Learn To Be A Fix & Flip Investor

Wednesday, September 21, 2016

California Private Hard Money Lender—Negotiating a Win-win Solution

You’ve probably heard that the best deal you can get with a California private hard money lender is one that has a reasonable or affordable interest rate, which in many ways is true. But, that’s not the only thing a good deal is about i.e. there are few more things you should negotiate with your lender to get the best deal.

Dealing with a California private hard money lender means that you are dealing with a skilled, business-savvy individual who is no stranger to how private money or hard money works. Consequently, even the most transparent lender still needs to a decent return on their investment. In other words, you can easily work with a reputable lender to get the best deal for your commercial business venture. But, if you leave all the negotiating in your lender’s hands, you are more than likely putting yourself at a disadvantage.

Obviously, it is a win-win situation if you get the best deal possible and your California private hard money lender receives a profitable return. So, how is this all possible? Well, let’s discuss the ins and outs of hard money deals so that a win-win solution is in your hard money future.

For starters, you know that your interest rate matters. Thus, you clearly want to settle on a rate that you are comfortable—that goes without saying. Moreover, when discussing that lovely interest rate make sure to also inquire about your default interest rate. Your default interest rate is just as important as your regular interest rate because in the event that you breach the terms of your hard money loan you need to know how much your overall rate is going to increase. Furthermore, you should negotiate your points with your potential lender. Points are essentially fees that you are responsible for at closing i.e. part of your closing costs. In addition to agreeing on a fair and reasonable number of points, you should also try to negotiate your underwriting fee, referral fee (if applicable), renewal fee (fee to renew your loan for another term), foreclosure fees (this fee is added to your loan balance) and/or your late fees (if you are unable to make a payment on time) as well as really any fee that you are potentially liable for.

Loan Servicing Advice

With that being said, another important component of hard money loans is loan servicing. Typically, a private investor will cover this particular fee or rather pay the hard money lending company in the event that the hard money lending company is the entity servicing your loan. If another entity or a third-party is handling the loan servicing, then make sure you are clear on who is responsible for paying the fee. In most cases, you may not be responsible for this particular fee, but, nevertheless, it is important to double check so there are no surprises down the road.

Avoid the Pitfalls

Ultimately, these above-mentioned fees, rates, and points are crucial things to hammer out with your lender. So, do yourself a favor and make sure your deal is truly the best possible deal because you’ve covered all your bases.

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.

Tuesday, September 20, 2016

California Hard Money—the Basics and things to Consider

California hard money lenders are not lenders to be fearful of rather they are lenders you should definitely learn more about. In many ways, hard money requirements and regulations are the same no matter where you go but it does know the basics for the state your potential commercial property is located in.

If you are like many business entrepreneurs you may have just started figuring out what your loan options truly are and that’s perfectly okay. In general, hard money loans are, in their purest form, short-term loans that use real estate as collateral. This means, in order to obtain a California hard money loan you need to aware of the value of the commercial property you are interested in or if you want to secure this particular kind of loan with a commercial property you already own instead, you also need to know that value.

Obviously, the reason the value of your potential property or current property that you want to use as collateral matters because California hard money lenders, just like other hard money lenders, are more interested in the value of the proposed property versus your credit. With that being said, there aren’t necessarily specific types of property you must use for a hard money loan i.e. industrial property, commercial land, multi-family homes and so on are all okay for the purpose of collateral.
Now that you know what kind of property is good collateral for hard money loans, let’s address when it is the idea situation for these particular kinds of loans. As you know hard money lenders are your best option when traditional avenue are not (due your credit or the timeframe in which you need the financing for); thus, the ideal hard money situation includes land loans, construction loans, fix and flips or simply you need to move quickly on a property.

The Real Deal When Dealing with Hard Money

Now that you are clear on some of the basics, you may be asking yourself is hard money right for your particular venture? Well, only you can truly answer that question for sure. But, if you have less than prefect credit, need to move on a property within a week or two or simply have been rejected already by traditional banks then you’ve more than likely come to the right place—hopefully with a detailed business plan in hand.

Before Moving Forward

Nevertheless, before you move forward with your hard money options, it is important to take into consideration the true price of obtaining financing when you need it and in spite of your credit. In other words, make sure you compare interest rates and are fully apprised of your loan to value ratios. The good news is that California tends to have lower rates due to the almost overwhelming number of hard money lenders. Lastly, make sure that your future business venture falls in line with the loan amount that is available i.e. most hard money lenders will lend anywhere from 65-75% of the current value so be conscious of that fact going in.

Monday, September 19, 2016

California Private Money – Rehab Loans

If you know a thing or two about California private money then you probably know that there are several different types of loans that you can get with this particular kind of financing. For instance, if you are looking for a rehab loan then your best bet in securing that loan is either via a private lender or a lender that offers hard money financing.

Rehab loans are essentially loans that allow you to modify an existing commercial property in order to increase the overall value or worth of the property. These particular kinds of loans are typically not so easy to come by even when dealing with private niche lenders that thoroughly understand your goal and business vision. But, just because it is more challenging to secure rehab loans with California private money does not mean it is impossible.

In fact, if you do your research you can find a few reputable private niche lenders that are willing to lend a helping hand. Generally, one of the best ways to find these kinds of lenders or any lenders for that matter is to first do an extensive search via your state’s lender directory or you can start small even by doing a cursory online search of private rehab lenders. With the online lender directory, you will be able to narrow down your list of potential lenders based on the loan amount desired, the type of project i.e. industrial, commercial, land or multi-family, etc. If on the other hand, you choose to do a cursory search via a search engine such as Bing or Google, you will find a variety of local niche lenders that may be of use to you. Moreover, you can also find your future private lender by referral if you are looking for options closer to home or without the hard money middle man i.e. obtaining financing from a business associate or family member, etc.

Regardless, of where or how you find your potential niche lenders, it is important to know what each specific lender expects. In other words, you may have found a few good California private money lending options that will ultimately result in you securing a rehab loan, so make sure you know what is required of you so your business remodel is quickly funded.

Rehab Lender Expectations

Of course, it’s important to note that private money, in general, is more flexible. Consequently, what one rehab lender will require or need from you another rehab lender more than likely will not. With that being said, it is still in your best interest to learn up front what each potential lender does or doesn’t need from you.

Things to Consider with Rehab Lenders

Lastly, when dealing with your private lender remember that they generally want to some protections in place just in case you do not make the agreed-to improvements. You should also consider the extent of the project, the upside to the remodel, your personal financials and the possible prepay penalties that your private lender has a right to impose if they so choose.

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.

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.

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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Learn To Be A Fix & Flip Investor

Featured Post

The Big Show is Coming to Town.

Wednesday, September 21, 2016

California Private Hard Money Lender—Negotiating a Win-win Solution

Loan Servicing Advice

Avoid the Pitfalls

Tuesday, September 20, 2016

California Hard Money—the Basics and things to Consider

The Real Deal When Dealing with Hard Money

Before Moving Forward

Monday, September 19, 2016

California Private Money – Rehab Loans

Rehab Lender Expectations

Things to Consider with Rehab Lenders

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.

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