Learn To Be A Fix & Flip Investor

Wednesday, April 3, 2019

HARD MONEY LENDING ON OWNER OCCUPIED PROPERTIES

Unfortunately, due to recent consumer protection legislation, lending on Arizona owner occupied properties has becoming a frowned upon phrase in the private lending world.

However, there are ways to get an owner occupied private money loan where the borrower and lender can make a profit. Dodd-Frank is a bill—and out of this bill came how mortgages are to be handled by lenders. During time this bill was enacted the market was crazy and something needed to be done. But, many impacts of this legislation have been difficult for Arizona Hard Money Lenders and borrowers needing private money. Because of this legislation it has been a little tricky to get owner occupied loans done.

CAN ARIZONA HARD MONEY LENDERS LOAN ON OWNER OCCUPIED PROPERTIES?

Let’s start with what exactly is an owner occupied property and why is this such an obstacle? An owner occupied property is exactly what is says it is—a piece of property that the owner resides in. The government passed many consumer protection laws which were meant to protect the homeowner. That is good for the homeowner, but the result of this legislation created difficulties for lenders. No mortgage lenders are happy with this legislation.

The laws have to do with waiting periods and how the borrower must prove they can repay the loan based on their debt service ratio and so on. Arizona Hard Money Lenders are simple—they look at the property and base the loan amount on the value of the property. Easy peasy. However, all these new regulations make some Arizona Hard Money Lenders nervous. Arizona Hard Money Lenders aren’t lenders that care how much a borrower makes.

Thank goodness there is a caveat to this ordeal! There is an exception to the rule where Arizona Hard Money Lenders are still able to lend on owner occupied properties if 51% or more of the property is for business purposes. There are ways the lender and borrower can validate and prove that, as the laws require. As long as the numbers work, the loan can work. But, what does business purpose mean? It means that the money being pulled out of the property is for the use of the business. In general, if the borrower has a business and is filing business tax returns—and the borrower can prove that the money being pulled from the property is for the business, then that will be a loan considered for a business. The borrower will have to sign a business purpose affidavit. This affidavit states that this loan is for business purposes.

How does the math work on these loans? Let’s say you have a house that is worth $300,000. You want a loan for business purposes and the house is free and clear— the lender can lend 60%—you will receive a loan for $180,000 for business purposes.

Getting an owner occupied loan is trickier than in years past, but can still happen. This article was just a sneak peak into what Arizona Hard Money Lenders can do to get you an owner occupied loan. For more information, please contact us at level4funding.com.

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.

Tuesday, April 2, 2019

DIFFERENCES BETWEEN CONVENTIONAL MORTGAGES AND HARD MONEY LOANS

If you are seeking to invest in real estate and require funding, you have probably figured out you have two options—Texas Hard Money Loans or conventional mortgages.

The majority of people understand what a conventional mortgage is, but fewer understand what a hard money loan looks like. And, even though you may be familiar with a conventional mortgage, you may not truly understand everything that goes into financing from your bank. In this article we will break down the common differences between the two types of financing.

THE INS AND OUTS OF FINANCING

A difference that seems to stand out more than others is the time frame between the two types of financing and how long each of them take to close. With a conventional mortgage it typically takes around 45 days. The fastest you can close with a conventional mortgage is 30 days—and occasionally up to 90 days. There are many strict rules in place when it comes to the underwriting of a conventional mortgage along with a lot of red tape. With a hard money loan you can close within a week or two. The underwriting of Texas Hard Money Loans are less stringent and more flexible.

The funding sources of conventional mortgages and Texas Hard Money Loans differ, as well. Conventional mortgages are funded by lenders who sell their loans to larger banks and other investors. The money for Texas Hard Money Loans comes from private investors, investment funds and lines of credit. Texas Hard Money Loans are not sold to anyone else as conventional mortgages commonly are. These loans remain with the original lender.

Now, the money-interest rates. Yes, generally Texas Hard Money Loans have a higher interest rate than conventional mortgages. There is a reason behind the madness, though. Arizona Hard Money Lenders are loaning money for much shorter periods of time unlike banks who collect large amounts of smaller interest payments over time. Yes! That is the only difference when it comes to interest rates. You may have a hard money loan at an interest rate of 9%, but it’s only for six months—while your conventional mortgage sits at 4% and the bank collects that interest for 30 years.

Bank lenders offering conventional mortgages are lending them on residential properties that will be used as the borrower's home. The banks are looking at the borrower's credit and condition of the property. If a property needs rehabbed in any shape or form they will generally not be approved for a conventional mortgage. Arizona Hard Money Lenders, on the other hand, lend to both residential and commercial properties, but usually don’t lend on primary residences. Texas Hard Money Loans are set up for investors looking to fix and flip properties.

If you are looking for a hard money lender we are here to answer your questions.

Lenders are as unique as borrowers are. We would love to share our knowledge with you and find out if we can work together. Please contact us at level4funding.com.

When You Should Turn to Texas Private Money Lenders

Obtaining a loan isn’t easy. Lack of decent credit score and a reasonable debt to income ratio is what turns many people from traditional public lenders to private alternative options.

Being denied a loan can be the cause of many things. It could be an unstable financial history, or unreliability as a lender. It could be unstable plans or an architect who is unable to meet deadlines. It could also be lack of experience and risk of failure if the loan is for something like a fixer upper. Being denied for a loan doesn’t mean you should stop looking—it just means you should look other places.

Oftentimes, loans can be combined with one another. Or, as we reside in the age of technology, you can receive investors from crowdfunding websites. Other ways could be untraditional, like loans from friends and family, but all work. Turning to a Texas private money lender is another option, but private lenders offer both positives and negatives based on your situation.

Reasons to Turn to Private Lenders

Texas private money lenders are companies or individuals who invest in properties, usually using hard money. They approve candidates who wish to borrow based on the property’s value, potential, and chances for success. If your plans are solid and you have a reliable team, there is still a possibly to be approved by a private lender, even if you have been rejected by a public one and have less than perfect credit.

Another reason private lenders can be good to work with is because of their transparency. They will be honest with you if they do not like the project, and will be able to work with you a little bit more than public lenders like banks. For instance, they are known to work with lenders if they need loan extensions. These extensions can be anywhere from one to five years. With the ability to work more individually than public lenders, they can be a great option when seeking out a loan. However, private Texas hard money lenders have high costs that should be considered before jumping right in to a loan agreement.

Doing What’s Best for You

Hard money is a great option because it is fast, and the lenders who offer it can maintain some form of flexibility. However, their attractive qualities are countered by high interest rates and a short loan repayment period. In some cases, like those of fixer uppers, a short loan repayment period makes sense, and is usually preferred. Confidence in the repayment plan is essential because failure to meet deadlines could result in dastardly situations that would make it even more difficult to obtain another loan in the future.

If the cost of Texas private money lenders is too high, there are always other options or—other private lenders. Just because one private lender doesn’t work out, it doesn’t mean another won’t as well. As long as you understand the terms you are agreeing to, working with private Texas hard money lenders is common, and is often the solution many go to when seeking out a loan. If you are still unsure, or if your particular loan need isn’t something to be accomplished in such a short time frame, it’s always possible to hire a real estate attorney to look over the terms of the loan with you. Having a professional in the field can give you the confidence you need so you know that when you accept or reject a Texas hard money lender, you know you’re doing what’s best for you.

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 and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

How Texas Hard Money Lenders Can Help You with Fixer Uppers

Fixing and flipping homes has become so common in popular media that there are a number of various shows dedicated to every variety of fixer upper, inspiring viewers to seek out easy ways to fix and flip their own properties for a profit. Read more below to find out what opportunities you can find with Texas private money lenders.

Chip and Joanna Gaines are one TV couple that has taken the world by storm, and have even evolved into their own brand. Watching the show, it’s easy to become inspired to seek out local properties with potential for profit. If you’re someone who doesn’t come from readily available wealth, like those running a highly rated and successful reality series, you can turn to Texas hard money lenders to help fund your project.

Private lenders that offer hard money do a few things differently than banks and other public lenders. With the ability to approve a variety of borrowers, as well as offer speed and flexibility, lenders that offer hard money are a great option for ordinary people looking to fix and flip.

How Hard Money “Lends” Itself to Fixer Uppers

Oftentimes, the ability to fix and flip relies on a market with available properties—and if the market is limited, with few properties with high potential value, the ability to compete on the market is essential. This is what makes Texas hard money lenders so attractive.

Unlike traditional lenders, private lenders who offer hard money are usually able to begin the loan lending process immediately—literally as soon as the day of, which is not something public lenders can accomplish. Public lenders can take as long as a month or more to begin the loan lending process which, if bidding on a competitive market, could be the difference between obtaining your dream property and having to start from scratch all over again.

Hard money is also lending itself to fixer uppers in terms of the repayment period. A short repayment period falls in line with the timeframe of fixer upper, given that it is renovated without any major problems and sells fast. Though, if the property isn’t selling on an ideal timeframe, it’s possible to work individually with your lender and work out an extension. It isn’t unheard of and part of what private lenders offer. Their tendency to focus on the value of the property as an investment compared to the borrower’s

How to Know if Private Lenders Are Right for You

While private lenders have a variety of attractive characteristics that make them great options in situations of fixer uppers, they are not for everyone. Because of their ability to work faster, they have much steeper interest rates—and they can be as high as 5% more than other lenders on the market. Experienced house flippers may be able to handle the extra costs.

However, considering how the higher rates will factor into the repayment period will be essential. Having a strong financial background is not always necessary when working with Texas hard money lenders, but it may be necessary to those flipping for the first time. After all, as much as we all would like to follow in the steps of Chip and Joanna, we all start somewhere, and just because hard money is a solution for some, it isn’t one for all.

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 and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

BENEFITS OF HARD MONEY LOANS

Why choose a hard money loan when conventional loan interest rates are lower? That’s a good question.

Hard money and Arizona Hard Money Lenders play a unique role in the real estate investing world. There are numerous benefits to working with a hard money lender.

UNDERSTANDING HARD MONEY

When a borrower applies for a conventional loan the very first thing a lender does in run your credit history and check how many loans you have on your credit. If a borrower’s credit isn’t stellar and they have existing loans that typically puts a halt to the application process.

When a borrower applies for a hard money loan the priority does not weigh on the borrower’s credit score or the amount of active loans they have. Yes, a Arizona hard money lender generally does look at a borrower’s credit—however, a low FICO score is rarely a red light on the road to approval. Arizona Hard Money Lenders aren’t concerned by the borrower’s number of loans that are active—they are focused on the value of the property because that is the hard asset that backs the loan—that is the collateral.

Another major component to financing a project is renovation costs. Conventional lenders don’t typically finance renovations. Conventional loan underwriting is very rigid with many stipulations. On the other hand, a hard money lender will put out draws to finance the rehab of the property.

There are countless benefits to working with a Arizona Hard money lender.

The benefits of hard money lending is not only that the focus is shifted from a borrower’s financial situation to their assets and that they will use property as collateral while financing the renovations. Arizona Hard Money Lenders generally do not impose early payment penalties, as well. That can be a life saver to an investor who quickly rehabs and sells the property. Hard money underwriting is more lenient which speeds up closing dates. This is important because it doesn’t matter how rich you are or how great your credit is—the process of getting a conventional loan is long, tedious and a general pain. Using a hard money lender, a borrower can close their deal in less than two weeks—and in the real estate world quick closes are everything.

How Texas Bridge Loans Can Help Surprise Your Significant Other and Make for an Easy Move

Read Jim and Jenna’s story below to find out how to “bridge the gap” between homes so that you can move into your dream house without having to find an alternative, transitionary moving space in between it all.

Jim was in love with his long-time girlfriend Jenna and wanted to surprise her with their dream home. They’d already committed to living together long-term, but their current home was causing them all kinds of problems: dripping sink, outdated tile, unreliable air conditioner. And, the fire alarm had yet to alert them of one too many pitas that had been forgotten in the oven.

It was time to move.

Jim wanted to surprise Jenna with a new home, while also easing the moving process. As he was looking over his options, he found himself looking away from contracts and contingencies that he had to sell his current home first. He soon came across Texas bridge loans and found that they didn’t have contingencies and allowed prospective homebuyers to find their dream home, and then work to sell their current.

This would help Jim surprise Jenna. If he didn’t have to work around any stipulations that he had to sell his current home first, he could invest all of his energy in finding the perfect home—and the perfect engagement.

How to “Bridge the Gap”

“Bridging the gap” would require Jim to use the down payment on his current home to be used as a loan for his next home. Doing this would mean paying two mortgages and paying interest that was two percent higher than the general market. It wasn’t cheap, but Jim wanted to take a risk. Taking the risk give Jim the freedom he desperately wanted for both his home search and proposal planning. There was a little bit of pressure for Jim to fix the problems with his current home immediately, so that it would increase its ability to sell on the market. While it could mean extra costs, Jim had a few personal connections that wouldn’t cause a huge dent in the budget. He couldn’t wait.

Success and Eligibility

Texas bridge loans require that the borrower have a solid financial history. Fortunately for Jim, he had a great credit score and great debt to income ratio. He was thankful he was able to be approved so easily, because he knew it certainly wasn’t the case for everyone. And while he could afford two down payments, it wasn’t a decision he made easily. He figured that surprising Jenna as they moved forward into the next steps of their lives would be worth it. With the help of his personal connections, he was able to fix the problems in the current house—right under Jenna’s nose. She had no idea he was home searching until he found the perfect two-story with a rose garden and white picket fence. He proposed under a trellis in the backyard, and proposed they move in immediately. Jenna said yes.

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 and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.