Learn To Be A Fix & Flip Investor

Tuesday, September 10, 2019

If the old ways of getting a loan for your building project are standing in your way, do what A. J. Ellis did when her ideas keep hitting closed doors—look at other solutions like a new construction loan funded via Arizona hard money i.e. private lending. Read further to find out the steps she took.

A. J. wanted more than anything to build her own houses from the ground up, designed to stand out, not be cardboard cutouts of each other. A degree in architectural design and years of work experience in a construction firm made her certain she could do it if she had the funding.

But it seemed that A. J. was the only one who held that opinion—every reason for being turned down seemed to appear as she went from banker to mortgage company to credit union. Her credit score was middling, her credit background was non-existent, a co-signer was required, etc. She began to wonder if the idea really wasn’t that good.

“File 13,” her assistant told her after lunch one day, handing her a brochure. “We don’t do business with these folks.”

She glanced at the brochure—it was an advertisement for a private lender who set up new construction loans in Arizona for individuals who couldn’t go through the traditional routes. She slipped it in her briefcase and that night began researching these types of lenders. They were respectable people, it seemed, with projects built by their money scattered all over the state with no problems arising after completion for whatever the builder had in mind.

The advantages of such funding—basically a short term loan that financed construction of real estate investment property—were attractive.

Private lenders could fund quickly, sometimes within a week, something that traditional lenders could not. This included application time, another hitch with the conventional funding.

A new Arizona construction loan backed with Arizona hard money could be designed to fit the borrower whereas regular lenders tended to go with one structured approach.

Background was not so important here as was the ability to pay back the loan and how much equity there was in a property. Lack of certain documents or a past negative blimp in credit didn’t seem to matter so much with the private lenders.

The disadvantages of this type funding were not attractive, however—they made one think, but they were understandable.

Collateral generally meant a borrower’s house—if default occurred, the lender took and sold the home. Interest rates and fees were much higher than conventional loans—she could end up paying the principal and almost a fourth of the total in interest with some arrangements. These, along with the collateral, kept the lender’s risk percentage down.

The repayment periods were short causing the monthly payments to be higher. Restructuring the budget would be necessary.

Ellis is now the builder for a subdivision of well-thought-out houses with individually attractive features. She took time to understand what she was taking on, found a lender she could work with and turned her ideas into reality with a new construction loan designed just for her. With that plan in mind, your own project could become more than words on paper.

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

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: 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.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Being just of college, degree in hand and experience working in your father’s real estate firm since you were a child didn’t mean anything to the big banks and the established mortgage firms. You need an investment property loan to simply get started in the business–do you want to deal with the firm across town that sets up through Arizona hard money?

A bit of research pointed out that these loans are good for investors who have some money, but are not comfortable putting up everything to purchase a piece of property. You fit that description—you do not want to ask your father for money since he just spent a bundle on your college work and tapping into your trust fund is not a good idea – it needs some growth anyway.

Further reading advised when considering loans in this area, pay attention to all the details, fine print and adjunct clauses in order to know exactly what you are taking on, both pro and con.

An investment property loan via Arizona hard money does have its positive side, the first one being timing. Conventional lenders can take as much as six months to close a regular loan—private lenders, on the other hand, generally can get approval and closure within a few weeks at most. You may be young, but you know the value of time, especially when it comes to an attractive property that’s on the market.

Collateral normally is attached to the property, but this isn’t always true. The borrower can use personal assets ranging from residential property to a retirement fund.

Terms can be designed just for you—you can have a custom-made loan, in other words. With a bit of diplomatic negotiation, you may be able to have the repayment period adjusted in order to lower payments or even have certain fees that are normally attached removed or at least end up paying a lesser amount.

This sounds pretty good, you thought to yourself, and being a bit of a cynic, looked for the downside, knowing there had to be some drawbacks.

Investment property loans made through private firms, it seemed, all came with higher-than normal fees and interest rates/points. This, according to one of your father’s salespeople, was protection money. “They are taking a big risk on some of their clients,” he pointed out. “With the higher rates, plus collateral, the lender is guaranteeing that they don’t lose everything they have dispersed in case a borrower can’t repay a loan, no matter the reason.”

Repayment periods are on the average about 12 months in length, with the borrower paying mostly interest every month and the principal due at the end of the term. Keep the timing in mind, one article said, because if you cannot pay the balance at the end of the repayment period, either your loan will be re-financed or your collateral will be seized. Both of these options are costly.

A private lender may be just the thing for your investment property loan, but be certain you have researched the area carefully before making the decision to take on one of these loans. Keep on top of the situation for the entire time and work with your lender—you may need them in the future for yet another project.

Found a wonderful old house that would make a great project to fix up and sell?

That takes money and you need a loan, specifically a renovation loan. Who do you talk to when the established lenders have already said no?

Your brother-in-law and an investment counselor you know casually both said the same thing: “Go talk to the Arizona hard money people—they can help you.” A few conversations later, you found out that depending on who you were talking to, these loans were either a dream come true or a total nightmare to be avoided unless you were in desperate straits.

Deciding to be positive and knowing research was time well spent, you looked into this kind of funding further, both on the internet and by talking to the woman in the office next to yours who was an investment counselor. You found out that Arizona hard money funding no longer had the worst reputation in the business and was actually recommended for Arizona renovation loans.

Advantage of these types of loans included:

--Flexibility and a fast turnaround: there were instances in which application, processing and approval were narrowed down to three to five days.

--Credit doesn’t have to be perfect. These lenders didn’t slam the door in a would-be-borrower’s face if their credit score and/or background weren’t perfect. Collateral was the important thing here.

--Down payments could be obtained from anywhere—a relative, a sale you made, etc.

--'Different’ properties. There was no backing away if the property you wanted to invest in was not a conventional one, i.e. an apartment house or single family home. A once-church that could be turned into a nightclub made no difference to these lenders as long as the value was good and turnover looked imminent.

--Total funding: most of the loans covered the entire cost—no getting funding from three or four people and having to hope it all added up. Working with your lender you set a schedule of agreed-upon draws and worked through it.

All to the good, you thought, and asked Jeanne Carson, the investment counselor, about the downside of renovation loans made through Arizona hard money lenders. She shook her head and smiled. “There are several,” and went on point out the following things.

Interest rates can be as high as 18 percent and there are numerous fees for every aspect of the process. The lender after all, is in business to make money and this is one area that protects them from losing everything in case a borrower defaults.

Repayment terms are short and generally you pay only interest with the principal due at the end of the term. Overages are your responsibility—if your contractor goes over budget, you pay those costs. Late payments are not acceptable—you can find a foreclosure notice in your mailbox if you miss a couple, sometimes even just one.

After that consultation, you were almost ready to look at other types of funding, but something kept telling you to go for it. So you did and all the hard work, lost sleep and a few added expenses paid off, making you one of those positive stories you read about Arizona hard money renovation loans.

Business loans seem to be a Catch-22—you need a loan to start/grow a business, but you can’t get one via the banks because your business is small/not growing green as is. Maybe it’s time you went with a Arizona hard money set up.

These type loans are individual, custom-made, off the beaten track, but they aren’t entirely without restriction. Collateral is required. In this respect, Arizona hard money loans allow the use of your assets—namely the property value of commercial real estate--in order to back the loan. This protects the lender in the event that borrower defaults on repaying the money for whatever reason, up to and including death.

There are numerous alternatives to funding your business as you will discover when you start the search. Traditional mortgage companies and banks are the first place most business owners go to only to discover they don’t fit the tightly structured qualifying package that these lenders have to work with. Not to mention the load of documentation that has to be produced, the time it takes to get an application processed and the fact that you don’t really talk to the actual lender to explain your situation. Instead a committee or board that you never see decides if you get your money or not. And a considerable amount of the time, the answer is No, even for a series of small mistakes.

So if you fund your Arizona business loan through a Arizona hard money lending company, what are the advantages to this method?

Timing: if your business is in financial trouble, you don’t need to be told that the decision will be made in around six months. The Arizona hard money people reach their decisions much more quickly and you will know where you are sometimes as fast as two weeks.

Documentation: it takes hours and hours to fill out all the forms that comprise a conventional lenders‘s application. But in the event of non-traditional funding, when only your collateral is being given a close look, this is not case.

Credit scores/history: banks are set up to depend heavily on these items—most of them want a FICO score of above 700. If you don’t have that, it can slow things down considerably—other holes in your past credit history, for example, a foreclosure, can stop the process altogether. The lenders who work in Arizona hard money don’t view your credit score as nearly important as your ability to show collateral/pay the loan back.

To be certain, all these reasons make applying for this type funding fall into a positive light. But there are other factors in taking on a Arizona hard money business loan that are worth considering. Let’s look at them.

These loans are expensive—fees and interest rates are higher than conventional loans are. This, again, protects the lender, in case of loss.

Funding of this type is risk-filled since there is always the chance that something will go wrong and you will end up losing your collateral. A worse-case scenario is that if your collateral is now deemed as not being worth the value of the loan, more must be provided and that may fall into providing personal items of value.

These loans are a positive value to many business people and there are numerous stories of good results from taking one on, but before you do, research the situation with great care, talk to an attorney, an accountant, people who have been in real-estate for a sizeable number of years. Then determine if a Arizona hard money business loan is the right funding for your business.

Monday, September 9, 2019

All you have thought about since you saw that old closed hotel downtown is fixing it up, but with your credit, where would get the money? Someone said “Try a commercial Arizona hard money lender.”, but what is that?

As you found out after grabbing your laptop and a fresh pot of coffee that night, lenders in this field base any loan upon commercial assets instead of using the borrower’s financial backing, credit, or steady employment –the things that conventional lenders put at the top of their list.

By depending on property instead of just the borrower, a private lender is able to loan money that a bank or mortgage company could not. Funding with them is set up through a first mortgage and is termed a ‘no doc’ or non-bankable loan.

Further reading on various websites let you know that there were numerous reasons a borrower might go with this type of funding, such as:

*You need a loan quickly because the property may be sold to another buyer any day and traditional loan applications, if you can even get one approved, take three to six months.

*Your situation is unique and you need a creative individual solution in order to meet your needs and the conventional lenders just can’t do that with their strict rules and regulations.

*Needed collateral is not limited to one piece of property, but is spread over several different areas.

*You are a foreign national without any ‘credit depth’ (availability of credit information ) in this country.

*Your credit falls under the term ‘disabled’.

Those were just some of the reasons outlined that called for a commercial Arizona hard money lender.

Other advantage of this type of loan were the fact they required no credit score, only minimal documentation and decisions were made by the lending company—no ‘loan committee’ or board that never talked to you personally, but still held your business dream in their hand. The types of loans and real estate properties covered were wide ranging as well.

Best of all, you found, decisions could be made in 10 business days and there were no upfront fees.

This sounded really good to you, but there had to be some hitches some place –life had already taught you that while the balance of a situation might lean heavily toward positive, somewhere in the entire picture lays a few negatives. You kept reading.

Commercial Arizona hard money lenders sometimes, but not every time, required a higher down payment than you would have had to pay a traditional lender. Interest rates could be as much as 10 percent higher than a mortgage companies. The risk involved is directly tied into these requirements. These lenders also give short payback periods such as one to three years, unlike banks whose repayment terms can start at five years and stretch to 30.

In the morning, I am going to call some of these companies, you thought as you closed out your computer. You particularly liked the first one you looked at–tons of information on the webpage and a boxed disclaimer that said for a would-be-borrower to be careful and become as knowledgeable as possible before even talking to a commercial Arizona hard money lender. Perhaps this time next year you would be the owner of a hotel with considerable market value.

If you are one those investors whose leanings still are in the direction of conventional funding, a 90% Arizona hard money loan may be the best answer for you.

These type loans are more difficult to obtain, but your project will be partially funded as opposed to having your entire effort wrapped up with one lender.

The documents required of a potential borrower are more in line with those requested by banks and mortgage companies. Basically the following items must be presented to your lender of choice: bank statements for past two months showing both your checking and savings accounts, your sales agreement, tax returns for the past two years, the proposed construction budget and a list of your current residential and commercial properties.

Depending on the lender, other documents may be asked for, but these are the ones generally requested by companies who provide this type financing.

Defined as Loan-to-Value, 90% Arizona hard money loans are the fix-and-flip area’s top-tiered lending. Requirements are stricter, despite their being in the non-traditional ranks of funding. This funding area does not cover owner-occupied loans, but does branch out over a large range of real investments other than this one.

A would-be borrower must have a FICO credit score of at least 600 and be very certain that he or she can sell the property within a year’s time. The down payment is set by looking at the borrower’s credit scores and past experience in the real estate field, ending up mostly at around 20 to 30 percent up front.

The average interest rate falls between 10 and 15 percent for these loans, depending on the lender and the perceived risk involved

You must have a property appraisal in hand. It does not need to be expensive or extremely detailed, just filled with correct information about your project. Most lenders in this field are more interested in the property value following the needed renovations and improvements than the basic value beforehand.

Application can be made for amounts beginning at $25,000, although most companies start with $75,000 and the figure can reach $2M. Figures like those are real assets to an investor’s portfolio later while trying to get other projects funded.

Each lender is different, but most set the repayment period for a 90% Arizona hard money loan at around 12 months, although some are longer. The clients’ needs also can be factored in here as well.

An added advantage is that if the loan is paid off early there is no prepayment fee attached.

A little hard work never hurt anyone, especially if it pays off in the end. If you have areas where traditional funding is unable to help you out and you need funding, a 90% Arizona hard money loan is a good area to check into. Do your homework; talk with people who are knowledgeable in this area. Finally make appointments with several companies that you feel might be a good fit for you and discover if this is the way you should go.

Learn To Be A Fix & Flip Investor

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Tuesday, September 10, 2019

Found a wonderful old house that would make a great project to fix up and sell?

Business loans seem to be a Catch-22—you need a loan to start/grow a business, but you can’t get one via the banks because your business is small/not growing green as is. Maybe it’s time you went with a Arizona hard money set up.

Monday, September 9, 2019

All you have thought about since you saw that old closed hotel downtown is fixing it up, but with your credit, where would get the money? Someone said “Try a commercial Arizona hard money lender.”, but what is that?

If you are one those investors whose leanings still are in the direction of conventional funding, a 90% Arizona hard money loan may be the best answer for you.

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