Yes, you can. 100% financing is rare in commercial real estate deals, but much more common in residential real estate investing, particularly in fix and flip deals.
There is a chance for 100% financing in almost any real estate deal because nothing is ever impossible. Typically, these deals tend to be approved for seasoned property investors. However, getting approval on a commercial fix and flip with 100% LTV is much more feasible.
Commercial fix and flip loans are simply loans that allow real estate investors purchase a distressed property, fix it up and then sell the property for a profit. These are generally shorter term loans ranging from 6 months to 36 months. Typically, banks will not lend funds to purchase and repair these properties because there is too great of a risk of default. An Arizona Hard Money Lender can finance both the purchase price and the repairs.
LTV is the loan to value ratio. Loan to value ratio is a financial term used to express the ratio of a loan to the value of an asset purchased. When searching for an Arizona Hard Money Lender you will discover that each are unique. Some have higher interest rates. Others require less points. And, others such as Level 4 Funding specialize in servicing fix and flip loans that will include financing the property and any rehab funding. You will receive rehab funding through draws. A draw is money that will be used for specific issues being rehabbed in the property. Typically, a rehab will be assessed and the funds will be directly given to the investor to make said repairs.
WHAT LENDERS WANT TO SEE
Generally, lenders want to see borrowers have some skin in the game. You may see a handful that require no money down and are content with the borrower playing a different role in the project. It is more common to see lenders require at least 10%-20% of the purchase price. Once the purchase transaction is closed, it is more common to see lenders provide 100% of the renovation or construction costs. The more experience an investor has, the more comfortable a lender is working with them and the better loan terms will become.
It is also more common to see a lender loan 70% ARV (after rehab value) than 100% LTV. The ARV is what the property most likely will sell for after the investor has fixed it up. This can still equal 100% financing of the project. For example, a property’s purchase price is $51,000 and it’s ARV is $73,000. Seventy percent of $73,000 is $51,100. The purchase price is $51,000. Done. But, what about repairs? That is simple; the repairs will be paid in draws. Using these calculations the investor would not require any out of pocket money. Of course there may be other rates and fees included.
It is not common to receive 100% financing for an Arizona commercial real estate deal, but it is possible.
Whether it works using LTV or ARV, it can work. When speaking to an Arizona Hard Money Lender it is advised you inquire about different financing options and determine what work best for your unique situation.
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 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.
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