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Tuesday, September 4, 2018

How to Build Wealth Using Owner Occupied Hard Money Loans

Owner occupied hard money loans are the unsung heroes of the real estate biz. Knowing how to leverage them is key for those who have dreams of going big but are just starting out.

Many people dream of getting into real estate because it’s a solid way to build wealth, yet quickly back down when they realize it’s also an expensive “game” to get into. Although few realize it, owner occupied hard money loans are often a gateway to wealth, giving those with an entrepreneurial mindset a chance to build even if they come to the table with very little to start. Before getting into how to leverage them, let’s break down how they’re different.

Owner Occupied: As the name implies, the person making the purchase intends to live on the property. This is common with foreclosures and HUD homes, with the latter requiring that the owner reside in the home for a full year before converting into a rental. Some co-ops and homeowner’s associations have a similar stipulation, though it’s generally permanent, meaning the owner must always be the one occupying the residence. Whether the owner intends to reside on the property or not will impact loan terms too, with those intending to stay generally receiving more favorable terms. It’s also worth noting that guidelines will vary from one contract to the next, so it’s important to read all contracts carefully to determine what an entity considers “owner occupied” and what stipulations come along with the designation.

Non-Owner Occupied: Generally speaking, the term “non-owner occupied” won’t appear much outside the mortgage industry. In this case, it’s used to designate risk. Perhaps not surprisingly, an investor dealing with money troubles is likely to let a loan for a rental or investment property go into default before he’ll put his primary residence at risk. For this reason, banks tend to be a little cautious here. It can be more challenging to get a non-owner occupied loan and the terms won’t be quite as good as they would have otherwise been.

A Win-Win Solution for Those Starting Out

Naturally, those just starting out don’t generally have strong records and pockets lined with cash like the banks like. However, one thing those who do make it have is tenacity. They’re willing to put in the work to see good returns. They just need a clear path to follow. By opting for an owner occupied loan, you’ll naturally get more favorable terms. Many people prefer this anyway because the first home they invest in is something they work on in their spare time, so being on site is a no-brainer. Plus, they aren’t paying a separate mortgage or rental payment to have a place to live at the same time. Opting for owner occupied hard money loans versus a traditional bank loan also opens up more doors, like closing fast and not having to struggle with all the requirements traditional mortgage companies have. From there, you can fix up the property as you have time and then flip it a year or two down the line when you’re ready.

It’s important to have clear expectations before getting into fix-and-flips.

Before you get into fix-and-flips, particularly if you plan to live in the home while you work on it, it’s essential to have an exit strategy and timeline. While some savvy entrepreneurs sell after a year or two, picking up anywhere from $10k to more than $50k per sale depending on their level of expertise, others convert their homes into rentals and build up a portfolio. Knowing where you plan to go after and what your anticipated timeline is will ensure you maximize your earnings. If you think owner occupied hard money loans may be the first step on your path to wealth, call us today for details.

Dennis Dahlberg Broker RI/Level 4 Funding LLC Privatae hard Money loans 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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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Sunday, August 26, 2018

Why Investors Choose Hard Money Loans

There are many advantages to using hard money loans that make the higher cost of the loan less of an issue for investors as well as homeowners.

When most people think about taking out a loan, the first concern is what it will cost to borrow the money that they need. But even as counterintuitive as it may sound, in the business world there are factors that end up being more critical than money. Which is why many investors gladly choose to use hard money loan over more traditional types of loans from a bank or mortgage company.

One huge benefit to using hard money is that the loan approval is based on the value of the property that is being used as collateral, which is almost always the property being purchased. This eliminates the worries about personal credit scores, debt to income ratios and the issues of other outstanding loans. The only factor that is considered in most hard money lending transactions is the current market value of the property. And as long as the loan amount is under 70% of the current value then the loan is almost assured of being approved. Investors have the ability to secure funding for multiple properties without the lenders being concerned about the debt load. This keeps the investors happy because more deals mean a greater profit.

Flexibility is another great feature of hard money loans that appeal to investors. A bank is always very riged about the terms of a loan and their policies regarding length of term and fee structure. But a lender who works with hard money is not required to operate under the same stringent guidelines that govern banks and other lending institutions. Hard money lender have the ability to work with a borrower to create terms which are mutually beneficial.

Time is Money

One factor that is often even more important than money in the business world is time. When an investor finds a great deal on a property, there are sure to be other investors making offers and trying to steal the deal. So for an investor to make an offer that is being funded via hard money, sells see that as a major advantage. The seller knows that the funding will occur quickly and that they will not be a lot of red tape or the potential for the deal to fall through. Sellers also know that a potential buyer who is willing to use hard money to make a purchase is serious about the property and will complete the transaction as quickly as possible.

Hard money loans are a wise option

Most real estate investors are well aware of the benefits of using hard money from the fast funding to the added flexibility in terms. And due to all of these benefits, investors are very willing to pay a higher interest rate and even a few added fees to use this nontraditional lending resource. Faster funding means more investments can be made in a short period of time and will create a greater return on investment.

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Friday, August 24, 2018

Why Borrowers Choose Hard Money Lender

There are many options for borrowers who are seeking a loan. But choosing to work with hard money lenders is a great option for several reasons.

Hard money lender offer many benefits that are not available from the traditional banks and mortgage lenders of the world. Some borrowers discover that they have no choice but to work with hard money lender due to their low credit score or lack of credit history. But many other borrowers choose these nontraditional lenders because they are a better fit to meet their borrowing needs.

Traditional banks, credit unions and mortgage companies are very regimented and only offer a few types of loans. And the loans that they do offer have no real flexibility. So borrowers are forced to take the terms and rate that is offered or find another lender. But hard money lenders are able to work with a borrower to create a customized loan that meets the needs of the borrower. Loans come in all shapes and sizes so hard money is a great option of a person purchasing a home or the investor who is interested in buying a property to flip or even an entire rental complex.

Getting approved for a traditional loan can be difficult. Not only is it important that you meet the credit score and income criteria but you also need to be able to provide detailed documentation to prove your earnings and debt. So it is stressful and time-consuming. But these lenders are more interested in the current market value of the property than the personal financial history of the borrower. This is because the approval of the loan is based on a comparison of the loan amount being requested and the property value. The term is loan to value. In most cases a lender is only comfortable lending up to about 70% of the current market value of the property. They use this number so that there will always be some equity in the property and in the event of the borrower defaulting on the loan, the lender can sell the property to recover his or her investment.

Timing Can Be Critical For Hard Money Lender

In some cases, getting a fast loan is more important than getting the very cheapest loan. A buyer might be trying to purchase a home which is very competitively priced, meaning there will be a lot of bids on the house. So by submitting an offer noting that the funding is in the form of hard money is a big benefit. The sellers will know that if selected, that buyer will have funding quickly to close the deal. The same is true for an investor who finds a great deal but wants to make the purchase before other investors discover it. The fast funding of hard money can be all that makes a great deal work.

Making a Deal with a Person

Borrowing from a nontraditional lender is much more personal than borrowing from a huge corporation. You are actually working with a local person in most cases and can ask questions, make requests and even get a great deal of education on the art of hard money deals. Many borrowers are happy to have the option to work with an individual or small group rather than a huge company with impersonal service. All of this personal service and the potential to customize a loan makes hard money a great option for many borrowers.

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Who Can Benefit From Hard Money Loans

Hard money loans are not or everyone or every situation. But there are several cases where hard money is the best solution.

Hard money loans are loans that are funded by individuals or small groups rather than from a bank or other lending institution. For this reason, these loans are often referred to as non-traditional loans. Because the finding is not coming from a bank, there is more opportunity for flexibility on the terms of the loan which makes them well suited for certain borrowers specific needs. And in most cases, hard money is loaned for a short period of time which can typically range from a year or less to about five years. But again, these terms are all flexible and can be negotiated with the lender. So other important items to note about hard money loan are that the rates for the loan are higher and there can be additional fees charged for funding.

In most cases, it makes sense to assume every borrower would seek the lowest interest rate possible for every loan. But in the case of flippers or real estate investors who are renovating and then selling a property, speed and less hassle can be worth paying a few extra percentage points on the loan. Flippers are working in a very competitive market and need to act fast when a property with great potential comes on the market. Waiting 30 days to hear back from a bank about a 15-year mortgage is not going to meet this investor’s needs. But a turnaround of less than a week is definitely going to be helpful. And many sellers who are familiar with hard money look at an offer including hard money funding as a definite advantage. They know that the funding will occur quickly and the property will close in just days.

Builders are another group who are not interested in investing months in the application and approval process required by banks. Builders have no intention to keep a property for 15 years. The plan is to purchase the property, build the house and sell as soon as possible. This makes the fast turn around and easy application process of hard money loan a perfect choice.

Credit Issues are No Issue for Hard Money Loan

Not everyone has perfect credit and sometimes the cause was beyond the person’s control. Mounting medical bills, the loss of a job, divorce or a death in the family can all result in an inability to pay bills and the deterioration of good credit. But working all the way back to good credit can take many years. In the meantime, many consumers turn to hard money as a way to get a loan, get back on their feet and begin their financial recovery.

Hard Money Loans - Not For Everyone But Perfect For Some

Hard money is not a universal solution to money problems and if used improperly it can be very harmful. But there are many times when using hard money is the best option. The easy application and approval process and the fast funding made this alternative resource a great choice for many borrowers.

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What Hard Money Lenders Are Looking For

Most borrowers assume that all loans hinge in having good credit. But understanding the criteria used by hard money lender can be life altering.

Traditional lenders are not the only game in town when it comes to securing a loan, which is good because not everyone can meet the criteria for those loans. One of the best features of hard money is that hard money lenders are using a different set of criteria and are making it possible for many more people to obtain a legitimate loan.

Credit history and credit score are always going to be reviewed when there is any type of loan application or request being made. But hard money lender are looking at a lot of other information as well. The approval is based more on the value of the property and the potential for the property than it is on the creditworthiness of the borrower. Other points of interest will include the borrower’s history in real estate investing, business background and the borrower’s willingness to invest his or her own money into the project. All of these are good indicators of how hard the borrower is willing to work to make the project a success and how much potential the borrower has as a smart real estate investor.

In addition, lenders in the hard money sector are trained to look at the potential of a property as well as its current condition and value. Investors are buying a property to improve it and increase its value and a smart lender will see the value in that as well. Taking the potential of a property into consideration often times means that the lender is willing to loan more on the property than the standard 70% of the loan to value ratio.

Tips For Landing Hard Money

Lenders are all interested in making money and the hard money sector is no different. So providing as much information to the lender as possible is always going to increase your chances of getting approved. Complete your due diligence of the property and be honest with the lender about your findings and your plans to increase the property value and make the money to pay back your loan. This includes providing a detailed exit strategy as well as a backup plan. Also detailing past experience in the real estate investment industry will help to demonstrate that you have the ability to complete the project in a timely and professional manner.

Be Honest

Lenders have a sense of who is being honest and who is trying to pull off a fast one. If you have credit issues or have no credit, then be honest and explain that. Even though the lender is not a bank, he or she will research you and your credit history. Issues that you think are hidden will likely pop up and can crush your credibility. But if you explain the past and map out your plan for the future, you have a much better chance of getting approval from hard money lender.

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Thursday, August 23, 2018

Tips for Finding a Hard Money Lender Austin Texas

Sadly, not every hard money lender Austin Texas is legitimate. But following a few simple tips can ensure that you are making the right selection for your hard money needs.

There are many reasons to consider using a hard money lender Austin Texas even though this is not as conventional an approach as using a bank or lending institution. But a borrower should follow a very similar process when selecting a lender to work with on a hard money loan. Borrowers need to complete their due diligence to make sure that the lender is legitimate and is truly offering a service and not just trying to take advantage of borrowers who need to seek alternative lending sources.

One of the first important pieces of information to verify is that the hard money lender Austin Texas is licensed, bonded and insured. In other words, make sure that your potential lender is really a business person who provides hard money loans austin or represents a group who provides loans. In some cases, a less than homes person will represent himself or herself as a lender simply to take advantage of honest borrowers. In these cases, the lender will ask for upfront fees for processing or to consider a loan application, only to disappear with your money. They have no intention of making any loans, they are just running a scam to collect fees.

Other fraudulent lenders are just placing ads to attract potential borrowers who all too eagerly supply the fake lender with financial information, personal information and even sometimes processing fees. Then the borrower’s information is sold to create fake identities or to commit other types of fraud or identity theft. And again, they are no closer to getting the loan that they need.

Verify Past Client Experiences

In addition to researching the legitimacy of the lender, it is a good idea to ask for references to speak to. Clearly, the lender will only provide you with contact information to satisfied clients, but it is a clear sign of trouble if a hard money lender Austin Texas will not provide references. This is a sign that they have a bad reputation, do not follow through with promises or might not even be legitimate. Proceed with caution is no references are available, or even better, find a different lender to work with.

Verify the Terms Being Offered

As with any loan, when seeking a hard money loan, you need to be sure to verify all of the terms of the loan. In most cases, hard money is offered at a rate of about 10% - 15% as the total cost of the loan. Some lenders might break the fees into different categories or have a different name for some fees but the total cost should not be more than that. In addition, reputable lenders are not going to ask for huge upfront fees. There could be a very small administrative fee or fee for an appraisal but large processing fees are a sign of a potentially dishonest lender. Following these few guidelines will ensure that you are able to work with a reputable and reliable lender for your hard money needs.

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Wednesday, August 22, 2018

Tips for Finding a Hard Money Lender Austin Texas

The term hard money loans Austin is very often misunderstood by borrowers. Their thought that these are less than legitimate loans is a misunderstanding that could be costing them money.

Hard money loans Austin are loans that are not funded by a traditional bank or credit union. Instead, these loans are funded by an investor or a group of investors. But the loan is still a legal and legitimate loan with a legally binding loan agreement in place. But the main difference between hard money and a traditional loan in that hard money loans Austin are secured through the equity in the property and not the credit-worthiness of the borrower. This fact alone makes hard money a great option for many people who cannot secure a loan from a bank or credit union.

There are many people who choose to use hard money even though the interest rate is higher than that of a traditional loan. But even at a higher interest rate, hard money is great for a buyer with poor credit or no credit, an investor who is carrying multiple loans or property flippers who need to move quickly on purchases and cannot wait for a bank loan application to be approved. Having no other option is fairly self-explanatory and it is easy to understand why those folks are happy to use hard money. But the reasons that investors choose hard money is usually more related to the faster funding and the much easier application requirements.

Rather than a long process of completing application forms, proving debt and income numbers and then waiting for an approval, hard money loans Austin are almost always based solely on what is called the loan to value rate. In these loans, the lender uses an appraisal of the property to determine its current market value. Then the lender determines how much he or she is willing to loan the borrower against the property. Each lender can select his or her own actual percentage, but most will not exceed 70% of the current market value. This is to protect the lender in the event of the borrower defaulting on the loan. The lender can then sell the property to recover the original investment.

Understanding the Terms

Another important difference when borrowing from a private lender is that the terms are not as strictly regulated. This means that private lenders have the ability to negotiate the terms of the loan with the borrower to create a custom loan that works for both parties. This can mean that the length of the loan is customized or that there is a single balloon payment at the end of the loan or even that there is a flat penalty imposed if the borrower pays the loan off early.

Different Can Be Good

Using a hard money lender Austin Texas is not some shady back alley deal, it is simply a loan that is funded by someone other than a bank or credit union. And though the terms of the loan can be different, they can actually work to benefit both the lender and the borrower.

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