Learn To Be A Fix & Flip Investor

Wednesday, January 23, 2019

What you Need to Know About Arizona Airbnb Loans

Airbnb has become very popular for both travelers and Airbnb hosts. Find out how to obtain your first Arizona Airbnb Loan so that you can get into this growing segment of real estate investing.

Airbnb has become very popular. Since 2017, all leisure travelers have booked 25% of their stays at an Airbnb rental property. There are over 4 million listings in more than 191 countries. These numerous travelers who are eager to stay at an Airbnb represent a good opportunity for people to generate extra income by renting out a house, condo or other space. On average, hosts make $924 a month. Some hosts have made enough to even quit their jobs. You need to remember that there are costs associated with Airbnb such as increased insurance, paying commission to Airbnb, cleaning costs and restocking costs associated to get the property ready for the next guest.

If you desire to become an Airbnb host, you will need an Arizona Airbnb Loan. One of the obvious costs required when becoming an Airbnb host is the property itself. A decision you will have to make is whether you will buy or rent a property to list on Airbnb. You will need to talk with your CPA to review your tax situation. If you are renting out your personal home, after 14 days you will need to report this income. If the property is not your primary residence, then you will need to report this as rental income.

Commission charged by Airbnb to process payments is an additional cost. This reduces your profit margin. Lastly the supplies, cleaning, and insurance of the rental property before the next guests arrive are additional costs that will lower your profit margin.

Financing Challenges for Airbnb

All these costs add up quickly and will require that you shell out thousands of dollars before the first guest is booked. Financing for people operating an Airbnb is difficult. One reason is that banks are reviewing the financing of Airbnb properties and not sure how to classify them if they are to be used as a rental property. Mortgages for rental properties have been viewed by banks as a highly risky loan. As far as a home equity line of credit, banks will not lend on a property that is used for Airbnb.

Local laws and ordinances also can be challenging. Some cities outlaw the use of homes as an Airbnb rental, so banks will not lend on them.

While Arizona Airbnb Loans through conventional lenders may be difficult, there still are possible financing options. In recent years, companies offering small business loans have popped up. An example of one is Payfully. While they do not finance property purchases, they do purchase Airbnb reservation receivables. Payfully will deduct a fee for this service and this will need to be calculated in you forecasted profit. This is an expensive additional expense. Airbnb also offers an early payout with a one percent fee. There are also companies that will advance on credit card payments which is, again, a very expensive option. If you are seeking to get your foot in the door as an Airbnb host, obtaining an Airbnb loan may be challenging, but there are options to assist you. At Level 4 Funding, we have provided capital to an extensive list of Airbnb hosts. 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

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.

Arizona Hard Money Loans Explained

Many real estate investors turn to Arizona Hard Money Loans in order to fund their projects. It’s important to understand the difference between these types of loans and conventional mortgages before signing on the dotted line.

Traditional lenders are designed to serve companies with good credit. There is a requirement that the company has strong monthly cash flow. In addition, the lender will require the principal to sign a personal guarantee. The personal guarantee is in lieu of putting the asset up as collateral. Arizona Hard Money Lenders, on the other hand, require that the asset (target property) be used as collateral. Less emphasis is placed on the borrower’s credit and cash flow. The hard money loan loosely represents a traditional mortgage.

Arizona Hard Money Lenders are not counting on you repaying your loan back; this is why your credit is not a big consideration. The value of your collateral is the primary consideration for your loan. Arizona Hard Money Lenders are similar to other short to medium term loans with high interest rates. The terms of the loans are from less than one year to five years. The underwriting process will vary between lenders; however, you can expect interest rates to be between 9% to 21%.

The property that you are seeking to acquire will determine the amount of the loan you will qualify for. The more valuable the property, the larger the loan. This is non-negotiable. Each Hard money lender will have their niche market that they lend such as commercial or residential, so you will need to do a lot of leg work to find the right lender for your project. You will need to develop a business plan for the property showing the cash you have available and how the loan is going to be repaid. In the business plan, you will need to reference your experience in real estate. If you are new to fix and flip, you may consider taking on a partner that has experience. A drawback is that this will lower your profit, but it will be more impressive to the lender when considering the loan. Your credit will be looked at only to determine your interest rate. Here again, the right partner with good credit can lower your interest rate.

Paying Back the Loan

The loan to value (LTV) will be one consideration in the terms to repay the hard money loan, others will be the area the project is in and the terms you negotiated. Remember, the more risk the lender has to take, the high the interest rate. In addition to the interest rate, you will also need to pay closing costs, points, and origination fees, and these fees are often paid upfront for the loan.

Make sure you have reviewed all documents in their totality before signing. It’s important to fully understand just what you are getting into.

The loan operates like an installment loan. Your loan will accumulate interest and you make monthly payments (in most cases) until the loan is paid off. If you can, you may want to pay off the loan early because of the high interest level you will be paying. There is a special niche that Arizona Hard Money Loans service. It includes if you have located an acquisition and have to act quickly or if you have bad credit, you may want to consider using a hard money lender. At Level 4 Funding, we work with hundreds of private Arizona Hard Money Lenders that specialize in various segments of real estate investing. Call us to find out if we have the right lender for you.

Private Money Lenders in Arizona

Private Money Lenders in Arizona differ from conventional lenders in a number of ways. Understand the key differences so that you can determine which lender is right for your project.

To start, you need to understand that Private Money Lenders in Arizona differ from conventional lenders. These lenders loan to individuals and companies seeking to rehab a property. The Private Money Lenders in Arizona are also known as Arizona Hard Money Lenders. Utilizing this type of lender will allow you to compete for a property that you may have located, and a cash buyer is also competing for the same property. Additionally, private lenders will lower your costs of funds and allow you to leverage your capital so you can take your business to the next level.

Conventional lenders offer long-term loans so you can purchase a home to live in. These consumer mortgages have strict rules and requirements for underwriting. This is due in part to the financial crisis of 2008 when the government stepped in and changed the rules for securing a consumer mortgage.

Private Money Lenders in Arizona work with businesses and investors. Since they do not work with consumers for typical 30-year fixed mortgages, these types of lenders do not have to comply with consumer regulations. The loan, from private lenders, can be structured to the needs of the rehabber for flexible and fast financing. The loan will be priced to compensate the lender for the risk that they will be taking.

Short Term Loans

Conventional (consumer) mortgages will be offered in 15-year to 30-year terms. The private money loans (rehab loans) will run 6 to 18 months with most maturities within a year. Private rehab loans are not the vehicle to use if you are planning on rehabbing the investment property and keeping it. If you are seeking to purchase and rehab a dilapidated property, then this is the loan you want to utilize. This is the type of loan which is easy to purchase, rehab and sell the property. Underwriting rules are developed by the underwriter who is, in this case, a hard money lender. The lenders will evaluate each project on its own merits and determine the interest rates that will compensate the lender for the risk that they will take. The lenders have underwriting guide lines which differ from lender to lender. The hard money lender looks at such things as where the property is located and how fast it can be sold in case of a default. Most of these lenders will look at the borrower’s business plan, people involved, and the likelihood that the project can be completed profitably.

Unlike conventional lenders, borrowers often work closely with the hard money lender.

Once a conventional lender underwrites a mortgage, there is little communication with the borrower. With a Private lender (hard money lender) you will be establishing a relationship for the current project and future projects. Your success as a rehabber depends on how quickly the lender can act and get to closing, the interest rate which is charged, and working with you to get the draws as the project moves forward. At Level 4 Funding, we work with hundreds of private lenders. Call us for a no-obligation quote.

What you Need to Know About Arizona Hard Money Loans

Real estate investors turn to Arizona Hard Money Loans for a variety of projects. For your best chance of approval, understand what these types of lenders are looking for before seeking your real estate loan.

Real Estate investors are always on the hunt for the best investments in real estate. Once you have located the property, financing the property is the next challenge faced by both professional and beginners. Rarely does the buyer have the money set aside to purchase the property. To cover the costs associated with the rental property, the buyer looks at loans to cover the costs. When making the decision to use a hard money lender, due diligence and investigation into lending options would be prudent.

So, just what are hard money loans? Arizona Hard Money Loans are secured by the real estate and are short term in nature. Rather than the creditworthiness of the borrower, the loan is backed by the value of the real estate. Expect higher interest rates than conventional loans with terms that are one to five years. Private investors fund hard money loans.

Just when do real estate investors turn to hard money loans? There are a few situations that you, as an investor, will look to use these types of loans, such as a turnaround situation, short term financing, and if you have poor credit and, at the same time, enough equity in your property that will make up for your credit challenges.

Arizona Hard Money Lenders

Arizona Hard Money Lenders differ from each other in several aspects. For instance, there are specific concepts as well as real estate segments that they focus on. First, the borrower is looked at in such areas as the underlying asset and risk of loss, the strength of the borrower, the business plan the borrower presents, and repayment of the loan by the borrower. The lenders will examine the property, looking at aspects such as the current value of the property, does the property need to be improved, and the value of the property after the improvement occurs. In case the borrower defaults, just how easy will foreclosing on the property be? This includes the liquidity of the market that the property is located in as well as the demographics and potential growth opportunities.

Arizona Hard Money Lenders turn you down for a variety of reasons. It’s good to stack the cards in your favor by understanding just what your particular lender specializes in and what they consider a good investment.

Going to a hard money lender is not a guarantee of approval. Some of the reasons a hard money lender would not be interested in the loan include the property falling outside of the lender’s parameters, the borrower falling outside the qualifications for the loan, or a lender that does not have sufficient capital to meet the loan amount the borrower needs. Tenaciousness is what is needed when searching for the financing for an investment property. If you get turned down, pick yourself up and keep searching. Real Estate investing is considered a tough game. If you choose the hard money loan avenue, they are considered riskier than conventional loans. You will need to a risk taker; if you are not a risk taker, then you may want to consider another investment avenue. You also will need to consider different ways to finance a rental property.

Five Types of Arizona Fix and Flip Loans

There are several different types of Arizona Fix and Flip Loans that you can obtain when looking to get into this lucrative real estate investment. Know the pros and cons before deciding which is best suited for your particular situation.

If you’re wondering on how to finance a house flip, you’re not alone. The endeavor of buying a home and then renovating it can be highly lucrative, and the first step is financing your flip. Getting Hard Money Loans in Arizona is unlike getting a mortgage for the house you plan on living in. There are various Arizona Fix and Flip Loans that buyers can utilize to buy distressed properties and then sell them. The qualification process has its pros and cons.

Hard Money Loans in Arizona are short-term loans. These loans are intended for real estate. The issuer is often a private lender and can be an individual, group of investors, or a licensed mortgage broker. The terms of these loans are much shorter than conventional loans. Most are six months to one year, though some can go up to five years. Interest rates can be considerably higher at 12% to 21% with 3 to 6 points upfront. These loans fund 60% to 70% of the value of the property. There is much less paperwork than conventional lenders, and the lenders will accommodate people with lower credit scores, as low as 550.

Cash out refinance: If your property has increased in value, then you have an option to refinance and get a new mortgage for more than you owe. This gives you cash in your pocket for new ventures. Closing costs in the range of 3% to 6% of the total loan will need to be paid.

Home equity loan or line of credit: If you’ve been able to build equity up in your primary residence, then you could apply for a home equity loan or line of credit and use your home as collateral. With a home equity loan, you have the full amount of the loan up front. With the line of credit, you draw on the line as you need it. You may be able to borrow up to 80% of your home’s equity.

Investment line of credit

This line is used for buying investment properties. This is drawn upon as needed. This type of Arizona Fix and Flip Loan lasts anywhere from 18 to 24 months. If you have a track record of flipping houses, this type of Arizona Fix and Flip Loan is best suited for that. The time frame for establishing this type of loan is usually about three weeks. The loan amounts range from $1 million to $50 million. The interest rates generally run 5% to 8%.

There is also peer to peer lending which is also known as crowd funding. This brings together a large amount of people who contribute funds to the project. This is usually raised through the internet.

High net individuals invest in these projects with a minimum of $5,000. There is not a lot of data about crowd funding for real estate projects. One firm funds up to 70% of the properties after repaired value. This type of funding can fund in as little as 10 days and the interest rates run 8% to 11% with the average loan term being 12 months. There is also an option for investors to take partnership interest in the property which allows the investor to benefit from interest and upside potential of the project.

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

Tuesday, January 22, 2019

Arizona Hard Money Lenders Versus Conventional Lenders, How They Differ

More and more individuals and companies are turning to Arizona Hard Money Lenders for their current real estate investment funding needs. Its important to know the difference between hard money and conventional lenders before deciding which loan is best for your needs.

The traditional lenders such as a national lender, your local bank, credit union or local mortgage broker realize a majority of their business from underwriting consumer mortgages or loans on a primary residence. Several of the largest mortgage guarantors, Freddie Mac and Fannie May, guarantee mortgages for consumers in the United States. When a consumer applies for a residential mortgage, the traditional lenders need to follow the lending guidelines set by both Freddie Mac and Fanny May. As a result, the consumer mortgage market is highly regulated. Before the housing crisis in 2008, the underwriting standards were very loose, and many people received mortgages that they could not afford. So, after the crisis, the U.S. Government established new standards that tightened lending standards for consumer mortgages that lenders had to abide by. Some of the highlights of the new standards are demonstration of more income, more savings, and better credit. Due to this, it takes longer to get a loan and much more documentation.

There are several differences between conventional lenders and Arizona Hard Money Lenders. The main differences are: First, most Arizona Hard Money Lenders do not lend on residential residences (unless you seek out a hard money residential lender). These lenders tend to lend to borrowers who invest in properties looking to flip the property and make a profit. Since they lend to investors and businesses, the lenders are less regulated then consumer lending. Second: Arizona Hard Money Lenders do not sell their loans to a second party. The lenders either lend their own money or money from investors. They loan based on investment criteria such as their win risk tolerance and lending experience.

Third: Arizona Hard Money Loans are typically short term in nature, terms range from one year to five year where typical residential loans can run 20 or more years. The hard money loan needs to be repaid in full at the maturity of the loan or converted to a conventional loan. Fourth: There are borrowers of Arizona Hard Money Loans with low credit scores, dings on their credit, do show enough income, or are self-employed. Some borrowers carry too many mortgages currently to qualify for a conventional loan. Without Arizona Hard Money Lenders, these people have no choice but to not get involved in the fix and flip industry.

After Repair Values of a Property

Fifth: Current conditions of a property are what a conventional lender looks at. Traditional lenders tend to avoid lending to rehabbers, though there are a few exceptions. Properties for conventional lenders must be livable right away. Arizona Hard Money Lenders look at property’s value after rehabbing of the property. Some of the expense for rehabbing can also be rolled into the hard money loan.

In this current market, cash is king, making the speed with which you can obtain a hard money loan very appealing.

Sixth: Ability to compete with a cash offer: You have located a property and a cash offer comes in. You cannot compete with that offer unless you work with a hard money lender. The ability for the lender to act quickly is an advantage. A hard money loan could possibly close in as little as 3 days, have minimal paperwork, and the property you are seeking to acquire can act as the collateral. If you are looking to go the route of a hard money loan, then you will need to do your due diligence and research various lenders. Call us at Level 4 Funding for a no obligation quote.