gap loan.

Our developer might have got 100 LTV commercial real estate financing, but gap funding let him get the best of both worlds.

He had the full purchase price covered, and the cost of the rehab covered as well.

What did this hypothetical developer do to make the most of gap funding? The first thing was he had a plan, that was clear which enabled him to finish the work as soon as possible. By working as fast as possible, our developer minimized the expense of both loans.

Not only was he able to fully finance the purchase of the property, but he also didn't spend any money on the repairs, all of this allowed him to earn a half million in profit. Without gap financing, he'd have made 300 thousand dollars less.

Who doesn't want to spend anything and earn half a million dollars? If your initial loan on your next investment property falls a bit short, don't let the expense of gap financing scare you. Gap funding is perfect for, confident and experienced real-estate investors who can complete a project quickly.

Arizona Fix and Flip Loans: Don’t Spend a Dime on your next project

Who doesn't want a loan to cover the full cost of their next flip? Earn a profit without spending any money, that's the dream. Arizona Fix and Flip Loans which cover the total cost of a flip might seem like elusive. But if you get creative and follow a simple rule you might not have to pay a dime for your next project.

Lets face it, few lenders are going to say, " oh you don't want to make a down payment, well that's fine, here's a bunch of money, should cover the full cost of your project," So to get your next flip fully funded, more than likely you'll need a second loan.

Taking out multiple Arizona Fix and Flip Loans is one strategy you might use to cover the full cost of your project

To get 100 percent of your costs covered you need a way to bridge the gap between your first loan and the total cost of your project, how do you do this? Seek out gap financing, which is just what the name says. This type of loan bridges the gap between a project’s cost and the initial loan amount.

A gap loan is like taking out a second mortgage on a rehab project, which means your gap lenders in second place if you default. Do you think the resale value of a half-demolished home is going to pay off both loans? Probably not. For this reason, gap financing usually entails a fixed split of the profits upon resale. So, gap financing then might not sound like the best 100 percent financing method out there. What’s another option?

You’ve heard of credit lines. If you have a sufficient credit line, you can cover the full cost of your project without spending any of your own money.

But getting a credit line to cover the cost of tens or hundreds of thousands of dollars in repairs is no easy feat. But, if you follow a few basic principles, you might not even need a second loan to cover the full cost of your next project.

Use the following strategies to get Arizona Fix and Flip Loans to cover the full cost of your project.

When it comes to flips there a couple of fixed variables in the equation, which are pretty much beyond your control, you can't control the amount of money your lender is willing to offer you, and you can't control the cost of rehabbing the property.

To get your loan to carry the total cost of your project, take the maximum amount of financing available and subtract the cost of your rehab to determine your maximum allowable offer:

Max loan amount (ARV or LTV%)- rehab cost= MAO

So if a lender is willing to front 70 ARV on a property worth 100,000 after repairs, and your rehab budget is 30,000, you subtract that from the 70 K the lender offers you, giving you a max offer of 40. If you manage to secure this property for 40, 40+70= your entire project is paid for by your initial loan.

So, get the best estimate of the amount of financing available to you and calculate the total cost of your project, subtract the two and then put in a bid for that amount. It is as easy as that.

This method isn't foolproof, what if the seller doesn't agree with your offer? Negotiate the selling price down, and then use a small credit line or gap loan to cover the difference.

So not spending a dime on your next flip is in your control if you follow these three easy steps:

• Determine MAO based on max financing available and your projects cost

• Get the seller as close to that number as possible

• Use gap funding or a line of credit to make up the difference

Friday, January 11, 2019

Arizona Rental Property Loans: Why you might want to take a second look at hard money

Many consider Arizona Hard Money Loans just too expensive to be a logical way to finance rental properties. But if you find a property that needs a little work, hard money could the help that's right for you.

An investor has scouted out a great property, but its got mold issues as a result of flood damage, but our investor has a plan. The properties listed at 300 and he's got a firm estimate it will take 50 K or so to repair the severe water damage, A few repairs and he is confident that he can rent out all five units, at 1500 dollars a month in no time, which will bring in 7,500 K a month. Income which is more than enough to cover the monthly cost of a conventional mortgage.

So he'll go to the bank right?

The bank might not be the right help that’s right for you when it comes Arizona Rental Property Loans

Our investor eagerly enters the bank office, proposal in hand. The terms are simple 50 K is all it will take to get this most promising rental property up to code. Based on this amount and the terms offered by the bank, he's confident that can make the 1,900 monthly mortgage payments.

The once bright smile of the loan officer dissolves as he reviews images of the waterlogged property, "so I see some work needs to be done, how are you going to carry your loan?"

"I have the savings don't worry, I've got more than 25 thousand, it should be enough to pay for the loan while the place is being fixed up," the loan officer interrupts him, "well what about the lead up time afterward how are you going to pay your loan until you find renters?"

"I've done my research, there's hardly a vacant unit in the neighborhood," the loan officer grimaces, he cannot argue with the facts. Still, he slides the application across the desk, "I'm sure things will turn out great, but we've got FHA guidelines to consider, rules are rules, I can't help you."

It seems our investors left out in the cold or is he?

Some advice, use Arizona Hard Money Loans to purchase a rental property then refinance to a bank loan

Our distraught investor hears about hard money from a friend "these guys are all about equity if a property has enough potential it doesn't matter how bad it is,"

Sure enough, our investor is eligible for hard money, but the interest seems steep 14 percent. His lender explains he can refinance after he's finished work to a cheaper loan. So he goes ahead, and things go according to plan. Work on the apartments only takes about three months, and it doesn't take to long for all the apartment units to fill up.

The bank's loan officer is well pleased because the apartments are now earning 7.500 a month with is more than enough to cover the mortgage payments and then some. Minus the expense of his new mortgage and basic property maintenance, our investor is now pulling in about 5 K in extra income every month.

None of this would have possible without hard money.

If there is a rental investment up for grabs, but the property isn't up to the bank's standards hard money gives you the capital you need, to take advantage of opportunities that might not be possible if you don't look beyond bank financing.

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.

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.