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Saturday, March 30, 2019

THE BASICS OF HARD MONEY LENDING

An investor can use hard money for businesses, construction and fixing and flipping homes. There are potential investors that are uncomfortable with using hard money because of the higher interest rates. However, understanding the benefits of hard money can easily rid a borrower of that concern.

Firstly, what is hard money? Hard money is money that an investor is lending in order for a borrower to proceed with their project—whether that be building a spec home or fix and flipping a residential property. A hard money lender is simply an investor who is looking to lend their money in order to make a profitable return. Arizona Hard Money Lenders rates typically range from about 2 points to 7 points and interest rates anywhere from 7% to 18%—this is a large range because each hard money lender has their own terms. Rarely, will a lender work on the high end of the interest rate—borrowers will more likely see 7%-12%.

The benefit of a hard money lender is the relationship an investor can build with their lender. It is common for a borrower to start out with more points and a higher interest rate and then watch the rates fall lower as the relationship becomes stronger. Once the lender sees the money return quicker they want to keep the business going with the investor because they have learned to trust that this investor will make money for them and make it quickly. This is a win-win situation for both the hard money lender and the real estate investor.

WHERE CAN I FIND ARIZONA HARD MONEY LENDERS?

It is not difficult to find a hard money lender. However, the ones a borrower will be best off with are smaller and more relaxed. These types of lenders will be easier to get a hold of, to answer your questions and all in all just easier to work with. There are both larger firms and smaller firms (or an individual). The larger firms will require more from a potential investor—they will do credit checks, require a minimum amount down. They will be harder to work with because they have a larger scale model they are working with and a large amount of borrowers they are filtering through their system. The smaller lenders don’t have to transmit borrowers through such a large model—they are more relationship based. Building a relationship is the goal for both investor and lender.

Yes, initially looking at points and interest rates it seems working with a hard money lender will be overly expensive.

Unlike a bank, working with a hard money lender will not only allow you to build a relationship— that trust you build will begin to pay off with lower interest rates and points. Once a relationship is built many investors simply can text their lender for an authorization on a project and the stronger the relationship, the more likely the answer will be yes— versus waiting up to 90 days for a bank to authorize an application. The benefits of working with a hard money lender far outweigh the slightly higher rates a borrower will pay in the start of this business relationship.

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.

WHAT EXACTLY IS A HARD MONEY LENDER?

You’ve probably heard the term “hard money lender.” But, what do they do? When do you need one?

Situations will arise when you just need cash quickly. There are situations when borrowers don’t qualify with traditional lenders such as a bank. Let’s say you want to purchase a house in a relatively short amount of time— in this case speed of execution is key in securing the property. Banks, and all traditional lending institutions, want some type of security to assure you will pay the loan bank. They will check your credit history, your payment history, your income and income tax returns. This gives them a personal guarantee they will be repaid in full.

Arizona Hard Money Lenders, on the other hand, are what is referred to as an asset based lender. What this means is that they care more about the actual property that the borrower is using as an asset than they do your credit history, payment history, income and tax returns.

FORMS OF HARD MONEY

There are many forms when it comes to hard money. Factors are when someone loans the borrower money against the receivables of your business. This is one way a business owner can use assets for their business’s operational costs.

Another form is the traditional hard money lender. The traditional form is when the lender is concerned with the property— whether it be a single-family home or a strip mall. It is whatever property the borrower is planning on improving.

All in all, Arizona Hard Money Lenders are concerned with the quality of the asset the borrower is using to secure the loan. A hard money lender uses property as collateral. What this means is in the case of default the property is legally taken over by the lender—who in turn, can sell the property to regain the money lost via the loan.

It is wise to choose a lender that is located in your geographic region, as Arizona Hard Money Lenders like to be able to kick the dirt on which they lend. You can find a lender in local newspapers or a simple google search. Google “asset based lenders” or “Arizona Hard Money Lenders.” You can also search “private money lenders” to find one. Also, make sure you allow google to search your location to find the lenders in your area.

There are many times a borrower will find themself in a pinch and in need of fast cash.

Arizona Hard Money Lenders typical pre-approve within minutes and secure the approval within 24-48 hours. Funds are readily available in less than two weeks. Terms and conditions vary between lenders, as they are not required to conform to traditional lending institutions strict regulations. Therefore, rates and terms can be worked out between lenders and borrowers.

SPEC HOME FINANCING WITH ARIZONA HARD MONEY LENDERS

The 2010 Dodd-Frank Act and other regulations have pretty much assured consumers that traditional lenders are not willing to provide speculative Arizona Construction Loans.

However, unlike traditional lenders, Arizona Hard money lenders are eager to finance these deals. Even though banks were encumbered with regulations due to lending practices, Arizona Hard money lenders do not have these same rules. Spec home financing is a high demand market that is left with not a lot of funding choices. Luckily, there are Arizona Hard money lenders that will gladly assist.

Spec loans provide financing for projects projected to have a high return. These loans can be used for many types of investors. These loans can finance single-family homes, residential units, manufactured homes and commercial properties.

WHAT TO CONSIDER WHEN WORKING WITH ARIZONA HARD MONEY LENDERS

First off, make sure you get to know your lenders and what practices make them comfortable. Remember, these lenders can finance projects that would be impossible to close with a traditional lender. Builders who work well with Arizona Hard Money Lenders open up a revenue stream unlike any other.

Make sure you understand the lender’s rates and fees for the spec home financing. These are short-term, higher interest rate loans. Often, these loan terms are between six and twelve months. However, these loans have been known to have terms up to 5 years. Do your homework and be fluent in your knowledge of hard money lending. The down payment requirements can be anywhere from no money down to 50 percent down—each lender is unique, just as each builder. But, keep in mind that if no money down is required, you will have to have some sweat in the game.

Find out if your lender is content with the geographic location of your project. Arizona Hard Money Lenders generally only want to work on projects that are in their location. Because of this, it is good to find a local lender. Inquire if your lender is comfortable including the lot cost in the loan, as well. Many lenders will fund both the construction costs and lot costs.

There are required items you will need when meeting with your lender: a business plan, copies of most recent tax returns, copies of bank statements and a marketing plan for your spec home. The marketing plan is important because you must prove to the lender you have a plan to sell this house that hasn’t even been built yet.

For builders, Arizona Hard Money Lenders can be not only a great link to revenue, but a life-saver.

To find a hard money lender that you can grow with is priceless. Working with a hard money lender is like building a relationship. They truly are a builder’s business partner. As you work on more projects with your lender you will most likely see your loan terms become even more favorable. Once the lender has built trust with an investor the process becomes even easier.

Friday, March 29, 2019

WHAT ARE ARIZONA HARD MONEY LENDERS?

“If you really want to do something, you will find a way. If you don’t, you’ll find an excuse.” — Jim Rohn

Arizona Hard money lenders are your “find a way.” If you have real estate investment dreams and traditional lending won’t work—don’t find an excuse, find a hard money lender.

Most people making a decision to test the waters of the real estate investing world don’t have extra money to simply buy property. Traditional bank loans typically don’t work for investors. Bank loan terms are long—usually ranging from 15 to 30 years. Real estate investors won’t have a property for anywhere near 15 years and so what purpose would a bank loan serve them?

Rookie investors often believe the bank is their best friend. Yes, it is true—bank loans have lower interests than pretty much any other lending option. However, not only will you be stuck with a 15 year mortgage—you will wait a minimum of 30 days for your loan to close. It is not uncommon that borrowers wait up to 90 days for their money. Now, that is just fine if you are buying your primary residence—that is the expectation the seller will have of you. Unfortunately, the sellers of properties that real estate investors are looking to buy won’t wait anywhere close to 30 days to get paid. To compete with all cash buyers you absolutely can’t wait around for a bank to approve you.

ARIZONA HARD MONEY LENDERS ARE THE X FACTOR

Because a bank is not typically the answer to a real estate investor’s financial needs, who is? Arizona Hard money lenders—also referred to as private money lenders—approve loans strictly for real estate. These loans are backed completely by property. All lending institutions need to have proof they will be paid back. Traditional lenders look at income and credit scores—this shows a borrower’s history of responsibility and ability to repay the loan.

Arizona Hard money lenders have a different approach. Although, they check a borrower’s credit and look into their financial situation—they do not base an approval on that alone. In fact, credit and income are a small category of importance when it comes to hard money lending. Their primary concern are hard assets—which means the property in question. In case of default on the loan the lender can simply repossess the property and sell it to generate the money lost. This is not what Arizona Hard money lenders want to do. In fact, they are generally very easy to work with. Unlike a bank where you are working with an entire team of people, most of whom you will never speak with, a hard money lender is one person. Investors and lenders have personal relationships. As long as you communicate with your lender they have the ability to be flexible. They just need to trust you.

Arizona Hard money lenders provide quick solutions to investors.

Not only will borrowers form a personal relationship with their lenders—as time passes and more deals are done they may easily see rates being reduced. Arizona Hard money lenders want these relationships with borrowers. Just as an investor wants to trust who they are borrowing from—the lenders wants to trust the person whom they are lending the money.

Residential Arizona Hard Money Lenders: what are the advantages of using these lenders over the traditional ones?

Although not the easiest type of funding to pursue and acquire, these lenders do have some positive assets over the more conventional ones. Why not let your home or office building work doubly hard for you and solve your funding problems?

A residential hard money lender is set up to provide what is termed a non-bankable loan on property already owned by a prospective client—usually a home, be it a single family building, duplex, or another hard form of collateral. While banks and mortgage groups can and do take three to six months to close your loan, the Arizona Hard Money Lenders can ideally do it within the space of a week. They are also less likely to lets a hiccup in your financial history put a halt to the entire process.

Holding a mortgage on another property can hold you up with conventional lenders—your debt to income ratio appears here because the theory is if you already owe money, the less likely you will be able to repay another loan on time if at all. Another rule is that you cannot borrow through a bank on property that is in need of renovation–they are strictly interested in the current value of a property, not what it could be in the future.

Again, a hard money lender can work with you on these as well as the more odd things that could stop you. One being is if the property was used for other purposes than a home before and you are looking to make it into a family residence now, this is yet another point that a hard money lender will be more receptive to.

These are only some of the reasons that while perhaps never entering a would-be borrower’s mind can put an application in danger of rejection from a conventional lender. Private funding organizations and individuals tend to view these areas differently and not necessarily something that would prevent you from receiving funds.

Are these type lenders really worthy of serious consideration?

You may actually save money by using these residential Arizona Hard Money Lenders since they can structure a longer repayment period for the loan than the standard types. The upfront fees and down payments that go with other loans are often not attached to these loans.

They are more interested in your collateral value as opposed to your credit score also while desiring that you have an average of 40 percent equity in your residence at the time.

Find out all you can about loans before making your first appointment with any lender, conventional or otherwise. If you are successful with your project, you will come away with a lot—professional contacts in the business, a growing portfolio and a firm reputation. All of these are good to have when you want to take on a larger project in the future.

Talk to your friends and colleagues who are in the field. Know the pros and cons of working with a residential hard money lender before becoming involved in the process.

What is a Arizona Fix and Flip Loan? Would this odd-sounding type of funding help you out?

(Basically this kind of loan involves a buyer purchasing a home strictly to sell—flip, if you will—as soon as possible. Most of the properties bought are in need of renovation. Once done the house is put on the market and sold, hopefully, at a decent profit to the owner, who then can pay off their loan and still have money in-pocket.)

Arizona Fix and Flip Loans are short-term types and most customers seeking one invest with hard money permitting them to purchase, repair and sell the property over the next year. Since the property is technically appraised before and after a renovation is performed, it is better to deal with private investors and people you already know who can better gage your ability to finish the job once you get funding.

The process takes a lot less time than the conventional lenders who are compelled to go through your credit history with the proverbial fine-toothed comb. One negative item or hole –a foreclosure, for example—will stop the entire effort while they check you out more closely to see if this will adhere to the strict rules they have to work by. Very often you are defined as less than a good risk and back to where you began.

A regular loan looks at a home or other building’s present value, but these types are less expensive in terms of interest and fees than non-conventional loans. A standard funding setup generally requires very good credit while the private funders and groups look towards what you have accomplished in the past and what you are working on currently instead of a high credit score.

Getting funding may be difficult if you are a beginning investor—you may have to set up an escrow account, borrow against personal property or both. An interest rate can range from 10 to 20 percent yearly.

What are some advantages of Arizona Fix and Flip Loans?

These loans are not bound by a lot of the rules that traditional funders are restricted to, such as not lending money if a property has any real health or safety concerns.

The amount of time it takes to be approved and closure completed is another relief to most investors. The process can take less than two weeks if you end up with a professional company that knows how things work. They are, however, looking at the recovery end for themselves and want to be confident that you can fix the property defects correctly and sell as soon as possible, allowing them to get their money back. In order to assure this, liens are attached as a security measure.

Another positive note is that the longer an investor is in business and doing well the majority of the time, the less he or she will pay for a loan in the long run. Occasionally a borrower can receive 100 percent of money requested and have several projects in progress at once.

Do all the research necessary before taking on a Arizona Fix and Flip Loan—know all the disadvantages as well as the advantages. They are not the answer for everyone—if possible, borrowers need to be certain of performance as an investor is of repayment. It pays to have all the facts—take time to learn.