Learn To Be A Fix & Flip Investor

Friday, September 16, 2016

California Hard Money Loans—How They Differ from Bank Loans

So you are exploring your financing options for your commercial business venture and maybe you haven’t even begun to see if you meet the necessary requirements for a bank loan since you’ve got your eye on a California hard money loan. Obviously, you need to choose the financing option that will work best for you, but it doesn’t hurt to know the difference between these types of loans.

If you are in the California area or are looking at commercial real estate in California, you are probably hearing a lot about California hard money loans these days. Moreover, with “harder to find financing for” projects in your near business future California hard money loans can sound like just the thing you need. But, have you compared and contrasted the differences between these particular kinds of loans and more traditionally-funded loans i.e. good old bank loans?

Maybe you have done thorough research on bank loans and maybe you haven’t—no one is judging you. But, with state lending laws changing practically every couple of years, you definitely should stay up-to-date on what your actual lending options are. With that being said, let’s go over some of the current bank loan basics.

OF course that’s not to say there aren’t a few bank loan basics that are forever. For starters, as you may already know, bank loans are either funded via bank money or through bank-approved third party institutions. Bank loan approvals are heavily based on your credit scores and bank loans are now more difficult to secure due their specific guidelines, many of which have been put in place by state lending laws. Other major difference between hard money financing and bank loans include the how much the borrower’s income factors into being approved, interest rates, closing costs and the underwriting process ---just to name a few.

Hard Money Expectations

So what can you expect with hard money financing? Well, obviously they are generally easier to get than bank loans as hard money is less regulated by state laws. Of course, hard money is often the financing of choice when you need your business venture funded sooner rather than later. Moreover, you can expect your income to not be as big a factor for approval as it is with a bank loan. However, what does matter more with lenders who offer hard money financing options is the value of your proposed collateral. In addition to the importance of collateral, interest rates tend to be much higher with hard money in order to compensate for the fact that they are sometimes approved almost instantly with loan terms ranging from weeks to several months. With bank loan terms you will typically see terms ranging from three to five years.

Closing costs and Underwriting

Lastly, closing cost for bank loans tend to range from two to five percent of the overall loan amount whereas hard money financing ranges from 3 to 10 points depending on loan amount. And in regards to closing cost, you will typically see banks using in-house software and lenders of hard money using third party underwriting service of their choosing.

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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Thursday, September 15, 2016

California Private Hard Money Lender and You

When dealing with a California private hard money lender for the first time, you may feel like a fish out of water simply because you are used to traditional funding or financing options. But, just because this is new territory doesn’t mean you can’t quickly get up to speed in order to get the best deal and work with a reputable lender.

So you’ve got your eye on a reputable California private hard money lender, but you are concerned about what you are ultimately signing up for. Well, first off that’s a perfectly normal response that occurs with even the best referral. The good news is there’s no reason to panic or start your lender search over. If you were referred to a California private hard money lender by a business associate or commercial real estate broker then more than likely you are in good hands. The reason you are in good hands is because private lenders, in general, get the bulk of their business their already established borrowers and brokers know their reputation is also on the line when finding a lender for someone.

With that being said, obtaining private hard money financing is more about getting a deal that works for you rather than it is about finding a lender. In other words, there is no shortage of private lenders that are in the business of hard money. Thus, it is more important that you put most of your attention toward the best deal or terms for your project.

Nevertheless, it is important to note that by definition hard money financing is funding for business ventures that are unlikely to be approved by banks. Thus, you should really be looking for lenders that are familiar with industry or type of loan that you are trying to get. In fact, this why working with a niche lender is one lender-specific concern you should have.

The Benefits of a Niche Lender

Besides a niche lender understanding the ins and outs of your commercial business venture which makes the financing process more streamline, there are also other benefits to working with someone who, in essence, gets you. For instance, private lenders, especially when dealing with hard money loans, tend to handle the entire transaction i.e. from start to finish. This means they are not only creating your deal or loan package, they are also advising you, ordering appraisals, matching you will investors and so on. Thus, doing all this and more becomes a lot easier when your lender truly understands what you need and why you need it.

Advice on Buy and Hold Loans

One finally not in regards to dealing with private lenders and hard money financing, some business ventures or rather investments are fix and holds or fix and flips, multi-family units, etc. Generally, many people start wondering about buy and hold loans as a means for funding But, remember hard money financing from a private lender is simply too expensive thus you may want to consider a trust deed when using a private lender for a potential buy and hold venture.

Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Wednesday, September 14, 2016

Phoenix Real Estate Is Booming–So is Everywhere Else!

Based on the data provided by S&P Case Shiller, the bottom is over (See Graph Below) and we are moving up again and this time it’s going to be even bigger!

It appears from the graph of the Phoenix House Values below, that the real estate market in the Phoenix area is heading up. Is it time to buy real estate again? How long will it take to come back to normal? Should I get out of the market and wait? These are hard questions to answer but Dennis makes these recommendations:

The upturn in values are due to LACK OF INVENTORY AND RECORD LOW INTEREST RATES.

Keep your home if possible. Do whatever it takes to keep the current home.

Do a Mortgage modification? HAPR 2. Its possible but there are very few who are successful.

If you ‘bail out’ and let the bank foreclose, you will not be able to purchase a home for 5-7 years, maybe even never again!

Inflation will it come back and will the value of the dollar drop dramatically? (This could change if the USA will cut spending and raise taxes, cut medical/social security, and increase the tax rate by 45%. I don’t think this will happen.)

The amount of debt in the USA will continue to grow. The amount is very frightening.

At this rate, in 5-7 years, it will cost $10 to buy a loaf of bread. Gasoline will cost $25/gallon. And the average starter home price will be $600,000.

Get out of debt; get rid of the credit cards and pay them off. Purchase only if you have the cash. Do not get into any debt. (I sound like your mother here, but she was correct.)

Start a side business. It’s too difficult to explain why here, but the best reason is the potential tax advantage and the possible income. Your own side business is the LAST area the government has yet to attack. Make it simple and get going. An extra $400 per month really helps.

If you are able, purchase quality single family homes in a good area and turn them into rental units. (Your side business?)

I’ve talked to a lot of people who feel that they can ‘let their home go and rent for awhile’. Rental rates are lower than their mortgage rates. Yes, they are! ‘We can save a lot of money by renting vs. paying the mortgage, and in 2 years we can purchase again and have a good down payment.’ Well, it’s actually going to be 5-7 years before your credit report looks good enough to purchase a home again. And can you really save the money? Most people will spend the money on toys. If hyper-inflation hits, like some economists predict, then you’ll be priced out of the market. Do you want to take the chance? Keep your home, do a HARP 2 Mortgage modification, and hang on — the next 5-7 years are going to be enjoyable.

Dennis Dahlberg is Broker/RI/CEO of Level 4 Funding, with many years of experience in lending, flipping and fixing. UPDATED 9/13/16

For Phoenix the bottom was officially September 2011.

For a PDF of this Graph Click Here

Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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California Hard Money Investors

By now you know that the wonderful world of hard money is more than just a world full of borrowers and lenders i.e. you know there another key player, especially when dealing with California hard money financing. So, let’s talk about those lovely investors and the best ways to invest in hard money.

Hard money financing is becoming the loan option of choice for many people for a variety of different reasons. But, the truth is most people simply want to move ahead with their commercial business projects on schedule without any unnecessary red tape. Of course, that lovely red tape that seems to go hand-in-hand with traditional lending options and banks is the response to the condition of the market meltdown, if you will.

But, market meltdown or not (which clearly things have been gradually improving since), business projects did not stop hence the rise of hard money financing, especially the rise of California hard money financing. With that being said, you may have wondered where all that precious California hard money comes from? Well, typically it comes from multiple investors or sometimes only one investor depending on the size or rather amount of the loan.

These particular investors are business savvy and know that hard money investing can be profitable as well as rewarding if they play their cards right. But, how do they play their cards right with such ease? Two words: due diligence. Due diligence basically, makes the world go round or rather the world of investing. But, nonetheless, it because these business savvy investors take the time to do their research, work closely with experienced lenders that specialize in this particular niche and carefully evaluate the terms of their potential investment that they are able to make money while simultaneously funding your commercial business dreams.

How to Make Money When Investing

In addition to working with experienced lenders and doing their due diligence, most savvy investors also seek advice from a third-party. In other words, a lender and an investor may seem like they are on the same page but it is always best to double check via independent counsel. Furthermore, independent counsel can ensure that personal guarantees are made when the investment requires them. Other ways that these commercial investors stay in the black by reviewing all documentation that is pertinent to their investment such as title endorsements, etc. and one way to stay on top of all relevant documentation is to work with a reputable loan service that they are personally comfortable with. Lastly, it almost goes without saying that these particular commercial investors never put all their eggs in one basket i.e. keeping things diversified is the name of the game and it always will be.

Risk less with Your Investments

Clearly, no investment can be made without some level of risk associated with it, regardless of how much due diligence and careful consideration occurs. But, an investor can increase his or her chances of making a wise investment that ultimately is a win-win situation for everyone involved by doing all that they can and by following the necessary steps mentioned above.

Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Tuesday, September 13, 2016

California Private Money – How to be a Successful Lender

Often when discussing California private money, you hear about what the borrower needs to do or what they can do to increase their chances of finding a good deal. Well, it’s time to look at the other side of things and discuss what a lender can do to stand out amongst the crowd.

So you are in the business of lending and you want to know what you can do be successful? Well, for starters, if you are a California private money lender then you know you’ve got some competition. But, you may not be too clear on why there are so many California private money lenders and that’s okay. Just think about why you decided to stay local or start up a private lending practice in this particular state? More than likely, you did it because California state law is a little more lender-friendly versus other states that have the only the borrower’s best interest at heart.

Nevertheless, the point is you are not alone hence you want to stand out. Well, the good news is there are a variety of ways to do just that. For instance, remember why you wanted to stay local? You wanted too because it was a smart move for you as a private lender right? Well, guess what the first tip for being a successful lender is to continue to stay local. This is the first tip because you are expert in your area and the majority of borrowers you choose to work will be within 75 miles or less of your office. Moreover, staying local will allow you to have a better feel for what or who you are ultimately investing in so once again—you get it.

Another bona fide way to stand out and stay successful is to know what you are good at i.e. find your lending niche. In other words, if the majority of your borrowers are closing on million dollar commercial properties then there’s your answer. Sure, there’s nothing wrong with a little diversification but chances are you can better serve people who needs are familiar to you.

Important Things to Consider

Other important things to keep in mind are your overall appearance to the outside world. For example, you should always to strive for transparency with your existing borrowers and your potential borrowers. Remember, references are a big deal in this industry thus one bad reference affects your bottom line. Furthermore, you are in the business of making hard-to-fund dreams come true so why try to be something you are not. In addition to keeping it transparent, you should also be focused in your marketing i.e. no one wants to borrow from a lender that approves all loan types so be specific at about what you do best in your advertising.

Be that Helping Hand

Ultimately, the best way to stand out is to keep investing in yourself. This means going to commercial real estate seminars and industry conferences, staying up-to-date on your local lending laws as well as be professional in the way you conduct your business.

Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Monday, September 12, 2016

How to find a California Private Hard Money Lender

When it comes to finding a California private hard money lender, you probably don’t even know where to begin or rather how to start a viable search and that is okay. In California, there are so many lender options that you will more than likely need a helping hand.

Generally, when you are trying to a reputable California private hard money lender the first place you should start is by checking the nationwide lender directory online. This particular directory allows you or anyone to search by loan type, loan size, location or keyword such as construction loan, etc. Moreover, this directory will provide you with direct access to your potential lenders in general or specific private non-bank lenders. In addition to searching for a California private hard money lender via the nationwide lender directory, you can also ask for references from your business associates.

Regardless, of which search method you choose to take advantage of, finding a few good names doesn’t mean you are done. Clearly, you need to contact at least your top 10 lenders and present each of them or the majority of them your loan scenario. Remember, it is important to find a lender that is likely to approve your loan request, but it is also important to work with someone that you feel comfortable working with.

Once you have set your sights on your future lender, the next step is clearly the application process. Nevertheless, it is still important to highlight that you make sure your future lender offers the commercial real estate loan type that is right for your business venture or project. By taking the time to make sure you have chosen your best option as well as the most compatible private lender you will ultimately save yourself a lot of time and money.

Application Process Advice

The application process of private money financing is typically the next step if we want to simplify the overall process. In other words, if you choose to work with a broker then step one is making sure you that you have an acceptable deal before signing your contract. Once you have properly vetted your lenders and signed your contract, you should get in touch with an appraisal company at least for an estimate of your proposed commercial building or of the real estate that you want to use as collateral. Of course, most lenders will want to use their own third-party appraiser, but at least you will have a clear idea of the value of your collateral.

Private Money Broker can lend a Helping Hand

The actual application itself is often not difficult to fill out and generally requires bank statements/ tax information. A private money broker can quickly take care of this for you if you so choose. After the application is completed and credit reports have been pulled, your lender will begin the underwriting process. While your lender is reviewing your application you should be taking this down time to coordinate with your real estate attorney and/or title company in order to close on your commercial property.

Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Learn To Be A Fix & Flip Investor

Featured Post

The Big Show is Coming to Town.

Friday, September 16, 2016

California Hard Money Loans—How They Differ from Bank Loans

Hard Money Expectations

Closing costs and Underwriting

Thursday, September 15, 2016

California Private Hard Money Lender and You

The Benefits of a Niche Lender

Advice on Buy and Hold Loans

Wednesday, September 14, 2016

Phoenix Real Estate Is Booming–So is Everywhere Else!

For Phoenix the bottom was officially September 2011.

California Hard Money Investors

Tuesday, September 13, 2016

California Private Money – How to be a Successful Lender

Often when discussing California private money, you hear about what the borrower needs to do or what they can do to increase their chances of finding a good deal. Well, it’s time to look at the other side of things and discuss what a lender can do to stand out amongst the crowd.

Important Things to Consider

Be that Helping Hand

Monday, September 12, 2016

How to find a California Private Hard Money Lender

When it comes to finding a California private hard money lender, you probably don’t even know where to begin or rather how to start a viable search and that is okay. In California, there are so many lender options that you will more than likely need a helping hand.

Application Process Advice

Private Money Broker can lend a Helping Hand

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