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Sunday, January 13, 2019

Can You Really Get Funded with Hard Money Loans in Arizona in Days?

Whether you need funding before the year is up or are simply eager move on a deal before it vanishes, Hard Money Loans in Arizona can help. Unlike traditional mortgages which can take more than a month to get cash in hand, you can measure your HML timeline in days.

According to a recent report from Ellie Mae, closing on traditional mortgages is becoming an increasingly sluggish process, with the average refi now taking 43 days and purchase taking 46. This is the longest close time seen in more than a year, meaning those who need to move quickly are out of luck if going through traditional channels.

The same report notes that FICO scores stand in the way for many people trying to get financing. In all, 71% of those funded have scores that top 700, but the stats are a bit grimmer for those going the conventional route. Just 13% of financing was awarded to those with a 650-699 FICO score and less than 4.5% went to all groups sitting at 649 or below. Overall, the average score of those approved currently sits at 727, yet it’s important to note that the average person doesn’t have a score this high. Even though FICO scores are at an all-time high across America, CNBC says they’ve peaked at 704.

Time and credit scores are major barriers for those hoping to move on the purchase of a home quickly, but these numbers largely reflect the landscape for traditional homebuyers. Those working in real estate investing or who want to grab a great deal on a distressed property and restore it face additional challenges. When lenders are being picky about the traditional markets and raise the bar for criteria like FICO scores, those trying to get funded for mortgages under less-traditional circumstances are edged out even more. This is where Hard Money Loans in Arizona can help.

You Can Get Funded Quickly—Even with Rotten Credit

Regardless of whether you’re an average person who wants to purchase a distressed property with the hopes of turning it into a dream home or you’re a real estate investor, you may have trouble even getting the banks to talk to you at all. However, hard money loans work differently. Your FICO score is not a major deciding factor, but the value of the property you’re looking at is. In other words, simply choosing a home that’s a good deal, be it because you’ve negotiated a lower price or the seller is motivated to unload his junk home fast, will be enough to get your foot in the door.

If you can find a good deal, you can have cash in hand in a matter of days.

Conventional financing comes with a lot of red tape because it’s subject to different laws and guidelines than Hard Money Loans in Arizona are, so conventional options take longer to process… and that’s if you’re funded at all. If you’re organized and prepared, it’s not unheard of for alternative funding to come through in a matter of days, making it a great choice for those who need to move quickly or are even struggling due to an “average” or less-than-average FICO score.

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.

Saturday, January 12, 2019

Top 3 Tips for Working with Hard Money Lenders in 2019

The financial landscape is always changing. Learn what Hard Money Lenders in Arizona are looking for in 2019 to improve your chances of getting successfully funded.

1. Have some skin in the game. Before the market burst, you could sometimes get funded without putting any of your own money into a project. This is rarely true these days. While you can get up to 90% LTV, which may well cover everything you need it to, plan on having some of your own cash set aside for emergencies. At the very least, it’ll provide reassurance that you can see your project through if unforeseen circumstances creep up.

2. Bring experience and knowledge to the table. If you’re working with Hard Money Lenders in Arizona to fund your real estate projects, you have to prove that you know what you’re doing. The market is still great for fix-and-flips, fix-and-holds, and new construction, but your experience and knowledge will determine the outcome of the project. If you’re lacking in either, you may need to find a partner whose skills complement yours before you can take on a project.

3. Work out a solid plan in advance. Your plan should include a comprehensive timeline, each task you plan to complete, all costs you’ll incur, market research, and more. If you aren’t a specialist in any given area, be it contracting or appraisals, bring on an expert to help you plan or to review what you’ve established. It’s a smart thing to do regardless, simply because it eliminates a whole lot of costly variables, but it’ll help you get approved for financing too. You’ll also need to nail down your exit plan before approaching anyone for financing. That’s pretty straightforward if you’re doing fix-and-flips, but you may need to explore several options and crunch more numbers if you’re doing new construction or fix-and-holds.

You Can Still Get Funded with Rotten Credit!

One of the biggest questions people ask is whether Hard Money Lenders in Arizona are still willing to work with people who have bad credit. The answer is YES. Absolutely. You’re more than the sum of a credit score. If you’re bringing a great deal to the table and you’ve got what it takes to see it through, rotten credit will not hold you back. Just make sure you’re addressing the three points outlined above and are choosing projects with a lower loan-to-value rate to improve the options you’re offered.

Work with a broker who’s as eager as you are.

Experienced brokers, particularly those who work with private money, always know several Hard Money Lenders in Arizona who are looking to fund deals. They can help you find someone who understands the nuances of your business and will find the best terms available. Moreover, they understand the value of what you’re doing and want you to come back to them for your next project, so they’ll work even harder than most to make sure you’re not just getting an approval, but a great deal too.

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.

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.