Learn To Be A Fix & Flip Investor

Sunday, January 20, 2019

Three Reasons to Use Hard Money Loans

Understanding the benefits of Arizona Hard Money Loan will help borrowers justify the cost of using hard money. There is a price to be paid for everything that offers this many benefits.

Arizona Hard Money Loan are certainly more expensive than traditional loans. And because they are more expensive, many borrowers question what could be a good reason to use hard money. And the simple answer is that there are several reasons that hard money is a great option for many borrowers. Arizona Hard Money Loans can eliminate many of the issues that borrowers face when working with a traditional lender.

Anyone who has worked with a bank or mortgage company to secure a loan will tell you that there is nothing fast or simple about the process. You are required to complete long forms and submit a huge pile of documents before the lending institution will even consider loaning you any money. But because the focus of a hard money loan is on the collateral and not the borrower’s credit rating, there is far less information and documentation required to apply for the loan. In addition, the application evaluation process is much faster. Lenders are not required to evaluate as much information and can decide on the approval much more quickly. And with the request approved, funding is normally completed in just a few days. All of this speed is definitely worth the higher cost of hard money loans.

Another complaint from many borrowers is that traditional lenders are not at all flexible. They follow a specific process and will write loans on their terms only. If you do not meet their criteria, or if you are looking for a slightly different set of terms, then they are not interested in working with you. But being private allows hard money lenders more freedom in their processes as well as the terms for the loans that they fund. This less than standardized underwriting process allows borrowers to negotiate terms with the lender and actually end up with a semi-custom loan. And as we all know, anything that is customized is worth paying more for.

Approval is Key

If you are unable to qualify for a traditional loan, then it is a simple decision to pay a little bit higher interest rate to secure hard money. Hard money lenders are even willing to work with borrowers who have a foreclosure on their credit history. So this is a great opportunity for borrowers to begin to rebuild their credit while also enjoying all of the other benefits of owning a property. The easier approval process and requirements are two of the benefits that most borrowers are happy to pay a little more for.

Added Benefits

When you have no other loan options, paying a higher interest rate and higher fees is a small price to pay to secure a loan. Borrowers who are in need of a fast loan process are also often willing to pay the higher rates associated with hard money to secure a great property. And borrowers who are seeking unique loan terms or who need to negotiate the loan terms are happy to pay a private lender for the ability to tailor a loan to fit their needs.

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.

Three Benefits of Hard Money Loans

Arizona Hard Money Loans are a great financing tool when used correctly. Understanding the loans benefits can help you to begin a very successful real estate investment career.

Arizona Hard Money Loans offer many benefits to borrowers and real estate investors. That is why seasoned professionals use these loans on a regular basis to purchase commercial properties, rental properties and fix and flips. But the novice investor needs to be educated to avoid misuse of these types of loans which can result in a financial disaster. Understanding the benefits will also help new users understand the best ways to uses hard money loans.

The speed of hard money is one of its greatest benefits. Not only is the application process much less complex than that of a traditional loan, but the approval and funding stages are also more expedient. This allows real estate investors to make an offer on a great property and know that they can close quickly and secure the property before another buyer comes along and starts a bidding war. This fast turnaround is certainly good but it comes at a higher interest rate than traditional loans. So smart borrowers know that hard money is best suited for fast projects. The application and approval are fast, the project is short-term and the higher interest rate is paid for only a short time so the loan is still rather affordable.

Part of the reason for the faster processing of hard money is that the qualifications are different than a traditional loan. Hard money is also called asset-based because the loan is secured with collateral rather than the borrower's creditworthiness. This makes it much easier for the lender to evaluate the property and determine if he or she will fund the loan. This qualification system makes it much easier for a person with low credit to secure a loan as well.

Flexibility Is Important

Hard money is offered by private lenders which makes these loans great for anyone who is looking to finance a rather unusual project. Most banks are not willing to finance fix and flip projects due to the risk as well as the short term of the loan. Private lenders can also be more open to funding a loan on a property that is in very poor condition as they can evaluate the potential of the property when the renovations are completed. A traditional lender is not willing to take that chance on a loan.

Understand Hard Money’s Purpose

Understanding that Arizona Hard Money Loans are designed for short-term projects and projects that are not going to fit into traditional lenders standards is critical to using the loans correctly. The higher cost is not really as big a deterrent as some borrowers might believe. Paying a little bit more is always better than not getting funded at all and missing out on an opportunity. Borrowers simply need to read the loan agreement completely and understand all of the terms and conditions of the agreement before signing it.

Saturday, January 19, 2019

The Cost Of Hard Money Loans

Arizona Hard Money Loans do cost more than traditional loans. And it is important for borrowers to understand all of the fees and costs of the loans before choosing hard money.

Whenever you get a loan from a professional lender, which could a lending institution or a private lender, the lender is conducting a business in order to make money. So you know that you are going to pay something for the use of the money that you are borrowing. But what most borrowers do not take into consideration is that added benefits or services are going to cost more. In the case of hard money loans, the added cost also brings with it added value.

It is important that borrowers speak to each lender to determine the fees that he or she charges on hard money loans. These fees can include the basics such as interest and points which you will pay on any loan, but there can be a long list of other fees that lenders will apply. Some of the more common fees include the underwriting fee, application fee, processing fee, referral fee and more. If you feel that there are too many fees to be legitimate, then seek out another lender as each hard money lender is pretty much free to access fees as he or she chooses. But also keep in mind that a few fees such as a small application fee and a processing fee are used to cover the administrative chores involved in the loan process.

There can also be some penalty fees involved in your loan that you will want to understand before agreeing to the loan and signing the loan documents. A late payment fee is fairly self-explanatory. Some lenders will offer a slight grace period but others will charge a hefty fee if the payment is even a single day late. If you are getting to the end of your current loan and cannot make the final large payment, some lenders will extend the loan or do a renewal but there is a cost for that as well. And finally, the lender is counting on a certain amount of profit from the loan in the form of interest. If you pay the loan off early, then the lender loses some of that profit. Many lenders will create an early pay-off penalty that is just about equal to the interest that would be lost due to the early payoff.

The Benefits

Hard money does come at a cost, but there are many benefits including fewer criteria to qualify for the loan and lower credit score requirements. In addition, the loan terms are far more flexible than a traditional loan and the funding is much faster as well. Clearly, the cost offers some important benefits to be considered.

Know The Terms

Each borrower needs to decide if Arizona Hard Money Loans and the cost associated with these loans is worth it to make a deal. Some real estate deals are so time sensitive that hard money is the only option to close on a great property before a bidding war begins. Evaluate the costs and decide if hard money is going to land you a great profit or if the cost is too high for you.

The Best Uses of Hard Money Loans

Not all loans are meant to be used for every financial need. Understanding how to best use hard money loans can help borrowers to take full advantage of these loans.

Because hard money loans offer some very specific benefits and drawbacks, there are certain types of purchases which are best suited to hard money loans. Having a clear understanding of how hard money works and its benefits can help first-time borrowers use them to their greatest benefit to increase profits and to grow their personal wealth.

These private loans are generally made for only a short time which can range from just a few months to a few years. Being short-term these loans are obviously best when used for short-term projects rather than being used in the place of a traditional mortgage which would span several decades. Some examples of short-term deals include fix and flips, land loans, construction loans and to bridge a time when a person is experiencing credit challenges and could be facing a foreclosure. In addition, hard money loans are the perfect option for a buyer who needs to have a loan funded very quickly. Then once the purchase is completed, the borrower can seek a traditional loan to pay off the hard money lender.

There are several reasons that hard money is best only used for a short-term project. The first and most important reason is that the interest rate on these private loans often ranges from 10% to 15%. To put that amount into perspective, current traditional mortgage rates are ranging from about 4% to 6%. In addition to interest, hard money lenders will also charge borrowers points and other fees. Points equate to 1% of the loan amount per point. So paying 5 points on a $100,000 loan would be a cost of $5,000. Additional fees could include applications fees, processing fees, appraisal fees, and even funding fees in some cases.

Fast Is Good

There is no question that getting a loan application approved quickly is a huge benefit for most borrowers. This can ensure that you are able to purchase a great investment property or even your dream house. But you need to understand that you are going to pay a higher price for this fast loan service. So budget both your time and money carefully. Keeping a renovation project on time can be difficult but if it allows you to use hard money and remain in the time frame outlined in your loan terms, it is worth the extra effort and late nights to get the work completed.

Make a Good Choice

Understanding the terms of your loan and the total cost of the loan can help you to use hard money as efficiently as possible. Often times these short-term loans are only used as a bridge to allow for time to secure a traditional loan at a substantially lower interest rate and for a more appropriate length of time. But in other cases, these loans are perfect for a renovation or fix and flip project that is only expected to take a few months.

What are Fix and Flip Loans?

The fix and flip investment strategy involves purchasing the ideal property that is ripe for renovation or a quick turnaround. There are several types of Arizona Fix and Flip Loans that can help make your dream a reality.

The fix and flip real estate investment strategy involves purchasing property that is in need of either minor renovation or major construction. After improving the property, you then sell it for a profit. As simple as it sounds, there are many moving parts and areas that require a certain depth of knowledge. Let’s dig a little deeper.

You purchase a property through an auction or a foreclosure or, lastly, a bank foreclosure sale. At that point, depending on the property, you may choose to sell it “as is.” A true fix and flip, however, involves improving the property first, adding value, and then selling it. Improving the property can range from small but important updates to the kitchen and bathrooms to a complete renovation of a home.

A successful fix and flip involves many components. As a Fix-and-Flipper, you must be able to acquire a property at a price that allows you to do the renovations and make a profit. You, as an acquirer, must know your market, as a project manager, you must be able to manage the various contractors to execute the improvements, and, finally, you need to be able to secure funding for your project. One major hurdle is obtaining financing from a bank. You will find that this process may too long and costly. For example:

· Typically, the fix and flipper is opportunistic and purchases distressed properties. This means that time is of the essence and a lengthy and cumbersome bank loan will delay the process.

· The bank route depends heavily on the buyer’s credit history. Your track record and expertise in fix and flip investments is usually discounted by banks.

· The bank route may not lend for improvement costs for a fix and flip property.

Fix and Flip Loans—The Bridge Loan

Loans for fix and flip investments are typically known as Arizona Bridge Loans. The bridge loan is the “bridge” between the sale of the purchased property once renovated. These loans are short term in nature and secured by the real estate. The number and type of Arizona Fix and Flip Loans are varied. Some of the different types are:

· Purchase the property: A seller has a distressed property and the buyer has the opportunity to purchase the property at a deep discount, make some minor renovations, and then sell it.

· Renovation loan: A buyer has the opportunity to purchase a single-family home. The borrower will renovate the home to make it more eye appealing and modernize it with a new kitchen, bathroom, painting, and landscape, and then put the property up for sale.

· Arizona construction loan: A vacant piece of land is available with a dilapidated single-family home. The borrower demolishes it, replaces it with a 2-unit duplex and then sells it.

At Setabay, we work with hundreds of private Arizona Hard Money Lenders, many of which specialize in fix-and-flip loans. Our interest rates start as low as 5.99 percent with terms that range from 3 to 60 months.

The cause of capital inefficiencies in the lending market allows Arizona Hard Money Lenders the opportunity to provide liquidity while the borrower pays higher interest, organizational costs, and points. These loans are collateralized by the property or land involved in the project. The term of the loans is usually 12-24 months. An individual who invests in Arizona Fix and Flip Loans has their money going directly to the originator who then provides their clients with the working capital to fund their projects. At Setabay, we offer some of the best interest rates in the market. Call us for a no-obligation quote.

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

Differences in Loans to Flip Houses in Arizona

Securing loans for flipping houses can be quite a challenge for investors. There are many loan options available to flip houses. It is important to distinguish the pros and cons for each type of loan in order to decide which is your best option.

Conventional Loans

Conventional loans are loans given by banks and mortgage companies. These loans are solely based on the borrower’s FICO score and income. There are a variety of conventional loans to qualify for. These loans can be easier on your wallet than other options. The interest rates are at market level, which will be lower than most other loan options, and the payments will be spread over a longer period than other loans—usually 20 to 30 years. The down payment on a conventional loan will depend on the program a borrower qualifies for and can be anywhere between 3% and 20%. Typically, these are not given out to fix & flip houses. To qualify for these types of loans you need a great credit history—banks like to see at least a 650 FICO score, a low debt-to-income ratio and proof of income from the same place of business for at least 2 years.

Government Insured Loans

The Federal Housing Administration (FHA) offers rehab (Arizona Fix and Flip) financing through its 203k loan program. This loan covers the lender for both the property itself and the renovation costs, unlike conventional loans that only lend for the purchase of the property. These loans can be used for multi-unit property investments. The only catch is that the borrower is required to live in one of the units. This loan is a very low cost financing plan, but the government has many rules and the borrower must adhere to all those rules to get financing. These loans are only available for a limited selection of properties and there can not be extensive repair to the house. These loans are meant for properties that only need cosmetic repair.

Owner Financing

Owner financing refers to the owner of the property lending the money to the buyer of the property, takes a mortgage on the property sold and is repaid through monthly installments based on the terms between both parties. This type of “loan” is usually closed quickly, and the fees that other lenders charge are usually not included. The problem with this situation is most sellers cannot afford to maintain their lifestyle while they wait for the money, from the house they sold, to be paid in full. If the buyer defaults then the seller is forced to take them to court and add that additional headache to their life. This type of loan can get very complicated, very quickly.

Arizona Hard Money Loans

A Arizona Hard Money Loan is the most popular loan for real estate investors. This type of loan is backed by the borrower’s assets not their credit score. In fact, most hard money lenders aren’t overly concerned with a borrower’s income as long as they have the hard assets needed to cover the loan. They are interested in the return of their investment. Loans are typically closed within 3 days, down payments are negotiable, and often 100% financing is available. The interest rate is higher than other options (usually 7-15%) and they are short-term loans (3 months to 5 years).

House flipping can easily provide a healthy revenue stream.

Whichever financing method you choose make sure it is a method that will ensure you will be put you in a position to continue to invest.