Learn To Be A Fix & Flip Investor

Monday, October 29, 2018

Private vs. Hard money lenders: The Differences

You may wish to finance your next investment property, but find yourself a bit confused about the differences between private and Phoenix hard money lenders. This article will attempt to clear up some of this confusion and some common misconceptions, so you can get a clear perspective and find the help thats right for you.
Some consider private money and hard money lenders essentially the same thing. But there are a few fundamental differences you of which you should be aware. It all comes down to the criteria these lenders use to evaluate borrowers, and these considerations can impact the type of deal you can secure.
The main difference between these two types of lenders is how they evaluate individual borrowers. Private lenders might consider all three C's of lending (credit, capacity, and collateral). Hard money providers generally only consider the value of the collateral on offer.
Therefore, private lenders may put scrutiny on aspects of your financial history such as your credit score. A private lender may also want to get a sense of your capacity or your ability to repay your loan. They might look into your financial history to ensure your income is sufficient to carry your current debts, usually this measurement is expressed as a debt to income ratio (DTI). If your credit score or DTI doesn't meet the private lender's criteria, you may not qualify.
In contrast, hard money providers mainly look at the value of the collateral on offer, i.e., the value or potential value of the property you aim to finance. However because collateral is the primary consideration in the case of hard money there are some misconceptions when it comes to this type of lending.
The main complaint about Phoenix hard money lenders is that they are less willing to work with borrowers
Because hard money providers mainly look at the collateral offered by the borrower, they assume a higher risk. Because of this assumed risk hard money is often more expensive than private money.
However, some assume that hard money providers are less flexible than their private counterparts. Because this type of lender only looks at collateral, they might have less confidence in a borrowers ability to repay. Therefore, if a borrower meets turbulent fiscal headwinds, many assume it's in a hard money providers best interest to foreclose on the property and resell it at a profit.
But this is a flawed assumption; because any reputable lender wants their borrower to succeed.
Foreclosure is a hassle, and no one wants to deal with it. So don't assume your hard money provider won't work with you if you run into financial difficulties.
Arizona Private Money Lenders may offer a better deal, but fewer borrowers may be eligible.
Going the private money route can result in a better deal. Because most private money providers look into your credit and your capacity to repay, and therefore they have more confidence in you as a borrower.
This confidence on the part of the private lender could give you the leverage to negotiate a better deal.
While private money may potentially be cheaper, it may also be less convenient. You may not qualify according to the standards of an individual lender. In addition, underwriting your loan could take a long time, and this application process could cause you to miss out on your investment opportunity.
But there are no hard and fast rules in the case of either private money or hard money, as every individual lender is different.
Just know that the primary difference is that private lenders may consider( may being the operative word here), all three C's of lending before approving an application, while hard money providers only consider the collateral on offer.
Private lenders might be able to offer cheaper loans, but the application process might also be less convenient when compared with their hard money counterparts. It is a catch 22. Private money might be less expensive but also less convenient. Hard money might be more convenient but it also might be more expensive.
However, don't make assumptions, every private or hard money lender is different. Ask any lender you approach about how they evaluate individual borrowers to see what type of deal you might be able to negotiate.

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.© 2016 Level 4 Funding LLC. All Rights Reserved.
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Phoenix Fix and Flip Loans: How to Make Money in Apartments

When it comes to fix and flip loans and apartments you need to have a strategy to pay off the loan as soon as possible. The following article will tell you where to find the best deals, how to value apartments and how you can use simple income boosting strategies, to maximize the value of your apartment property, quickly earn a profit and pay off the balance of your loan.
Before you take out a loan to flip an apartment, you need to find the right property.
Finding apartment properties to flip is a bit tricky, as most apartment buildings are sold off-market. Landlords don't want to alert tenants to possible changes in ownership, and so they avoid listing their properties outright. So to find apartment properties with the most potential you need to get in touch with local real estate brokers, who can give you a sense of which properties are available.
After finding a potential property to flip, consider the following:
• Is the property is in an exceptionally dilapidated condition: Is there an immediate need for physical improvements, If you can, then make these improvements, and you can quickly boost the properties value and resell it at a profit.
• Consider outside factors that could increase the property's value in the near-term: Are new public amenities like hospitals and schools about to be constructed nearby? If the answer is yes, then you may not need to spend any money to see the properties value appreciate.
With Phoenix fix and flip loans and apartments evaluate each deal based on the income potential of the property
The main difference between flipping apartments versus single-family homes is a matter of valuation. Residential properties are valued based on comparable sales, which limits the potential returns from residential flips. With commercial properties, I.e., apartments, the income generated by the property determines its value. Therefore the potential returns from an apartment renovation can be enormous, depending on how much you can raise the amount of income generated by the property.
When it comes to valuing apartment buildings, the value is usually set based on the market cap rate (annual income/ fair market price) divided by the overall annual revenue generated by the property.
So if your apartment earns 120,000 dollars in income annually and the prevailing cap rate is 5 percent= 120,000/.05= 2.4 million dollars.
This nuances of this valuation process are beyond the scope of this article.
However before taking out any loan you need to have a strategy in place to pay it off quickly. You also want to earn a profit by causing the value of the property to appreciate as quickly as possible. So when it comes to apartments, what's the fastest way to raise a properties value? Raise rents.
With fix and flip loans and apartments your best bet is raising rents which present a low cost way to boost value and pay back your loan quickly.
With any flipping project, you need a short-term strategy to boost a properties value, to pay off your loan and earn a profit as quickly as possible. When it comes to apartment flips the best way to boost value is to raise rents.
Obviously can be amoral or unethical about this, the improvements you make should justify any rent increases. However, in some cases you can still raise rents without paying for any improvements at all. If a property is charging rents that are exceptionally low, you can raise rents to a reasonable standard and quickly earn a profit.
Even a small increase in rent can dramatically boost the value of an apartment building. Consider the first example where the property was valued at 2.4 million dollars
• 120,000 (annual income) /.05 (cap-rate)= 2.4 million dollars.
This property is a 20 unit building, and each unit brings in 500 dollars in rent per month. If you were to raise rents by 50 dollars the property will earn 1,000 dollars of additional income per month, or 12,000 in extra annual revenue.
While this might not seem like a lot, this small increase in rent, based on a 5 percent cap rate, equates to a new valuation of:
• 120+12=132,000 (annual income)/.05 (cap-rate)= 2.64 million dollars.
So in this case that extra 12,000 dollars in income resulted in a 240,000 dollar increase in the properties value. As you can see, the sky is the limit when it comes to apartment flips. But of course there is math and then there is reality. So things wont always work out according to plan.
Nevertheless, before taking out a loan on an apartment property, find a reputable real estate broker and look for properties with:
• Easy low cost fixes that could raise value,
• Properties where new public amenities are being constructed which will increase the value of the property without any cost to you, and above all,
• Look for properties that are charging below market rents.
Raising exceptionally low rents to a reasonable standard is the fastest, and cheapest way to quickly raise the value of an apartment, allowing you to pay back your loan and earn a profit in the shortest possible amount of time.

Sunday, October 28, 2018

House Flipping Loans: Is Local Private Money the Right Help For You?

When it comes to house flipping loans and private money you need to first understand what private money actually is and where it can be found. Learn some basic strategies to find the help that's right for you
Private money is a vague term, but it refers to any private group or individual with enough capital to lend. So where you should you look for this type of lender?
You might begin your search online, where you will likely find many “private lenders,” but most of these are really hard money providers. Its difficult to pin down what exactly private money is, especially when compared to “hard money.” In truth, the differences are insubstantial, financing is financing after all.
The only real difference between private hard money that you should be aware of is that hard money often entails higher interest payments when compared with private. Hard money providers usually charge between 12 to 15%, while private lenders typically charge between 8 and 12%.
However truly private lenders are usually individuals that can offer far more flexible loan terms in comparison with other types of financing providers.
If you look online you likely wont find a truly “private lender,” that offers this type of flexibility, so then where should you begin your search?
When it comes to Arizona Private Money Lenders, the best way to find the right help for you and your deal is to ask around.
The best way to come in contact with private money providers is to attend real estate networking events. At such events talk to other house flippers to get a sense of their experience with various local private lenders. You should ask questions like how quickly were their loans funded? What were the specific terms of their deal? And how willing was the lender to negotiate these terms with them?
Above all, you want to find a lender that is willing to negotiate. Because when it comes to private money you want to take advantage of flexibility this type of financing offers.
When it comes to truly Arizona Private Money Lenders, if you can do your best to secure an equity partnership which can help you avoid the expense of carrying a loan.
You might not even have to make any payments on your loan if your private lender chooses to act as an equity partner in your project. In this case, the proceeds of your resale will pay off the remaining loan balance, while your lender receives a share of the profits you earn.
To negotiate this type of deal, you’ll probably need to find a truly private lender. Hard money is a great financing option in the case of flipping projects, but these are lenders, not investors, and they will give you a loan which you will have to pay back with interest.
If you want to find a true private investor for your next project you should avoid beginning your search online. Perform your due diligence by asking your fellow real estate developers about their experience with local private lenders. Once you find a lender that has a good reputation, see how much room there is to negotiate. If you can try to arrange an equity partnership with them which will help you avoid the expense of carrying a loan.

How To Understand House Flipping Loans

Not every loan works for every project so it is important that you understand all of the aspects of Arizona house flipping loans. This is a huge first step in a successful project.
Flipping houses can be a great business and a great way to build your personal wealth. But it can also be a very difficult business is you are not familiar with the financial needs and the criteria for that makes good house flipping loans. You will quickly learn that a traditional loan is not a good fit for most flippers. The biggest drawback on a traditional loan is the extended time frame to secure the loan. In addition, you need to have very good credit to qualify for most bank loans. But fortunately, there are much better solutions for your house flipping loans.
The best way to avoid all of the runaround and document requirements is to avoid the traditional lenders. Using a private lender is a lot faster and easier. The cost can be a little bit higher but in most cases, you can tailor the loan to meet all of your needs including a fast approval and funding process. These types of loans are called Arizona Hard Money Loans or asset-based loans and they are offered by a private lender or a small group of people who function together as a private lender.
The lenders are not looking at your credit history, income or even your credit score to decide if they are willing to loan you the money. For asset-based lending, the determining factor is the value of the property that you are buying. The lender requires that you use the property as collateral for the loan so that it is secured. All the lender is concerned about is that the value of the collateral is always greater than the balance of the loan.
Calculating the Amount of House Flipping Loans
Lenders who focus on these Arizona Hard Money Loans have a set loan to value ratio that they are willing to offer borrowers. The LTV is normally somewhere between 70% and 80% of the value of the property. There are two reasons for this choice. First, this assures the lender that the property will always be worth more than you owe in the event of a default on the loan. Second, the lender knows that you are very motivated to get the deal done as you have invested your own money in the project to reach the asking price. This is known as having some skin in the game and is a good motivator.
Know The Terms
Flipping houses in Arizona can be a great business and can grow very quickly if you are aware of the proper types of funding for these projects. In addition, you need to understand that the conveniences of hard money only come at a higher cost. So it is important that you find the best deal possible to begin your home flipping business and ensure your success.

Using Hard Money for House Flipping Loans

There are many benefits to using hard money when you need house flipping loans. These nontraditional loans offer all of the flexibility and benefits that will make you profitable.
Traditional loans are designed to be used by home buyers who are going to carry the mortgage for 15, 20 or even 30 years. But house flipping loans should never reach even a year if you are running your business correctly. You want to buy quickly, make the repairs and renovations and then get the house resold for a profit as quickly as possible. And asset-based lending or Arizona Hard Money Loans as they are also called can be the perfect loan for flippers.
Arizona Hard Money Loans are very short-term loans. Many are for only a few months and because of their short-term, the rates are higher than a traditional loan. The rates range from a low of about 7% to as high as 15% or more if the lender is unsure of the deal. There are also additional fees that the borrower will pay such as closing costs and lender fees. But the biggest benefit of hard money is that the application process is very fast and simple. Many loans are fully processed in less than two weeks which is far less than the average 90 to 180 days for a traditional mortgage to process.
The process to qualify for Arizona Hard Money Loans is based more on the value of the property that you are buying than it is on your personal creditworthiness. While the lender might check your credit score and require a score of 550 or better, that is far below more traditional lenders standards. The value of the property is also what will determine the amount that the hard money lender is willing to offer you. The loan to value rate is how this is determined. Each lender has a specific percentage of a property’s value that he or she is willing to loan. In most cases that number is between 70% and 80% of the current value of the property.
Collateral on House Flipping Loans
The reason that the LTV is important is that the lender will require that you use the property as collateral for the loan. This protects the lender in the event that you default on the loan. Bu loaning only a percentage of the property value, the lender will always know that the collateral is worth more than the balance you owe on the loan. If you do default, the lender will take possession of the property and sell it to recover his or her investment in the loan.
Hard Money is a Wise Choice
As long as you make wise choices and are aware of the expenses of an Arizona house flipping loans, hard money is a good selection to fund your purchase. But only when you have a clear renovation plan and time frame for completion of the project. The short timeframe of the hard money loan and the higher interest rates leave little margin for error if you want to earn a good profit.

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Monday, October 29, 2018

Private vs. Hard money lenders: The Differences

The main complaint about Phoenix hard money lenders is that they are less willing to work with borrowers

Arizona Private Money Lenders may offer a better deal, but fewer borrowers may be eligible.

Phoenix Fix and Flip Loans: How to Make Money in Apartments

With Phoenix fix and flip loans and apartments evaluate each deal based on the income potential of the property

Sunday, October 28, 2018

House Flipping Loans: Is Local Private Money the Right Help For You?

When it comes to house flipping loans and private money you need to first understand what private money actually is and where it can be found. Learn some basic strategies to find the help that's right for you

When it comes to Arizona Private Money Lenders, the best way to find the right help for you and your deal is to ask around.

When it comes to truly Arizona Private Money Lenders, if you can do your best to secure an equity partnership which can help you avoid the expense of carrying a loan.

How To Understand House Flipping Loans

Not every loan works for every project so it is important that you understand all of the aspects of Arizona house flipping loans. This is a huge first step in a successful project.

Calculating the Amount of House Flipping Loans

Know The Terms

Using Hard Money for House Flipping Loans

There are many benefits to using hard money when you need house flipping loans. These nontraditional loans offer all of the flexibility and benefits that will make you profitable.

Collateral on House Flipping Loans

Hard Money is a Wise Choice

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