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Wednesday, January 23, 2019

What you Need to Know About Arizona Hard Money Loans

Real estate investors turn to Arizona Hard Money Loans for a variety of projects. For your best chance of approval, understand what these types of lenders are looking for before seeking your real estate loan.

Real Estate investors are always on the hunt for the best investments in real estate. Once you have located the property, financing the property is the next challenge faced by both professional and beginners. Rarely does the buyer have the money set aside to purchase the property. To cover the costs associated with the rental property, the buyer looks at loans to cover the costs. When making the decision to use a hard money lender, due diligence and investigation into lending options would be prudent.

So, just what are hard money loans? Arizona Hard Money Loans are secured by the real estate and are short term in nature. Rather than the creditworthiness of the borrower, the loan is backed by the value of the real estate. Expect higher interest rates than conventional loans with terms that are one to five years. Private investors fund hard money loans.

Just when do real estate investors turn to hard money loans? There are a few situations that you, as an investor, will look to use these types of loans, such as a turnaround situation, short term financing, and if you have poor credit and, at the same time, enough equity in your property that will make up for your credit challenges.

Arizona Hard Money Lenders

Arizona Hard Money Lenders differ from each other in several aspects. For instance, there are specific concepts as well as real estate segments that they focus on. First, the borrower is looked at in such areas as the underlying asset and risk of loss, the strength of the borrower, the business plan the borrower presents, and repayment of the loan by the borrower. The lenders will examine the property, looking at aspects such as the current value of the property, does the property need to be improved, and the value of the property after the improvement occurs. In case the borrower defaults, just how easy will foreclosing on the property be? This includes the liquidity of the market that the property is located in as well as the demographics and potential growth opportunities.

Arizona Hard Money Lenders turn you down for a variety of reasons. It’s good to stack the cards in your favor by understanding just what your particular lender specializes in and what they consider a good investment.

Going to a hard money lender is not a guarantee of approval. Some of the reasons a hard money lender would not be interested in the loan include the property falling outside of the lender’s parameters, the borrower falling outside the qualifications for the loan, or a lender that does not have sufficient capital to meet the loan amount the borrower needs. Tenaciousness is what is needed when searching for the financing for an investment property. If you get turned down, pick yourself up and keep searching. Real Estate investing is considered a tough game. If you choose the hard money loan avenue, they are considered riskier than conventional loans. You will need to a risk taker; if you are not a risk taker, then you may want to consider another investment avenue. You also will need to consider different ways to finance a rental property.

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.

Tuesday, January 22, 2019

Arizona Hard Money Lenders Versus Conventional Lenders, How They Differ

More and more individuals and companies are turning to Arizona Hard Money Lenders for their current real estate investment funding needs. Its important to know the difference between hard money and conventional lenders before deciding which loan is best for your needs.

The traditional lenders such as a national lender, your local bank, credit union or local mortgage broker realize a majority of their business from underwriting consumer mortgages or loans on a primary residence. Several of the largest mortgage guarantors, Freddie Mac and Fannie May, guarantee mortgages for consumers in the United States. When a consumer applies for a residential mortgage, the traditional lenders need to follow the lending guidelines set by both Freddie Mac and Fanny May. As a result, the consumer mortgage market is highly regulated. Before the housing crisis in 2008, the underwriting standards were very loose, and many people received mortgages that they could not afford. So, after the crisis, the U.S. Government established new standards that tightened lending standards for consumer mortgages that lenders had to abide by. Some of the highlights of the new standards are demonstration of more income, more savings, and better credit. Due to this, it takes longer to get a loan and much more documentation.

There are several differences between conventional lenders and Arizona Hard Money Lenders. The main differences are: First, most Arizona Hard Money Lenders do not lend on residential residences (unless you seek out a hard money residential lender). These lenders tend to lend to borrowers who invest in properties looking to flip the property and make a profit. Since they lend to investors and businesses, the lenders are less regulated then consumer lending. Second: Arizona Hard Money Lenders do not sell their loans to a second party. The lenders either lend their own money or money from investors. They loan based on investment criteria such as their win risk tolerance and lending experience.

Third: Arizona Hard Money Loans are typically short term in nature, terms range from one year to five year where typical residential loans can run 20 or more years. The hard money loan needs to be repaid in full at the maturity of the loan or converted to a conventional loan. Fourth: There are borrowers of Arizona Hard Money Loans with low credit scores, dings on their credit, do show enough income, or are self-employed. Some borrowers carry too many mortgages currently to qualify for a conventional loan. Without Arizona Hard Money Lenders, these people have no choice but to not get involved in the fix and flip industry.

After Repair Values of a Property

Fifth: Current conditions of a property are what a conventional lender looks at. Traditional lenders tend to avoid lending to rehabbers, though there are a few exceptions. Properties for conventional lenders must be livable right away. Arizona Hard Money Lenders look at property’s value after rehabbing of the property. Some of the expense for rehabbing can also be rolled into the hard money loan.

In this current market, cash is king, making the speed with which you can obtain a hard money loan very appealing.

Sixth: Ability to compete with a cash offer: You have located a property and a cash offer comes in. You cannot compete with that offer unless you work with a hard money lender. The ability for the lender to act quickly is an advantage. A hard money loan could possibly close in as little as 3 days, have minimal paperwork, and the property you are seeking to acquire can act as the collateral. If you are looking to go the route of a hard money loan, then you will need to do your due diligence and research various lenders. Call us at Level 4 Funding for a no obligation quote.

What you Need to Know About Fix and Flip Loans

A growing segment of today’s real estate investment strategies is the fix and flip model. There are several key factors to be aware of if you are looking to obtain your first Arizona fix and flip loan.

While today’s reality TV shows on fix and flipping homes may make flipping houses and making money seem like a done deal, it is not quite as easy as it appears in this thing called “real life.” There exists the real possibility that you can lose money as well as make it depending on how you manage your project and capital. Let’s take a look at the number one roadblock many just starting out in this field run into—the money to obtain their first property.

So, just what are Arizona fix and flip loans? It is a type of loan that many in this segment of real estate investing turn to in order to get into this sometimes-lucrative investment strategy. It is a short-term loan, made by non-conventional lenders. What is a non-conventional lender? These types of loans are typically made by private investors or investment groups and are considered hard money loans. The Arizona fix and flip loan is exactly what the term says it is—a loan used to purchase a property you plan to fix up and sell.

With a Arizona fix and flip loan, you can expect a term of six to twelve months, an interest rate in the range of 12% to 21% (if you have used Arizona fix and flip loans previously, then you may expect a lower rate), a no prepayment penalty (depending on the lender), and a loan http://applewoodfund.com/arizona-fix-and-flip-loans/amount that lies between 60% to 75% depending on the value of the property.

The Advantages of Arizona fix and flip loans

When you have located a property that you have an accepted bid on, speed is essential. These loans can be closed in as little as a few days to one week. This is an advantage for the real estate investor. This is compared to a conventional lender where it may take the conventional bank 30 to 60 days for an approval. In addition, the conventional lender will require mounds of paperwork. A fix and flip lender will care less about debt-to-income ratios, your credit score, and even your income. The property is not considered as current value but the after-renovation value. The fix and flip lender will also look at the market the property is located in, if the borrower seems trustworthy, and if the numbers in the business plan submitted by the borrower makes sense.

Unfortunately, there is also a downside to these loans. At Level 4 Funding, we can help you determine if this type of loan is right for your specific real estate investment.

Some of the downsides of Arizona fix and flip loans are the higher interest rates, shorter terms, and higher costs upfront such as points and origination fees which can make it harder to turn a profit on a project for the first time (inexperienced) investor. As an inexperienced investor, you make consider taking on a partner that is experienced in fixing and flipping homes. Taking on a partner will make it easier to secure funding. If you are considering venturing into becoming a real estate investor, you will need to develop a business plan and run the numbers on the target property to make sure the project makes sense. The ideal project entails obtaining a property that you can purchase well below the value, and quickly fix and flip the property in a short period of time for the increased market value.

The Facts About an Arizona Owner-Occupied Hard Money Loan

An Arizona owner-occupied hard money loan requires the borrower to live on the property. With the tightening of underwriting for conventional mortgages, individuals are turning to these types of loans.

Since the financial crisis in 2008, the U.S. regulators have tightened the regulations on home mortgages. Higher credit scores, more cash, and increasing credit worthiness are all things that have changed. If you are in a situation where one or all of these items will prevent you from getting a conventional home mortgage, then you may want to look at an owner-occupied hard money lender. These are loans that the owner of the property will be living in the property that the loan is being secured for.

If you are in a situation where you cannot be approved for a conventional mortgage, then an alternative may be the owner-occupied hard money loan. If properly underwritten and the loan is compliant with government regulations, this could be a great alternative. The hard money loan is also a great alternative for real estate agents or mortgage professionals whose clients may not be able to purchase a home going the conventional route.

Another type of hard money loan is the consumer bridge loan. This type of loan is short term in nature, with terms that start as low as three months. The purpose of the loan is focused on borrowers who cannot secure a conventional loan. Some of the reasons that a conventional loan is not an option is: the borrower has one existing home and is seeking to purchase a new home, downsizing, short-term problems the borrower faces such as foreclosure, bankruptcy, or insufficient amount of time on a new job, a short sale, not enough cash for a sufficient down payment, divorce or probate, avoiding the need to liquidate assets such as stocks, 401Ks, 1031 exchanges, and fallout from reverse mortgages. Conventional lenders will usually not make a conventional loan if any of these situations are present.

The Terms for a Bridge Loan

The terms for a bridge loan are: closes in 5-7 days, but could be longer, the term is eleven months maximum, typical interest rate is 9.9% and expect to pay points in the range of 2-3% plus admin and doc fees.

There are Arizona Hard Money Lenders that offer loans with longer terms. At Level 4 Funding, we often extend existing loans for current lenders and can help you find the right type of loan for your current real estate project.

An Arizona owner-occupied hard money loan is, as the name states, a hard money loan for a longer term on a private owner-occupied residence. These are less common. Most times, when a borrower seeks this route, it is because of credit issues that cannot be resolved in 12 months. A borrower will need to have his credit “seasoned” and it may take longer than a year. The borrower may be either self-employed or has a short time on the job. These types of loans could close in as little as 5-7 days, but expect longer, there is no prepayment penalty, and you will need to pay points in the range of 2-3% as well as admin fee and doc fees and debt ratios that must be below FNMA requirements. Other loans terms that a private lender could offer are 20/20 and maybe 15/15. Finally, do your homework, conduct due diligence and research the lender to make sure your loan is in compliance with BRE regulations. Here, at Level 4 Funding, we offer some of the best interest rates in the market. Call us for a no-obligation quote.

How to Secure Arizona spec home financing for Construction

Spec home financing is the term used for obtaining a construction loan on a property that does not yet have a buyer. They differ from a conventional loan in a few key metrics.

A spec loan is an industry term used for financing construction of a property, residential or commercial, that the builder has not sold yet. Spec loans are a small percentage of the total construction loans made. To secure an approval for your project you will need to do more leg work compared to a conventional lender. There are, however, lenders out there—as long as your project has good profitability. Due to the fact that Arizona spec home financing is a loan for a construction project that has no committed buyer, this type of loan is much riskier than other construction loans. If you locate land that is completely unimproved, you will improve your chances of qualifying for a loan, so you can build on the lot.

The project you choose should be able to be completed within a solid time frame. You want to look for an acquisition that can be completed quickly since construction loans are short term loans. They last only as long as the project lasts. The loan is paid out in draws with the consideration of the percentage of completion. By starting a project that can be completed quickly, you minimize the lender’s risks. Because the loan draws are based on a percentage of completion, they tend to be small in the beginning and increase as building ensues. You would be well advised to have a cash reserve before beginning your project.

The land is your equity. Using your land as collateral for Arizona spec home financing may increase your chances to secure the construction loan for your project. Some lenders may require you to put the land up for additional collateral for the construction loan. The land could even be used as your whole or partial down payment.

If You Do Not Have Experience, Bring in a Partner

To see yourself succeeding in securing the construction loan, you may want to consider bringing in an experienced partner to demonstrate to the lender your ability to complete the project and show a profit. Bringing in a partner with credit that is better than yours can also improve your chances of securing Arizona spec home financing for the project as well as demonstrating that the project is more creditworthy. If you are short on cash, bringing in a partner can also help with a down payment. They can also assist with improving the asset picture when applying for the loan, particularly if the debt to equity ratio would benefit. Lastly, know when bringing in a partner that you will be reducing your projected profit by giving a share to the partner you bring in.

Develop a business plan that is compelling.

Since you have not secured a buyer yet for your project, you will need to “sell” your lender on your project. You need to tell a story why your project will succeed as well as develop projected financials that are detailed and show how you will produce a profit. You will need to work hard to convince the lender that your project is a risk that he wants to invest in. You will need to develop where your project begins, what your view is as far as how you will develop it, and where the project will be at the end. Every lender will want to know your exit strategy—the “end of the story” that tells him how you will repay the loan. We, at Level 4 Funding, are happy to assist you in developing your strategy for a successful project. Call us for a no-obligation quote.

Monday, January 21, 2019

All You Need to Know About 100% LTV Commercial Real Estate Financing

100% commercial real estate financing is possible. Let’s take a look at what lenders look for when determining your eligibility.

This type of loan is used solely for income producing properties and is not for residential use. Some of the types of properties that you can obtain a 100% LTV commercial real estate financing for include shopping centers, retail malls, hotels, complexes and office buildings. Independent lenders and home mortgages are actively making loans on commercial real estate. Additional lending companies are pension funds, insurance companies, private investors and SBA loans. A small percentage of preferred lenders offer 100% LTV commercial real estate financing for owner occupied commercial properties—meaning that your business must occupy at least 51% of the property. This SBA loan is for established businesses only.

A mortgage is typically loaned to an individual borrower. Commercial real estate loans, on the other hand, provide loans to entities which include corporations, developers, funds, trusts and limited liability partnerships, all of whom are formed specifically to own commercial real estate. If the entity does not have a verifiable credit rating or financial track record, then the financial organization may want the principal’s personal guarantees. In the event of a default on the loan, the lender will look at the loan guarantors to recover the funds. If you obtain a loan without a personal guarantor, the lender cannot seek recourse with the principals.

Loan repayment schedules differ from one type of loan to the other. Residential loans are repaid over the term of the loans and are amortized over the life of the loan. Commercial loans range from five years to twenty years and the amortization period is usually longer than the loan. The lender will charge an interest rate depending on the term of the loan and the amortization schedule. Additional considerations for the interest rate are the borrower’s credit strength and the negotiable terms. Higher interest rates will normally be charged on longer term loans.

Loan to Value Ratios

Loan to value ratios are another way to differentiate commercial loans from residential. This is a figure that measures the loan to value (LTV) against the property. The lower the LTV for both commercial and residential loans, the more favorable interest rates the borrower will qualify for. The reason is that the more equity the borrower has in the acquisition property, the less risk the lender needs to assume. Commercial loan’s LTV fall into the 65% to 80% range. The rates will differ depending on the loan type, such as raw land versus rehabbed land. This means, of course, that you will usually be paying a higher interest rate for 100% LTV commercial real estate financing.

DSCR stands for Debt Service Ratio and is one of the ratios lenders consider when approving loans.

Lenders will look at the properties ability to service the debt by looking at the ability of the commercial property to service the debt, including interest. This is known as the Debt Service Ratio (DSCR). If the DSCR is less than 1 then this indicates a negative cash flow. Lenders look for loans with a DSCR of 1.25 or greater. Unlike residential loans, commercial loans carry higher interest rates. There are additional fees added to the overall cost of the loan which differs from residential loans. Some of the fees include appraisal, loan application, legal, survey fees and origination fees. Some of these costs are upfront fees. Restrictions may be built into the loan for disallowing prepayment of the loan. This is an important consideration as many investors are looking to turn properties quickly and a prepayment penalty can significantly affect the bottom line. If you’re looking for commercial real estate financing, call us at Level 4 funding for a no-obligation quote.