Understanding the thinking of Arizona hard money lenders

Will you have to make a down payment with your Arizona hard money loan?

This is indeed the question of the hour. Do hard money lenders require a down payment? Unfortunately, this question isn’t answered as easily as yes or no. Most of the time, the answer is “no.” But, that isn’t always the case. Let’s take a closer look.

First, understand that there is a difference between a down payment and needing money to start the deal off from the beginning. You will find that various lenders will require a certain percentage as a down payment, and as with any other loan, this percentage will be calculated based on your credit score. So, while a low credit score won’t necessarily keep you from getting approved for Arizona hard money, it may keep you from getting a low down payment or interest rate.

Remember that all Arizona hard money lenders are taking a significant risk in loaning money to you, and the certainly have to assess that risk to ensure they stay in business. If the lending institution or person decides to take a chance on you, the down payment will probably be calculated on a case-by-case basis. Ultimately, hard money lenders are trying to make a profit, not treat this as a charity case.

Understanding the thinking of Arizona hard money lenders

Again, this is not a charity deal on their part. They want to give you the money, but they do not want to end up losing money in the long run. Many times, Arizona hard money lenders will loan you an amount of about 60-70% of your LTV (loan to value ratio). That is a pretty significant chunk of money considering that they don’t have to give you any at all.

Sometimes customers consider that 30-40% gap between the actual purchase value of the home and the amount you are lent as a down payment. This is not the case. You will be required to come up with some of the money on your own, but it is not generally put toward the amount you owe on the loan.

For fix and flip projects, Arizona hard money gets even more complicated. Before you even apply for Arizona hard money, you will likely have estimated numbers in mind. You need to know how much the property is worth, how much the repairs will cost, and how much the property will be worth when it’s all said and done. Obviously, you are in this for a profit so that last number needs to be higher than the first two combined. When hard money comes into this situation, remember that the lenders may calculate things differently than you, and what they say goes.

Three Mistakes to Avoid Making with Hard Money Arizona

Common Mistakes for dealing with Hard Money Arizona

If you’re looking to be savvy and make a profit with hard money Arizona, look no further. We can supply you with all the information you need and before you know it, you can be making money along with thousands of other Americans working in the real estate market. You can use hard money Arizona to invest in real estate, but there are risks and pitfall you need to be wary of. Here are three things to not do when working with hard money fix and flip projects in your area.

Three Mistakes to Avoid Making with Hard Money Arizona

Taking too long: After you get the hard money Arizona loan, it can be tempting to make your plan and sit on it for a while. However, this is a common mistake and could end up hurting you severely in the long run. Have a plan in place before ever even applying for the hard money loan, and plan on starting your repairs the day you get the money. Your fix and flip repairs should take about two weeks, but definitely no longer than a month. The only way to make a profit is to get things done, so you need to do just that. Get in, get out, get on your way.

Misestimating the time on the market: This can be a tough call to make. Definitely be consulting with local experts such as real estate agents or appraisers that work primary in the area or location you are working out. Get a feel from them about how long you can expect for the average time on the market for a property that is priced properly. If you only have a three month loan and the average time on the market is six months, you could be in quite a situation trying to pay that loan back before your fix and flip project has actually sold.

Overpricing: It’s understandable that you want to get more for your money. The entire reason you invested in the hard money Arizona process is to make a profit that makes your home worthwhile. However, some contractors overestimate the value of their time and that can be a harsh reality to face. Don’t set the price of the property higher than other homes that compare to it or you are simply wasting your time. You don’t want to be sitting on a huge loan to pay back and a property you are trying to sell without any resources to take care of either. Keep your prices reasonable and allow the process to work its magic.

Five Steps to Make Money through Fix and Flip with Arizona Hard Money

Make Money with Arizona Hard Money: Fix and Flip

I think a lot of us scroll right past anything that has to do with loans these days (unless we need one for ourselves, of course). We couldn’t dream of pursuing more debt, so we make it work. However, unbeknownst to most Americans, you can actually make money with Arizona hard money loans, and the profit is significant enough to capture your attention. Don’t believe me? What if I told you that the average profit for one fix and flip project is right around $30,000? It can be done my friend, it can be done.

Five Steps to Make Money through Fix and Flip with Arizona Hard Money

1. Find the property. Like anything else in life, the first step is the hardest. It’s a big commitment to step into and it can be a tough one. Consult a realtor, do your research, and become an expert. Constantly gather knowledge on the real estate market and find out how it works. One of the most important things to know is the ins and outs of real estate in the location you are investing in. Ideally, there will be a high demand for real estate in that area. Look for a home with room for improvement and potential.

2. Evaluate the Property. Much like step one, this part can be tough. After you’ve found a potential property, you need to do a thorough evaluation of the condition and the price. Crunch some numbers and see how things add up.

3. Apply for an Arizona hard money loan. This is where things get a little easier. Applying for an Arizona hard money loan is easy, and strictly equity-based. Try to get a loan that covers most, if not all, of the property’s listed price. You likely will not have a lot of extra money to throw around on the project, so ask for what you need on a loan.

4. Start your repairs. Congratulations! If you’ve made it to this step, the hard part is over. You’ve finished most of the paperwork and, if you have a passion for rehabbing properties and homes, this is your time to shine. Create a timeline for your contractors and stick to it. Try not to have all home repairs take longer than one month. 

5. List the property. The last and final step is fairly easy. Consult an agent, and price it right. Don’t overprice the home because you know how much blood, sweat, and tears went into it—otherwise it will never sell. 

Making money with fix and flip projects and Arizona hard money is truly an easy and rewarding experience!

Don’t Get Discouraged by Hard Money Lenders in Arizona

Getting reasonable rates from Hard Money Lenders in Arizona

If you know anything at all about hard money loans, you know that their interest rates are high. This may have turned you off to them in the past, but don’t let it deter you from pursuing one if the time is right for you. However, you need to keep in mind that getting a loan from hard money lenders in Arizona is entirely different than getting a loan from a conventional lending institution. You simply will not see those low interest rates you are hoping for, and we are going to do a bit more exploring as to why. 

Hard money lenders in Arizona do want to lend to you, but you have to keep in mind that they are taking a significant risk in doing so because they do not base their decision on your credit or ability to pay. You can have embarrassingly terrible credit and still end up with a hard money loan. However, you will never get a hard money loan with a 3% interest rate. That is said without hesitation. Hard money loans are mainly short term and contain higher interest rates. The typical loan is anywhere from three to nine months—never the 30 year traditional mortgage. 

Don’t Get Discouraged by Hard Money Lenders in Arizona

The entire loan process can be an exhausting and frustrating one. However, if you see it through until the end, the results are usually very rewarding. Don’t let the higher interest rates deter you from pursuing a loan, but do keep in mind that you don’t pay all that much in interest because the length of the loan is so incredibly short. While I am not suggesting that a hard money loan is any better or worse than a traditional loan, you will not be spending tens of thousands of dollars on interest with hard money. Comparing the two types of loans is like comparing apples and oranges—just plain different.

For the most part, hard money lenders in Arizona will likely not be offering you single digit interest rates. That can be a harsh reality to face, but it’s good to know. Hard money lenders in Arizona tend to lower the interest rates for experienced investors, so if you’re new to the game, you may just want to hang in there for a while and feel it out.

Reasons Hard Money Lenders in Arizona Might be Rejecting You

Are Hard Money Lenders in Arizona Turning You Down?

If you have done your research and have decided to pursue a hard money loan, getting approved should be no problem. However, sometimes it is; and that can be truly disheartening. But, don’t give up! There are ways for you to adjust your approach and get the money you need.

First, you need to keep your deals at our below 65% LTV. That means that you are not asking for an amount that is more than 65% of the property’s value. But, that’s not all there is to it. So much more goes into hard money lenders in Arizona decision than you even know.

Often, it is not just the dollar amount that matters. While it is important to keep that LTV at a reasonable amount, keep in mind that many lending institutions send out evaluators and appraisers to inspect properties on their own terms. It’s not that they don’t trust you or your appraiser’s judgment, they often just need to see it for themselves before making their decisions.

Reasons Hard Money Lenders in Arizona Might be Rejecting You

Like I mentioned before, it’s a tough situation to be in when you feel that your hard money lender is being harsh on you and unforgiving to your circumstances. However, they are trying their best to work with you, but are taking such a significant risk in loaning to you, that they have to protect their assets as well.

One thing hard money lenders in Arizona tend to shy away from is sketchy neighborhoods. This is true for fix and flip loans and investment loans. Several factors are taken into account when assessing a neighborhood: crime rates, cleanliness, the real estate market in that area, percentage of ownership vs. rental, etc. Don’t plan on  getting a large loan to fix up a mansion in the ghetto. It just won’t work.

Hard money lenders in Arizona want to see a return on their investment. That’s why they’re in the business in the first place; makes sense, doesn’t it? The funds available for these loans come from private investors looking to make a profit on the money they aren’t needing at the time. They need to know you can pay; if you can’t, you may not get approved.

Hard money lenders in Arizona are there to help you out, so understand their risk, do your research, and keep pursuing your loan until it works out.