Things to Consider as an Arizona Hard Money Lender

arizona hard money lender - Things to Consider as an Arizona Hard Money Lender

WITH AN ARIZONA HARD MONEY LENDER LOAN, THE PAYOR NEEDS THE MONEY.

If he is coming into the private market and paying higher rates, it is because he has been rejected by or cannot go to the banks. I like paper because it can have a lower risk factor than any investment that I know. I am an equity investor. I know the property can pay me when the payor can’t. I do not want a loan turned down by the institutions unless there is enough equity that I would love to own the property and have the staying power to re-market it. As a hard money lender Arizona, when I buy a discounted mortgage I am doing so because the seller of the note needs the money – not the payor. In addition, my yield is derived by buying the note at a discount, not because the payor is being charged usurious rates. Which brings up another important point!

As a hard money lender Arizona, if you are loaning money at high rates you may be in violation of your local state usury laws. “Usury” is charging more interest than is allowed by law. These laws vary from state to state. In a situation where I make an Arizona hard money loan at 18% interest, I could be in violation of a local state’s usury laws. If I buy a 10% note discounted to yield 18% – that would not be usury. Making or buying a usurious loan can lead to a complete loss of all interest as well as other potential damages. There are federal “truth in lending” laws that apply to mortgage lending as well as local state versions in some states like California. For example, the APR – Annual Percentage Rate must be disclosed on a loan that includes points and other loan costs. It can be a violation of federal law not to do so. Violation of these laws could lead to a total loss of interest and principle on a loan, lawsuits or judicial problems. Buying a discounted mortgage is a whole different matter. Most laws do not apply to a secondary buyer.

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Private Money Lenders Arizona Risk Less

Private Money Lenders Arizona Risk Less

So, what is a Private Loan? It is a loan made, in this case, to a real estate investor and is secured (collateralized) by real estate.

PRIVATE MONEY LENDERS ARIZONA ARE TYPICALLY GIVEN A FIRST OR SECOND MORTGAGE THAT SECURES THEIR LEGAL INTEREST IN THE PROPERTY THUS SECURING THEIR INVESTMENT.

We are not talking about high Loan-To-Value (LTV) ratios the banks and savings and loan institutions make on homes. We typically employ low LTV ratios to our Private, also called Hard Money Lenders Arizona, to increase security of the loan. Standard LTV ratios are usually under 75% of the value of the property securing the loan and frequently as low as 60%. This means additional security on the investment.

For example, if a property is valued at $100,000, Hard Money Lenders Arizona would usually not loan more than $75,000 dollars on the property. That’s a 75% loan-to-value ratio. This approach taken by private money lenders Arizona is obviously a much safer approach from that taken by conventional lenders. These banks get into trouble because they make loans at a 90%, 95%, or even 100% loan-to-value ratio leaving them no equity for transfer costs, if they are ever forced into a position where they have to take back the collateral property. It is in the best interest of the hard money lenders Arizona to minimize risk and maximize return and this is why private loans should not be made without a 25%+ safety net.

private money lenders arizona

Variations in Arizona Hard Money Lending

Variations in Arizona Hard Money Lending

AN ARIZONA HARD MONEY LOAN IS A LOAN SECURED BY THE VALUE OF A REAL ESTATE PROPERTY.

Arizona hard money loans are typically arranged at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution but by private investors, generally via local areas brokers who specializing in arranging hard money loans. In reality every hard money lender Arizona and every hard money loan is different than any other.

There are many other factors that affect individual loans among them:  credit, personal income, equity, loan purpose, term, owner occupancy, property type, property age and condition, location, city and state regulations, co-borrowers, market trends, availability of lenders and other factors. The relative importance of the factors varied from loan to loan. Every Arizona hard money loan situation is to some degree unique—your own situation is unique. The only effective way to find out about your specific case and what can be done is enter a very basic request from a hard money lender Arizona. The lender will have to review your request and reply with questions or with initial an approval. Based on the reply from the hard money lender Arizona, you can modify your request and provide additional data.

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Arizona Hard Money is a Great Alternative to Conventional Loans

Arizona Hard Money is a Great Alternative to Conventional Loans

With the current state of the economy and the tightened financial markets, the use of private money lenders Arizona has skyrocketed over the last couple of years. Adding fuel to the fire is the fact that our so called “Great Recession” has put many people into bad credit situations that prevent them from obtaining financing through traditional lending sources. You know that you need private money lenders Arizona in some way shape or form. Perhaps it’s to finance a fix and flip investment or maybe it’s a cash out re-finance on a property you own to get some liquidity for your business. There are any number of reasons—you’re just searching for the best private, also called hard money lenders Arizona, out there before you pull the trigger. Or you are thinking about getting started as a real estate investor and have just been introduced to the concept of private money. You’re doing your research to get a full understanding of how it works and to find hard money lenders Arizona that you can trust when you are ready to move forward.

If you are taking a loan from private money lenders Arizona, that really just establishes that no financial institution is involved. The money given is directly from private people or a group of private people and not from a financial institution. Traditional loans are done by a lender giving loans that meet certain criteria, once the lender has given so many of these loans that fit in certain boxes they then sell the “package” of loans out to what is referred to as a “secondary market” this is typically Wall Street. Do you think that you are going to have a hard time getting that type of a loan from a traditional lender? The answer is YES, the reason is that if the lender does not sell the loans they have to keep it on their books, this limits their lending ability. Traditional lenders get paid to package loans not to keep them on their books, they need to get their money back so they can lend it out again. In contrast, hard money lenders Arizona write their own rules. They are able to make their own guidelines and not make funding decisions based upon the “box” that Wall Street or secondary market may put on them. Private money lenders Arizona are basically a conduit between people who have money that they want to invest and people who can use it, like you. One thing you should be aware of, though is that you’ll be looking at higher interest rates with hard money lenders Arizona because the loan is given out based solely on the credentials of the asset (typically a piece of real estate) and not the credentials of the borrower (your credit, job history, income, etc.).

THAT’S THE BEAUTY OF ARIZONA HARD MONEY!

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Your First Buy of a Home using Arizona hard money

Your First Buy of a Home using Arizona hard money

When it comes to buying a real estate investment property, the first deal is the hardest. Many talk about buying a rental property for several years until they finally take the initiative, by finding a property, and buying it. Many times the houses appreciate substantially…leaving people to wish they had bought ten more! However, financing your first investment property can be daunting, especially in Arizona.

THIS IS WHERE THE ARIZONA HARD MONEY LENDERS OF LEVEL 4 FUNDING COME IN. THEY CAN HELP YOU WITH ALL OF YOUR LOAN NEEDS.

So if concerns about financing your first property are stopping you from getting started, here are some other tips to ease your mind. Check your credit early for mistakes and items you may need to address, but don’t let less-than-perfect credit stop you from trying to get pre-approved for a loan from Arizona Hard Money lenders. You may be surprised by what Hard Money Lenders of Arizona will approve these days. Once you review your credit report, do not take any drastic action without first consulting with an expert. In particular, don’t close old accounts or pay off collection accounts right before trying to get a loan. Either action may hurt your credit score rather than help it. Also, don’t procrastinate any longer: lenders are being scrutinized for making risky loans, and standards are likely to get tougher in the near future.  If you are not eligible for a loan based on your credit or other qualifications, look for an investor partner to go in on the property with you. There are many others out there wishing they owned more real estate who lack the time and/or expertise to find and buy property. Although hard money lender’s interest rates are high, it can be worth it if you can refinance or sell the property in a relatively short period of time.

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Decide What Home to Buy by Knowing Your Numbers with hard money lenders Arizona

hard money lenders Arizona- Decide What Home to Buy by Knowing Your Numbers

All things being equal, second homes may offer better financing, but it will depend on where the property is located in Arizona and what you intend to do with it. Talk with your tax advisor about how you plan to use the property to decide whether it would be better to buy a second home or an investment property. I am not a fan of stretching the truth on applications. If you are buying  investment property, call it what it is. Whatever you do, don’t buy a property where someone talks you into saying you will live in it when you won’t. There are illegal scams that solicit “ straw buyers,” and these can get you into hot water.   You must understand the numbers. Investors have different goals. Some want to buy a rehab property, fix it up, and sell it quickly for a big profit. Others specialize in pre-construction, which means they put a contract on a home or condo in a development before it is built and then sell it for a profit, sometimes before they complete the purchase! Others will buy a home they can rent out, and are happy to break even or make just a little money each month, expecting appreciation to be the pay off. Still others want to buy a vacation home in an area they want to visit. They may use it from time to time and rent it out the rest of the year for a profit. Whichever approach you decide to take, make sure you understand the numbers, including the cost of financing, a down payment, advisor fees, repairs, etc.

Be realistic about whether you can afford to make the mortgage payments and the interest rates associated with Arizona Hard Money Lenders. Also, don’t sweat the down payment:

WHILE MANY HAVE TO COME UP WITH 10% DOWN ON  FIRST INVESTMENT PURCHASES, THERE ARE LOANS NOW, LIKE THE ONES FROM HARD MONEY LENDERS ARIZONA THAT ALLOW FOR 100% FINANCING ON INVESTOR PROPERTIES. ANOTHER OPTION IS TO GET A FIRST MORTGAGE FOR 80% OF THE PURCHASE PRICE AND A 10% HOME EQUITY LINE OF CREDIT BEHIND IT FOR A TOTAL OF 90% FINANCING.

hard money lenders Arizona

GET HELP WHEN BUYING A HOME — Use some Arizona Hard Money!

GET HELP WHEN BUYING A HOME — Use some Arizona hard money!

Sellers may also offer to help out by agreeing to accept part of the purchase price in the form of a note (I.O.U.) that you can pay off in the future. Certain loan programs allow sellers to contribute toward the closing costs to help minimize your out-of-pocket expenses. You also may be able to borrow against equity in your primary residence to come up with your down payment.

Still another possibility is to secure your down payment with funds you already have in a brokerage account, according to investor and loan expert Deborah A. Ten Brink, president of LLC Loan Network. She describes it this way: Sam wants to purchase an investment property for $100,000.00. Sam has a brokerage account with $50,000.00 in it. He must pledge 143% of the $25,000 down payment required by the lender or $35,750 (143% times $25,000.00 = $35,750.00). The funds are retained in his brokerage account, still accruing interest, but the lender puts a lien on the account to protect its interest, then loans him the full $100,000.00 to buy the property. When the investment property achieves 25% equity (proven by an appraisal), the lien on the account is released and the pledged amount plus accrued interest is once again completely under the borrower’s control.

Even if you have cash for a down payment, you may not want to tie it up in your new property. So, for example, Sam can open a certificate of deposit (CD) with the lender using his down payment funds of $25,000.00, and still borrow 100% of the purchase amount of $100,000.00. When the investment property achieves 25% equity (proven by an appraisal), the lien on the CD is released and the CD, plus accrued interest, is returned to Sam.

IN BOTH CASES, 100% FINANCING IS ACHIEVED! THESE OPTIONS ARE ALSO AVAILABLE TO INVESTORS WHO WANT TO CLOSE AND HOLD TITLE IN A BUSINESS ENTITY, SUCH AS A LIMITED LIABILITY COMPANY, LIMITED PARTNERSHIP, OR CORPORATION, ARIZONA HARD MONEYLENDERS. EITHER WAY, ARIZONA HARD MONEY LENDERS WILL FIND A WAY TO GET YOU THE MONEY YOU NEED TO INVEST.

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Steps to Get Approved For an Investment Property with Arizona Hard Money

arizona hard money - Steps to Get Approved For an Investment Property with Arizona Hard Money

1. Gather your paperwork. Be prepared to provide copies of: two month’s worth of your bank statements, investment account, and retirement account statements (all pages; not Internet statements); the last two pay stubs if you have a regular paycheck job; driver’s license and Social Security card; and bankruptcy, divorce or separation papers, if applicable. If you are self-employed, you may be asked for some or all of the following: business license or occupational license, letter from your CPA establishing two years’ self-employment, last two year’s tax returns, business bank statements, and/or business financial statements.

2. Assemble your team. You will want an accountant who understands investment property tax strategies; a realtor or real estate attorney who can help you make sure you use the properly worded contract and include the right contingencies; a mortgage professional with experience in investment properties; an attorney who understands asset protection to help you form the right structure for holding your investment property (often a limited liability company or LLC); and an experienced insurance agent. I strongly believe all of these professionals should invest in real estate themselves since investment property transactions have special nuances. Advisors with investment property experience can help identify potential problems before they happen. One of the big ones: holding investment property in your own name, warns Rich Dad Advisor Garrett Sutton, an attorney and author of Own Your Own Corporation (Warner) How to Use Limited Liability Companies and Limited Partnerships (SuccessDNA). By doing so, you expose your real estate and personal assets if a lawsuit arises.

3. GET PRE-APPROVED. BEFORE YOU START HOUSE-HUNTING, GET PRE-APPROVED FOR A LOAN THROUGH A MORTGAGE BROKER OR THROUGH A LENDER LIKE HARD MONEY LENDERS ARIZONA.   MAKE SURE TO  REQUEST THIS PRE-APPROVAL IN WRITING. THAT PIECE OF PAPER CAN BE VERY HELPFUL WHEN YOU NEGOTIATE THE PURCHASE OF A PROPERTY SINCE IT GIVES THE BUYER GREATER ASSURANCE THAT YOU WON’T TIE UP THE DEAL AND NOT QUALIFY. A NOTE FROM ANARIZONA HARD MONEY LENDER WILL GIVE THE SELLER ASSURANCE AND WILL GIVE YOU  A  LEG UP ON ANYONE ELSE COMPETING FOR THE PROPERTY.

arizona hard money

How to choose a Home with Arizona hard money

arizona hard money - How to choose a Home with Arizona hard money

You’ve heard of “analysis paralysis?” It’s a disease for many would-be investors. While you don’t want to dive in blindly, if you have done your homework and have found a good deal, at some point you have to just go for it. If you can’t seem to take the plunge, ask financial advisors, like the ones at Hard Money Lenders Arizona to help you make progress. Get involved with your local real estate investment club, or find an investor who can act as a sounding board.   House flipping is, essentially, buying a house or property with the intent to sell it for a profit.

THESE ARE THE KINDS OF DEALS ARIZONA HARD MONEY LENDERS ARE HERE FOR.  BUT THE LOGISTICS CAN GET PRETTY COMPLICATED.

There are a lot of decisions to make from the beginning. Where should you buy? If you purchase a house in an up-and-coming neighborhood, you’re banking on the neighborhood increasing in value. If you decide to buy in a new development, you’ll want to attract higher-end home buyers who want the luxury features and space offered in the suburbs. If all goes well, you could make a nice profit. But if something goes wrong — faulty budgeting, timing issues, a crime spike in that up-and-coming neighborhood — you could be stuck with a house you can’t get rid of.  So much in house-flipping depends on the real-estate market, which we all know is cyclical. During a boom, flippers have the upper hand and can almost name their price in some areas. But during a slow period, many of these fixed-up homes can sit on the market for months.  Once you know where you want to buy, the next step is deciding what type of property you want to purchase. If you go for a fixer-upper, you’re committing to improving the home, which takes time and money. If you buy a foreclosed property in an auction or from a bank, you could get a bargain on a vastly underpriced house. But remember that if the previous owners couldn’t pay the mortgage, they probably couldn’t pay for the upkeep, either — so you might have to deal with a rodent infestation or a leaky roof.

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Fixer Uppers and Foreclosures using Arizona hard money

Fixer Uppers and Foreclosures using Arizona hard money

Fixer-uppers and foreclosures are what most people think of when flipping comes to mind. But it is possible to flip a house without doing any work on it at all. During the real-estate boom of the early to mid-2000s, flippers could buy new construction homes, hold on to them for a few months, then sell them at a profit. Now there’s a trend toward trying to flip houses in new, high-end developments in outlying suburbs. If commercial and retail development. like big-box superstores, spring up, it could bring in droves of residents. But if the situation isn’t perfect — if gas prices rise, for example, causing home buyers to shy away from big commutes — this kind of flipping becomes pretty risky.

So why do people flip houses? And what does the average buyer — and seller — need to know about flipping before investing? How much money can be made by flipping a house? And what kind of moral line do you walk by paying bottom dollar to people who have lost their homes? We’ll address all of these issues as we investigate the art of house flipping.

If you watch home-and-garden cable channels, it looks like everyone is flipping houses, especially in Arizona.   “Flip This House” and “Flipping Out” are just a couple of the many cable offerings that sing the praises of buying a house and quickly selling it at a substantially higher price. With this many Arizona Hard Money lenders have been popping up as well, but house-flipping is more like a basic investing lesson:

BUY LOW, SELL HIGH REGARDLESS OF WHAT ARIZONA HARD MONEY LENDER YOU GO WITH.

You want to find a property that is undervalued or in just bad enough shape that you can invest minimal time and money in it before selling it. There are people who have made careers out of buying distressed properties and quickly turning them around for a profit. However, in a real-estate bust, things aren’t quite so easy.

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Budgeting is Key for homesflipping

arizona hard money - Budgeting is Key for flipping homes using Arizona hard money

The first piece of advice that most flipping experts give: Make a budget. While finding the perfect place and knowing your skill set (or having friends with skill sets) is important, budgeting is where new flippers most often fail. So where to start? First, get financing from arizona hard money.

  THIS STEP WAS FAIRLY EASY WHEN SUBPRIME MORTGAGES LIKE THE ONES AT ARIZONA HARD MONEY LENDERS WERE HOT.

These mortgages allowed buyers to pay little or no down payment. In exchange, they were socked with higher interest rates — but when you’re planning on owning the house for only a few months, that’s a minor issue, and Arizona Hard Money lenders can be a quick fix. When the market is flat, however, obtaining a mortgage for an investment property is more difficult, and sky-high interest rates empty investors’ wallets when a property sits on the market.  As a result, cash plays a much bigger role in getting that flip started. The bigger the down payment you can afford, the lower the interest rate. And, of course, it helps to have cash around for fixing up the flip.  If you’re planning to buy a new-construction home, budgeting can be simple. It’s just like buying a home you actually plan to live in — you need to cover the mortgage, insurance, taxes, real-estate agent and lawyer’s fees, and you can do it with arizona hard money. However, in a softening market, the supply of houses is much greater than demand, so you may own that property for longer than you plan to.

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Fixer-Upper Budgets for Flipping Homes using Arizona hard money

Fixer-Upper Budgets using Arizona Hard Money

If you’re working on a fixer-upper, the budget starts to grow when you consider the renovations you’ll need to make. According to most experts, you should add 20 percent to your estimate for the final cost. If you overestimate, you get a surprise windfall — but if you underestimate, you get stuck with unexpected bills.

HOWEVER MANY OF THESE COST CAN BE BUILT INTO AN ARIZONA HARD MONEY LOAN.

Structural improvements — like plumbing, electrical, insulation, pest control, and HVAC — are typically the least sexy but most important improvements a flipper can make. New hardwood floors and coat of paint may get buyers in the door, but a termite problem can kill a deal quickly. If your technical skills are lacking here, you’ll have to figure in the cost of labor, too.  Most real-estate agents advise fixing up the kitchen and bathrooms for the best return on your investment. In addition to the structural changes, this can include new cabinetry, counters, hardware, sinks, backsplashes, appliances, floors and lighting. Kitchen upgrades can be expensive, but they make a big impression like granite countertops and wine storage, for example. You could also decide to go green, which can add value to the house when the improvements are marketed as money-savers. Obviously, you’ll keep costs down if the house is in good structural shape and just needs updated paint and carpets — but things can quickly get pricey, especially if you’re using contractors and outside labor.  Again in Arizona make sure to utilize an Arizona Hard Money loan to help get the funds to pay contractors and outside labor.

arizona hard money

The Appeal of Arizona hard money is great for home flipping.

Arizona hard money is great for home flipping.

A huge aspect to consider when flipping a home is curb appeal — the outside of the house. You might need to paint, landscape and fix up the driveway, which adds to the budget. If you’ve bought in a pricey neighborhood, mowing the lawn and repairing the fence may not be enough — there could be homeowners’ association fees.

IN UP-AND-COMING NEIGHBORHOODS, YOU MIGHT HAVE TO BUDGET FOR SECURITY MEASURES. ONCE YOU HAVE YOUR BUDGET, AND YOUR ARIZONA HARD MONEY LOAN YOU CAN CHOOSE YOUR SPOT TO BUY YOUR HOME.

Once you’ve decided on what kind of house to flip — new construction, a fixer-upper or a foreclosure — you need to figure out the neighborhood. Don’t skimp on the research here. Make sure you really investigate the area — drive around during the day and at night, check recent sale prices and find out if any other flippers are sitting on empty houses.  If you’ve decided to flip a new home, your options are somewhat limited to what’s being built in the area — typically in housing developments. Some communities also have restrictions on buyers, requiring them to live in the house so the community doesn’t end up a ghost town.  If you’ve opted to buy a home in foreclosure, you’ll be buying from a lender — foreclosed homes are also known as REOs, or real estate owned by the lender. Purchasing an REO is a lengthy process, typically six to eight months. This is because for a bank to foreclose on a home, it must file court papers against the homeowner, which takes awhile. If it’s an auction, you’re ruled by that timetable. And because the home is sold “as is,” banks might not be as willing to hand out a loan.  In this case definitely findHard Money Lenders Arizona, because they will hand out a loan for a properly that need renovations and work.  If you’re determined to buy a house in foreclosure, there are plenty of Web sites that list REO houses, often for a fee. And many lenders, like Fannie Mae, list the homes they have in foreclosure. A warning here: Many of these sites will let you search for homes anywhere in the country, but experts agree that one of the biggest mistakes flippers make is buying a house sight-unseen. The photo of the house may be pretty, but there’s no way to guarantee anything else. It doesn’t give you any clues about the neighborhood, and there’s no way of knowing how old the picture is.

arizona hard money