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Wednesday, January 23, 2019

Arizona Hard Money Loans Explained

Many real estate investors turn to Arizona Hard Money Loans in order to fund their projects. It’s important to understand the difference between these types of loans and conventional mortgages before signing on the dotted line.

Traditional lenders are designed to serve companies with good credit. There is a requirement that the company has strong monthly cash flow. In addition, the lender will require the principal to sign a personal guarantee. The personal guarantee is in lieu of putting the asset up as collateral. Arizona Hard Money Lenders, on the other hand, require that the asset (target property) be used as collateral. Less emphasis is placed on the borrower’s credit and cash flow. The hard money loan loosely represents a traditional mortgage.

Arizona Hard Money Lenders are not counting on you repaying your loan back; this is why your credit is not a big consideration. The value of your collateral is the primary consideration for your loan. Arizona Hard Money Lenders are similar to other short to medium term loans with high interest rates. The terms of the loans are from less than one year to five years. The underwriting process will vary between lenders; however, you can expect interest rates to be between 9% to 21%.

The property that you are seeking to acquire will determine the amount of the loan you will qualify for. The more valuable the property, the larger the loan. This is non-negotiable. Each Hard money lender will have their niche market that they lend such as commercial or residential, so you will need to do a lot of leg work to find the right lender for your project. You will need to develop a business plan for the property showing the cash you have available and how the loan is going to be repaid. In the business plan, you will need to reference your experience in real estate. If you are new to fix and flip, you may consider taking on a partner that has experience. A drawback is that this will lower your profit, but it will be more impressive to the lender when considering the loan. Your credit will be looked at only to determine your interest rate. Here again, the right partner with good credit can lower your interest rate.

Paying Back the Loan

The loan to value (LTV) will be one consideration in the terms to repay the hard money loan, others will be the area the project is in and the terms you negotiated. Remember, the more risk the lender has to take, the high the interest rate. In addition to the interest rate, you will also need to pay closing costs, points, and origination fees, and these fees are often paid upfront for the loan.

Make sure you have reviewed all documents in their totality before signing. It’s important to fully understand just what you are getting into.

The loan operates like an installment loan. Your loan will accumulate interest and you make monthly payments (in most cases) until the loan is paid off. If you can, you may want to pay off the loan early because of the high interest level you will be paying. There is a special niche that Arizona Hard Money Loans service. It includes if you have located an acquisition and have to act quickly or if you have bad credit, you may want to consider using a hard money lender. At Level 4 Funding, we work with hundreds of private Arizona Hard Money Lenders that specialize in various segments of real estate investing. Call us to find out if we have the right lender for you.

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.

Private Money Lenders in Arizona

Private Money Lenders in Arizona differ from conventional lenders in a number of ways. Understand the key differences so that you can determine which lender is right for your project.

To start, you need to understand that Private Money Lenders in Arizona differ from conventional lenders. These lenders loan to individuals and companies seeking to rehab a property. The Private Money Lenders in Arizona are also known as Arizona Hard Money Lenders. Utilizing this type of lender will allow you to compete for a property that you may have located, and a cash buyer is also competing for the same property. Additionally, private lenders will lower your costs of funds and allow you to leverage your capital so you can take your business to the next level.

Conventional lenders offer long-term loans so you can purchase a home to live in. These consumer mortgages have strict rules and requirements for underwriting. This is due in part to the financial crisis of 2008 when the government stepped in and changed the rules for securing a consumer mortgage.

Private Money Lenders in Arizona work with businesses and investors. Since they do not work with consumers for typical 30-year fixed mortgages, these types of lenders do not have to comply with consumer regulations. The loan, from private lenders, can be structured to the needs of the rehabber for flexible and fast financing. The loan will be priced to compensate the lender for the risk that they will be taking.

Short Term Loans

Conventional (consumer) mortgages will be offered in 15-year to 30-year terms. The private money loans (rehab loans) will run 6 to 18 months with most maturities within a year. Private rehab loans are not the vehicle to use if you are planning on rehabbing the investment property and keeping it. If you are seeking to purchase and rehab a dilapidated property, then this is the loan you want to utilize. This is the type of loan which is easy to purchase, rehab and sell the property. Underwriting rules are developed by the underwriter who is, in this case, a hard money lender. The lenders will evaluate each project on its own merits and determine the interest rates that will compensate the lender for the risk that they will take. The lenders have underwriting guide lines which differ from lender to lender. The hard money lender looks at such things as where the property is located and how fast it can be sold in case of a default. Most of these lenders will look at the borrower’s business plan, people involved, and the likelihood that the project can be completed profitably.

Unlike conventional lenders, borrowers often work closely with the hard money lender.

Once a conventional lender underwrites a mortgage, there is little communication with the borrower. With a Private lender (hard money lender) you will be establishing a relationship for the current project and future projects. Your success as a rehabber depends on how quickly the lender can act and get to closing, the interest rate which is charged, and working with you to get the draws as the project moves forward. At Level 4 Funding, we work with hundreds of private lenders. Call us for a no-obligation quote.

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.

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.