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Monday, April 8, 2019

Are Arizona Hard Money Lenders the Real Deal?

Qualifying for traditional loans is not always easy—but is seeking out private, untraditional lenders really what’s best for you?

Tori and Tony wanted to learn to fix and flip houses, but they couldn’t qualify for a traditional loan. Their local bank and credit unions all said the same thing: their credit score was too low, and their debt to income ratio wasn’t low enough. Still, they didn’t want to give up their dreams of renovating a fixer upper, and decided to look into private money lenders.

Tori and Tony soon learned that private money lenders are untraditional options, usually private companies or investors, that offer hard money. Arizona Hard Money Lenders are often referred to borrowers who cannot qualify for traditional lending options. While they can be really helpful for borrowers in some situations, they may not be for everyone.

Finding Success Within the Eligibility of Hard Money

Hard money is great because, when you are approved, you can obtain it fast. Some Arizona Hard Money Lenders are able to begin the loan process within the week, if not as soon as the day of. Traditional lenders like banks may take as long as a month. Depending on why you need the cash and how fast, the ability to obtain a loan may make or break you. In Tori and Tony’s case, they wanted to purchase a property with high renovation potential. Because it was such a great piece of property on the housing market, they felt the need to secure the loan fast. However, there are a few daunting things about hard money to consider. The first is the high interest rates. Interest on hard money loans can be as high as five percent higher than other loan options. Additionally, there is a short repayment period. Depending on what you plan with your loan, this could be a good or a bad thing. Because Tori and Tony were wanting to renovate a home and sell it quickly with hopeful plans for profit, a hard money loan would be great. The short repayment period falls in line with the timeline of a fixer upper. In other cases, like using the loan for a rental property where money is coming in over a long period of time, hard money loans may not be right for you and your situation—especially coupled with the high interest rates.

Are Arizona Hard Money Lenders Right for You?

Determining if you should seek out hard money, is a decision that should be made based on your individual needs. Just because Tori and Tony were seeking out a private lender for a fix and flip doesn’t mean that that is a decision you will want to make too—no matter how common it is for private lenders to invest in fixer uppers. Ultimately you will want to consider your major limits in regard to money and time. If you meet with a private lender and are still unsure about whether it is the right decision for you, you can always meet with a real estate attorney. A real estate attorney will be able to help you identify any major stipulations with the loan agreement, and advise you of any concerns or possible risks. Not only that, but they can help provide insight on the legitimacy of the lender. Something always to consider is the lender’s reliability. When it comes to loans, it’s not only the borrower who has something to prove: it’s the lender, too.

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.

Pitfalls of Hard Money Lenders

Oftentimes, private lenders are suggested to borrowers who have poor credit or are unable to be approved by traditional public lenders like banks—but who are private lenders? Read more below to find out what you need to know before beginning the loan process with an alternative investor.

Alec was interested in a loan to fix up his property before adding it to the market, but he was having trouble being approved by his local credit union. Having gone to university and obtained a low paying job, his debt to income ratio was not one to be envied—or approved by banks. Needless to say, Alec was frustrated. As he began to pursue other options he realized he could turn to private investors, such as hard money lenders.

What Alec didn’t know was that his reliability as a borrower is just as important as his lender’s reliability. Unfortunately, Alec realized this when it was too late.

Who Are Private Money Lenders?

Private Arizona Hard Money Lenders are individuals or companies who offer money fast. The terms of these loans are that they have to be paid back on a short term repayment period. This is usually within one year, but can sometimes be expanded. Private lenders are generally very transparent with their borrowers because they base the foundation of approval on the property’s potential value. This means they will generally be straightforward with you on a property or investment plan that has some major risk factors. Additionally, they will likely be willing to work with you on an extension if they find the risks can be reasonably taken care of. When Alec found a local private money lender, he was excited to immediately begin his proposed plans for renovations. What he didn’t consider was his lender’s reputability in contrast to his own.

What Are Risks of Private Money Lenders?

Private Arizona Hard Money Lenders pose a variety of different risks. The first, notably, are the high interest rates and fees. Compared to traditional lenders, private lenders are expensive—the rates can be as high as five percent more. Many people, especially those fixing and flipping, determine that the speed outweighs the cost. If they are able to obtain money fast, they are able to flip a property with the highest potential. It’s not uncommon to be told to seek out a private money lender if you are having trouble qualifying for a loan. However, it is very common to for home renovators to turn to private lenders because of the speed and short repayment period, which falls right within the preferred timeline of fixer uppers. As Alec was learning about his options, it became clear that private lenders had a lot to offer, even with the risks. However, Alec’s potential lender had a history of pulling out of projects. Alec didn’t do any research into his lender, or research his lending history. So when Alec was ready to move forward with his plan—his lender wasn’t. Fortunately, Alec was able to move forward with another lender after looking over term agreements with a real estate attorney. There was mutual confidence between them both as lenders and borrowers and the property was able to be renovated quickly and successfully.

How to Make Money with Arizona Fix and Flip Loans

It’s no doubt the resurgence of people looking to fix and flip properties is based on the numerous shows about fixer uppers on HGTV—but how can you do it successfully?

There are a few things all the stars of HGTV have in common: money and experience. To the average viewer watching at home, fixing and flipping homes may just be interesting; to another set of viewers, it may become a new interest and passion that needs to find fruition. While the housing market is one you may be eager to get into, there are a few tips you could follow when seeking Arizona Fix and Flip Loans if you are wanting to pursue a new chapter of home renovating in your life.

Fixing and flipping entails a lot that is often glammed up on TV: finding a potential property, obtaining it and a loan, renovating it with few surprises, and making a sale quickly—with a profit. All the factors may be overwhelming, and it may make sense to seek a “traditional route.” However, what not many people realize, is that untraditional lenders literally “lend” themselves to the fix and flip process.

Seeking Out Hard Money Lenders

Seeking out a hard money lender after you’ve sought out your potential property is a great option when pursuing Arizona Fix and Flip Loans. First, Arizona Hard Money Lenders are able to do what banks cannot: approve a wide variety of borrowers. If you are lacking experience and a good credit score, it’s unlikely that a bank will approve you for a loan, even if you’ve put in the time and effort into your planning and research. However, Arizona Hard Money Lenders are different. Instead of considering the borrower’s reliability first, they consider the property’s potential. This includes things like plans, and whether or not it would be a good investment for them. Arizona Hard Money Lenders are usually great options for fixer uppers because of their ability to approve borrowers, but for their ability to do it fast. Sometime they can get the loan process started as soon as the day of, which can be essential when bidding on a competitive property. Additionally, they only offer short repayment periods, which falls into the timeline of fixing and flipping a property, should you be able to flip the property without problems, and sell immediately.

Dangers of Fixing and Flipping

While Arizona Hard Money Lenders can be great resources to obtain your Arizona Fix and Flip Loans, it’s important to consider a few things. Despite the fact that Arizona Hard Money Lenders work well within the timeline of a fixer upper, their fees are more expensive than traditional lenders. Coupled with the risks that come with any property during the renovation process, Arizona Hard Money Lenders may not be the best option for everyone. Making money off the fixer upper definitely won’t happen if you aren’t able to provide yourself a financial buffer. Not only that, but you must be confident in the reliability of your lender—this is not a one-way street. The reliability of a loan lender, especially untraditional lenders, are just as important as your own factor as a reliable borrower. It’s possible to make money off of fixer uppers, but you have to put in the thorough research and be confident about what option is best for you. If you are unsure if Arizona Hard Money Lenders are right for you, you can always reach out to a real estate attorney who can help you move forward confidently.

Sunday, April 7, 2019

4 Types of Investors Who Can Get an Advantage with Private Money Loans

Arizona Private money loans aren't always the best option, but there are several scenarios where they actually give the borrower a clear advantage. Here are four situations where private funds eclipse traditional loans.

Before we look at how private money beats bank funds, let's define what private money is exactly. In short, Arizona Private Money Lenders issue short-term loans, typically for flipping properties, buying commercial real estate or getting quick cash. They are often just individuals who are looking for people to invest in, so they aren't subject to the same rules and regulations are the big banks. So who can benefit from this type of funding the most?

Fix and flippers. Fix and flippers are people who are looking for a run-down or outdated property to buy, renovate and sell for a profit. Private money loans can be tailored specifically to their needs in terms of the length, rates and repayment plans. For instance, since a flip might take 5 months to complete, a flipper might take out a private loan for 8 months with no early repayment penalties. That way, when they sell the property, they pay off the loan, keep the profit and walk away.
Long-term investors who don't qualify for a mortgage. These are investors who want to buy a property but don't fit into the bank's box, perhaps because of lack of income proof, a past foreclosure or a not-so-shiny credit score.
Buy and hold investors. Buy and hold investors purchase a property to let it appreciate on the market for a while. Many like the easier qualifications of a private loan for the initial purchase. They then rent the property out to make money while they wait or refinance the property with a conventional loan.
Any investor who needs funding fast. Since private money exists outside the traditional system, there's no complicated underwriting steps, third-party verifications and hoop-jumping like at the banks. In fact, investors can get approved in a day or so and have funds in a week, letting them move faster on a great deal.

Are There Any Cons to Private Money Lending?

Arizona Private money loans offer convenience, flexibility and speed, but there is one area where they can't usually compete with bank loans — the rates. Interest rates are typically higher with these types of loans because of the risk. You'll also need to be able to put up an asset like a property (this can be the property you're purchasing) as collateral.

Private Money Loans in Arizona

If you fall into one of the above categories, a Arizona private money loan might be the answer to your real estate prayers. All it takes is a phone call to Level 4 Funding to find out!

Why Are Owner Occupied Arizona Hard Money Loans So Rare?

If you've ever tried to find an owner occupied Arizona Hard Money Loan in Arizona, you know how rare they are. Don't fret — they do exist, but you might have to get a little creative to make one work.

To explain why these loans are so hard to come by, it's important to understand what they are exactly. Unlike bank loans, where you're essentially just agreeing to pay the money back based on your good financial standing, Arizona Hard Money Loans are based on collateral. In other words, you take a personal asset (like a home or commercial property) and put it up to secure the loan.

Also, hard money typically comes from private investors instead of massive financial institutions, making the terms more flexible. That's why real estate investors and business owners use them the most.

Where we hit a snag is when the borrower intends to live at the property in question. Why? The loan is no longer intended for a commercial property or to bring in income, which puts it into more conventional mortgage territory. Being in that territory makes it subject to stricter regulations, more oversight from the IRS and third-party verification — all things that alternative lenders don't typically have to deal with.

With the extra hoops to jump through and the increased hassle, it's no wonder hard money lenders often don't want to touch them.

How to Get an Owner Occupied Arizona Hard Money Loan

Despite all this, some lenders are still willing to do owner occupied Arizona Hard Money Loans. And, there are often workarounds. For example, if you want to flip a home and live there at the same time, that can be configured as a "business purpose" which make the process infinitely easier. This is where your choice of lender is important.

The Right Lender Can Make All the Difference

These types of loans are rare, yes. But they're not impossible. Choosing the right lender can increase your chances of getting approved. In fact, it can mean the difference between getting an owner occupied Arizona Hard Money Loan to realize your real estate dreams and being left out in the cold. At Level 4 Funding, we have decades of experience and know the Arizona market backward and forward. Put our creativity and experience to work for you — give us a call or chat with us today to get started!

How to Turn a Rental Property Loan into a New Source of Income

Have you ever dreamt of pulling down an income without having to punch the clock and toil 9 to 5 at an office? Getting a Arizona rental property loan and buying an investment property might be the solution. Here's how to make it work for you.

It's hard to call an investment property passive income because there is work involved. As a landlord, you'll be on call to make repairs and you'll have to collect rents every month and do cleanings between tenants. However, many people find it preferable to working a 9-to-5 job because you get to work for yourself, the hours you devote to it pay great dividends and the work can be enjoyable.

Here's the problem; it takes a fair amount of capital to get started (the old "you have to have money to make money" axiom is quite true here). There's the upfront cost of buying the investment property, then there's the cost of getting the place ready for renters and there are all sorts of taxes and fees on top of everything else.

So where do you get funding for a rental property? One option is to go through the bank. The banks will offer relatively low interest rates, but their loans can be difficult to qualify for. In fact, they'll dive into your financial history and dig up everything; they'll poke into your bank account and they'll want you to have a great credit score. If you don't meet their standards, you're out of luck. Thankfully, there's an alternative.

Hard Money Rental Property Loans

Hard money Arizona rental property loan work differently. Your property is your collateral, so lenders aren't going to freak out if your funds are low or you've had financial issues in the past. They're also lightning quick — most people can get pre-approved in 24 hours and have funding in a matter of days. The interest rates are typically higher, but many people use hard money to get started before switching to a more conventional, long-term loan.

Rental Property Loans at Level 4 Funding

Looking for a Arizona rental property loans in Arizona? You've come to the right place. We offer super fast approval and funding (in a matter of days) and we have some of the most competitive interest rates in the state (starting at 7.99%). There are no prepayment penalties and you can get loan-to-value loans of up to 90%. We also have flexible loan terms. How flexible? Give us a call today and let's talk about how we can help make your rental property dreams a reality.