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Thursday, January 24, 2019

How Hard is it to Qualify for a Hard Money Loan in Arizona?

It's a question we get all the time — how hard is it to get approved for a Hard Money Loan in Arizona? Let's answer that right here and right now.

There's a lot of mystery surrounding Hard Money Loans in Arizona, and for good reason — they admittedly have a spotty history after some unscrupulous lenders took advantage of borrowers in the past. Add to that the housing loan debacle and the passing of the Dodd-Frank Act, and you've got a lending industry that's harder to figure out than ever before.

Before we delve into getting approved for a Hard Money Loan in Arizona, let's look at the approval process for a typical bank loan.

● Banks will dive deep into your financial history. Any issues — like a foreclosure, short sale, or bankruptcy — will most likely be a deal breaker.

● Banks require a good credit score. Most big banks want you to have a credit score of 740 and some will go down to 700, but the interest rate will increase the closer you get to that minimum number.

● Banks want a sizeable down payment. If you want to get approved for a bank loan, you'll be asked to have at least 20% of the value of the property on hand to use as a down payment.

Getting Approved for a Hard Money Loan in Arizona

The application and approval process for a Hard Money Loan in Arizona is completely different. First of all, there's no complicated underwriting process. This means the entire thing can be completed in as little as a week or two. Secondly, and most importantly, this type of loan is secured by collateral. So, instead of condemning you for blemishes in your past or looking at arbitrary numbers, a Hard Money Lender will listen to your plans and check out the collateral you have. Finally, lenders in this field get money from private sources, so it makes it a quite simple equation — if your investment is sound and your collateral works, you can get approved.

Find a Reliable Hard Money Lender in Arizona

If your real estate investment is in Arizona and you don't qualify for a bank loan, here's the good news: you're already in the right place. Level4Funding offers hard money to real estate investors, and we've been doing it successfully for decades. Give us a call today to see how we can help get you financing.

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.

How to Find a Reputable Hard Money Lender

Considering using hard money to finance your real estate investment? The process is much different than going through the bank, so we're here to help you get approved for one.

Hard Money Loans in Arizona are loans that are backed by collateral. That is, they aren't based primarily on credit scores and down payments like a traditional bank or credit union loan. Often, they're used as a bridge between a construction loan and long-term financing, or as a way to finish a fix and flip to turn a profit quickly. Hard Money Lenders in Arizona aren't regulated by the Office of Thrift Supervision or the Federal Reserve, so finding a reputable one can be a challenge.

Here are some questions to ask yourself when looking for a trustworthy lender:

What projects has the lender financed previously? If you're looking for a Hard Money Loan in Arizona for a fix and flip, look for a lender who has completed financing for fix and flip properties. If it's for spec construction, do your research and find one who has experience in that niche field.
How does the website look? Some lenders are fly-by-night; others just collect your information and pass it on to third parties. A legitimate Hard Money Lender in Arizona will have a professional website with a wealth of relevant information about what they do.
Are they easy to get ahold of? Their website should have a phone number, an email address, or a live chat where you can speak with a contact one-on-one. A reputable lender will want to talk with a potential borrower to hear about their project personally.

Make Sure to Do Your Research

Unfortunately, it's true — some lenders in the hard money game are essentially loan sharks looking to take advantage of people who've been turned down by the banks. Thankfully, there are many lenders out there who are genuinely interested in your real estate dreams and want to help them come true. By using our questions above and speaking with a lender, you'll typically be able to weed out the fakes from the real deals.

Hard Money Lenders in Arizona

Finding a reputable Hard Money Lender in Arizona is actually quite easy. Level4Funding has decades of experience with fix and flip, rentals, buy holds, and real estate sales in Arizona. We're a phone call, email, or live chat away — if you've been told "no" by the banks and credit unions, contact us to see how we can help fund your real estate goals today!

Arizona fix and flip loans offer a short-term vehicle for real estate investors to purchase properties, renovate, and sell the house for a profit, otherwise known as the fix and flip model. Arizona Hard Money Loans offer financing for investors to purchase houses and quick closing on properties in any condition.

Hard money Arizona fix and flip loans are for experienced flippers as well as novices. This loan can be closed in as little as 15 days and is perfect for experienced flippers that have at least three rehabs completed. Inexperienced investors can use a licensed contractor to help them through their first fix and flip model. It’s important to remember that this type of loan allows investors to compete with cash buyers. Terms for hard money Arizona fix and flip loans range from 1 to 3 years with funding is as little at 7 days. Rates range from 7% to 12%, lending fees 1.5% to 12%, and closing costs are 2% to 5%.

Fix and flip cash out refinancing is another option. If you have an existing property, you can refinance to purchase a new investment property by getting the equity out of your existing investment property. This type of financing is best for the following investor: rehabbers with existing owner-occupied primary residence, rehabber with non-owner-occupied investment property, and rehabbers with 30% to 40% equity in an existing property. Cash out qualifications are: 640+ credit score, debt to income 45% or less, cash reserve 0-6 months, debt service 1.25, and personal tax return 2 years.

Home equity line of credit for rehabbers works more like a credit card than a conventional loan. You draw on this line as you need it and is paid back on a monthly basis. This is best for rehabbers with owner-occupied primary residence, rehabbers with more than 15 percent home equity, and rehabbers with a targeted project in mind. Rates and terms of home equity line: term is 20 to 30 years, approval time is 45 days, rates 4% to 5.5%, loan origination fee 2% with interest only payments for 5 to 10 years and principle 15 to 20 years.

Investment Property Line of Credit

This is a line of credit (LOC) on investment properties. It works like a credit card, you make withdrawals as you need them. Investment line of credit is right for: 30% to 40% equity on non-owner-occupied existing property, and a rehabber who has a portfolio of investment properties who wants to purchase a new property. The terms of the investment property Arizona fix and flip loan: 18 -24 months, approval up to 30 days, rates 5.2% - 8%, Fees 1% - 2%, and closing costs 1% - 5%.

Bridge loans for rehabbers are short term loans that provide funds for the gap between real estate projects. Loan qualifications include proving the ability to pay two mortgages, 20% equity in existing property, and an exit strategy.

Online mortgage & permanent bank loans offer the following rates and terms: term 15 - 30 years, funding 30 - 45 days, rates 4.5% - 6.6%, fees 0% - 1%, closing costs 2% - 5% and a monthly repayment schedule. These are used by owner-occupied and non-owner-occupied primary residences and investment properties. Qualifications include a credit score of 640+ and debt to income at 45% or less. At Level 4 Funding, we have provided hundreds of fix and flip investors the capital they need at the best rates possible. Call us for a no-obligation quote.

Wednesday, January 23, 2019

What you Need to Know About Arizona Airbnb Loans

Airbnb has become very popular for both travelers and Airbnb hosts. Find out how to obtain your first Arizona Airbnb Loan so that you can get into this growing segment of real estate investing.

Airbnb has become very popular. Since 2017, all leisure travelers have booked 25% of their stays at an Airbnb rental property. There are over 4 million listings in more than 191 countries. These numerous travelers who are eager to stay at an Airbnb represent a good opportunity for people to generate extra income by renting out a house, condo or other space. On average, hosts make $924 a month. Some hosts have made enough to even quit their jobs. You need to remember that there are costs associated with Airbnb such as increased insurance, paying commission to Airbnb, cleaning costs and restocking costs associated to get the property ready for the next guest.

If you desire to become an Airbnb host, you will need an Arizona Airbnb Loan. One of the obvious costs required when becoming an Airbnb host is the property itself. A decision you will have to make is whether you will buy or rent a property to list on Airbnb. You will need to talk with your CPA to review your tax situation. If you are renting out your personal home, after 14 days you will need to report this income. If the property is not your primary residence, then you will need to report this as rental income.

Commission charged by Airbnb to process payments is an additional cost. This reduces your profit margin. Lastly the supplies, cleaning, and insurance of the rental property before the next guests arrive are additional costs that will lower your profit margin.

Financing Challenges for Airbnb

All these costs add up quickly and will require that you shell out thousands of dollars before the first guest is booked. Financing for people operating an Airbnb is difficult. One reason is that banks are reviewing the financing of Airbnb properties and not sure how to classify them if they are to be used as a rental property. Mortgages for rental properties have been viewed by banks as a highly risky loan. As far as a home equity line of credit, banks will not lend on a property that is used for Airbnb.

Local laws and ordinances also can be challenging. Some cities outlaw the use of homes as an Airbnb rental, so banks will not lend on them.

While Arizona Airbnb Loans through conventional lenders may be difficult, there still are possible financing options. In recent years, companies offering small business loans have popped up. An example of one is Payfully. While they do not finance property purchases, they do purchase Airbnb reservation receivables. Payfully will deduct a fee for this service and this will need to be calculated in you forecasted profit. This is an expensive additional expense. Airbnb also offers an early payout with a one percent fee. There are also companies that will advance on credit card payments which is, again, a very expensive option. If you are seeking to get your foot in the door as an Airbnb host, obtaining an Airbnb loan may be challenging, but there are options to assist you. At Level 4 Funding, we have provided capital to an extensive list of Airbnb hosts. Call us for a no-obligation quote.

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.

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.