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Sunday, January 27, 2019

How Does ARV Determine Risk for Arizona Hard Money Lenders and Borrowers?

When Arizona Hard Money Lenders consider granting a loan amount, they generally consider LTV and ARV. These two indicators help them analyze equity, risk, and return.

First, there is LTV. LTV is a loan-to-value ratio used to determine the amount of money a lender will lend. For example, say a home is worth $100,000 in each market. A borrower receives an acquisition loan from Arizona Hard Money Lenders for $50,000. In order to acquire the property, the borrower must match the lent amount of $50,000 with $50,000 of his or her own money. This establishes the LTV at 50%. Should, God forbid, the borrower fail to pay the lender and the property is foreclosed upon, then the lender will be buffered from loss upon liquidating the asset.

ARV, or after repair value, calculates the value of a distressed home after renovation. This ARV value helps Arizona Hard Money Lenders determine risk and equity regarding a property not only by understanding the current loan-to-value (LTV), but by looking at the after repair value (ARV). ARV is calculated by adding a property’s current value plus the value of renovations. To do this, one looks at the average price of similar homes in a neighborhood. These homes should have similar acres, rooms, features, and amenities. After this, the cost of renovating the house is evaluated, and finally the prices of renovated properties in the area are taken into account. As an example of this, say that there is a house worth $50,000 in a given neighborhood, and it will only cost $20,000 to repair it, summing up to $70,000 in total costs. However, after the renovations to the house, the property will be worth $100,000. This puts the ARV of the home at $100,000. The hypothetical profit is $30,000.

How Both Arizona Hard Money Lenders and Borrowers Benefit from ARV

Arizona Hard Money Lenders use ARV to set a cap for the amount they are able to lend. Generally, 70% of ARV is the maximum loan amount for Arizona Hard Money Lenders. Lending out more than this amount creates far too much risk for lenders. Nonetheless, the ARV establishes a ballpark idea of what lenders are able to lend by understanding how much is too much.

What is the maximum amount Arizona Hard Money Lenders will loan?

Aside from lenders, LTV and ARV help real estate investors calculate how much they can expect to receive from a hard money lender, how much they will need to put down, and how much risk they will face when trying to secure a profit. After looking at the figures, real estate investors will have a better idea if the investment is worth it to them. Will it give a good return on what they have put in? Will there be enough buffer room for them after the lender gets a cut of interest? Are the efforts of producing the renovations and marketing the property worth it in the end? Risk is at the heart of lending and borrowing hard money.

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.

The Pitfalls of the Past: Dodd-Frank and Arizona Hard Money Loans

How has the Dodd-Frank Act influenced Arizona Hard Money Loans during and after the Great Recession?

It’s the mid-2000s. The housing market is on the rise as the price of homes increases. Due to this favorable uptick, more people are looking to acquire loans to buy houses. Lucky for them, there are less banking restrictions, and many people with subprime credit are getting funded. It seems great. The housing market continues to boom. Prices continue to rise. The economy’s strong. All of a sudden, Freddie Mac won’t accept dicey, subprime mortgages. This decision leads to peril for some major lending institutions who find themselves unable to get returns on their investments. Bankruptcy soon follows. As banks struggle and closely watch subprime borrowers, indirectly, the value of homes begins to fall. More banks go under, the housing market collapses, and the stock market takes a nose dive. Cue the Great Recession. So, in attempt to learn from history, or avoid the fate of repeating history, what does the government legislate? Answer: the Dodd-Frank Act.

Dodd-Frank changes the lending game, especially regarding Arizona Hard Money Loans. A portion of the Dodd-Frank Act lays out the Mortgage Reform and Anti-Predatory Lending Act. This act restricts the circumstances in which Arizona Hard Money Lenders may lend money to individuals desiring to purchase personal residential property. Other restrictions for residential loans are added as well. Those giving out Arizona Hard Money Loans must verify if the borrower is able to repay their loan.

As a result of this, Arizona Hard Money Lenders shift to focus on investors looking to rent, sell, or commercialize real estate. Mainly because the Dodd-Frank Act does not limit businesses in regard to hard money, instead, it is interested in protecting the US economy from experiencing another subprime and residential lending apocalypse.

Post Dodd-Frank: Arizona Hard Money Loans

While this creates challenges for individuals looking to receive help after struggling with bankruptcy, subprime scores, or foreclosure, it has become a boon for real estate developers, especially where conventional lending was scares in the past.

Who are some of the main recipients of Arizona Hard Money Loans today?

So, post-Dodd-Frank, if residential lending is limited, who uses Arizona Hard Money Loans today? Well, to start, flippers use Arizona Hard Money Lenders to finance renovations on outdated homes. Many flippers use hard money to cover acquisition costs of property. Other flippers purchase property with their own money and use Arizona Hard Money Loans to cover the cost of renovation, or a particular portion of renovation such as roofing, cement, or plumbing. After completing the flip, the property goes to market, hopefully bringing in a good return.

The next category of individuals is those who are looking to renovate to rent property. These individuals, like flippers, use Arizona Hard Money Loans to acquire properties or finance costly portions of the renovation process. Once the property is completed, it is marketed to the public in order to rent. After this category of borrowers, there are contractors who look to build and sell property and businesses that look to expand their property or projects.

Loans from Residential Arizona Hard Money Lenders

Securing a loan from a bank can be impossible if you have rotten credit. But if you need money fast there are alternative sources you can go to, such as private investors that lend hard money.

Going to the bank for a loan can be intimidating. They have high standards and strict qualifications. Someone with imperfect credit history may not even make it to the bank. If you know your financial history isn’t up to par for public lenders, perhaps your situation lends itself to private investors, like local companies that offer hard money.

Residential Arizona Hard Money Lenders are local, private companies who can offer flexible relationships for people with low credit scores. They offer individualized, transparent relationships that generally lend themselves to easy approval. Their flexibility is often unmatched by banks. Banks tend to focus solely on your debt to income ratio and credit score before approving a loan, while Arizona Hard Money Lenders focus on the property’s collateral. The property’s value, or potential in cases of fixer uppers, are the driving force behind acceptance and rejection.

Unlike banks, Arizona Hard Money Lenders offer the benefits of speed. Because they can begin the loan process quite quickly, people working to prevent a foreclosure, bidding in a competitive real estate market, or renovating in a fast-paced environment find private lenders appealing. Banks can take as long as a month or more to get the process started—and that’s if you even meet their qualifications.

Things to Consider for a Hard Money Loan

Residential Arizona Hard Money Lenders often have high interest rates and fees because of the “risks” they are taking with the borrower. While they can usually provide money for you fast, they also have high rates. Depending on your situation, this may not be ideal for you. Additionally, they have short repayment periods. For experienced people working on fixer uppers, this can be perfect. Renovating the home successfully followed by a quick resale make for an easy payback period. However, a short repayment period may not accommodate everyone’s plans well. If the bank rejected your loan because of your debt to income ratio, it’s possible that a short repayment period may not make for the best financial situation for you.

Borrowing Successfully

The short repayment period and high rates are the biggest drawbacks of residential Arizona Hard Money Lenders. Of course, the decision on whether or not to move forward depends on your personal situation, and ultimate plans for the property. Researching your hard money lender will also be important. Arizona Hard Money Lenders are common and referred to people often, but not all hard money loan agencies are legitimate. Real estate attorneys are great sources to help confirm the reliability of your lender, or to help you understand the complete loan agreements. Some lenders may be legitimate, but have hidden fees within the contract of the loan. Analysis and evaluation of both yourself and the lender will lead to success. Borrowing successfully is possible, but is tailored to each individual. Be sure to know your situation well before making any decisions.

Saturday, January 26, 2019

What you Need to Know When Seeking Arizona Rental Property Loans

Making extra cash by renting out a property is definitely doable. However, for first time buyers and flippers, it’s important to evaluate all the situations before becoming indebted to a flop.

Obtaining funding from traditional lenders like banks and credit unions is easier when you have a strong credit score and a history of successful fixer uppers. Traditional lenders aren’t flexible like Arizona Hard Money Lenders when it comes to lending out money, due to the risks that accompany possibly unreliable borrowers. For those who may not qualify for traditional financing, Arizona Hard Money Lenders are private companies or investors who will lend money to people with imperfect credit scores, but with a cost: high interest rates and fees. Not to mention, a quick repayment period.

Many experienced people who fix and flip houses utilize services offered by Arizona Hard Money Lenders. They are usually able to afford higher rates, and with a fast sale are usually able to satisfy the needs of a quick repayment period with the sale of the flipped home. Not everyone will be able to meet these requirements, especially first time flippers. While they offer flexibility within the relationship, transparency, and general speed, the high costs can be risky for people delving into the housing market for the first time if proper research isn’t done regarding renovations. If you don’t have great credit, comparing traditional and untraditional lending options may seem like the first step to delving into the loaning process. However, untraditional hard lending money options do not compliment a long-term rental property where cash is coming in over a lengthened period of time. Their quick repayment period would make it difficult to repay, unless you had some extra cash on hand. Chances are, your needs of a loan eliminate that as an option.

Requirements of Arizona Rental Property Loans

Other things to consider are down payments, cash reserves, and mortgages. Traditional loans for rental properties will require a 20% down payment, and a cash reserve of at least 6 months. Another strong stipulation of banks is that they won’t approve more than 4 mortgages. Depending on your situation, a mortgage for a rental may disqualify you. Equity line of credit, the Federal Housing Administration FHA, or Veteran’s Administration VA are other sources to look into when the short repayment periods of Private Money Lenders in Arizonaand the strong stipulations of traditional public lenders aren’t working out.

Realistic Expectations

Renting out a property isn’t as simple as just collecting the rent. In addition to obtaining the Arizona Rental Property Loans, there are other things to consider. Factors such as home owner’s association, utilities, and possible renovations are other sources of potential financing. Being accountable and aware of your cash flow is going to make the process of financing a rental so much easier and save you stress in the long haul so that, when it’s time to collect your check, you can put it to good use.

Why Arizona Airbnb Loans are the Hottest Thing on the Market

It’s very common to rent out a traditional home or apartment. Now, because of the new travel market, people are taking advantage of Airbnb, a service that allows people to rent out their living spaces to travelers.

Airbnb is a company that allows people to rent out their living spaces to travelers visiting the area. Compared to hotels, services offered by Airbnb can be a lot cheaper and individualized to a specific traveling party. Airbnb may also be an alternative to those traveling last minute with nowhere to stay because of booked hotels. People located in touristic cities may find it beneficial to rent out part of their living space should they be seeking extra cash or ways to add to their savings.

Most people who host their spaces through Airbnb live in it simultaneously with the traveling party, designating particular rooms or areas in the home to guests. It’s not uncommon to see Airbnb hosts interacting with guests as a type of tour guide, giving out advice on places to see, eat and explore. That experience is certainly different from that of a traditional renter-landlord partnership, and requries some customer service skills. Having the ability to impact someone’s experience in a positive way as they explore a new city is just one way this relationship will differ from traditional renting scenarios.

Things to Consider for an Arizona Airbnb Loans

The popularity of Airbnb is steadily rising, making it a great investment option. Still, there are some things to consider. Accommodations are important, as you’re aiming to offer services comparable to a hotel. Having things like extra towels, running water, and space for luggage are just a few thingsto think about. While you will likely have a majority of the needed accommodations in your home, it is important to think of your space as the service you are providing, making it comfortable and reliable so that your place is up to par with the demand of travelers. If you don’t feel your space is appropriate, you may consider Arizona Airbnb Loans for small renovations.

Taking Advantage of the Market with an Arizona Airbnb Loans

Maintaining a high score on the app will drive the demand of visitors to you, and could eventually lead to partnership with Airbnb, where you could qualify for funds offered by the company itself. In ensuring the company is offering the best services and hosts possible, they’ve begun Airbnb Select where they offer Arizona Airbnb loans. In helping you maintain a great space, they are maintaining the integrity of their company. Otherwise, things such as personal loans or other short-term loans may come in handy if any small renovations need to happen. If you are considering hosting with Airbnb, your space is likely already accommodating and, with a decent credit score, you will likely be approved by a traditional lender for a small loan. Beginning to offer services through Airbnb is definitely doable, as seen by the hundreds of thousands of listings online.

How to Get Arizona Construction Loans to Build your Dream House

Building your dream home will be a long process of planning, but it can be done with hard work. There are specific loans designed to lend you a helping hand when you need it most.

Arizona Construction Loans are short-term loans for people on the market to building a new home. They are not given out all at once, but given in increments after meetings with the borrower and home builder, and strong regards to schedule. Ultimately, the loan is given out with each progressive step of the building process. Planning is very important, and because the lender cannot view the value of the home unbuilt, budgets, schedules, and progress visits are compromised with the lender who is heavily involved in the process. Staying on schedule will be important to both you and the lender because fees may increase with missed deadlines and a slowly moving timeline.

Being approved means having a solid plan and production schedule, but also a credit score of 680 and, typically, a down payment of 20 percent. Providing a strong financial history is crucial because proving that you are capable of simultaneously paying extra bills is as important as proving the home will actually be completed.

Receiving funds from a lender may happen with a strong credit score, but it won’t happen with weak plans. Your lender will be interested in reviewing everything your builder touches before handing over a loan. This will help ensure them that the money is going to use at a solid project with qualified people. Lenders providing Arizona Construction Loans are much more involved than other lenders working with other types of loans. In this case, your lender will be very influential regarding the builder, plans, etc. Their approval of your builder and architect will be absolutely necessary. If they don’t believe in your production members, your loan may never be approved. Your lender will likely be a traditional public lender, such as a bank or credit union, whose familiarity with the community makes them a great option for borrowers looking to build in the area.

Types of Arizona Construction Loans

A construction-to-permanent loan converts the loan into a mortgage after the home is complete. With a construction-to-permanent loan, there is only one closing process. A construction only loan is the opposite. Closing costs are paid twice, because the loan is split into both construction costs and a mortgage, requiring the fee twice. Whatever your choice, repayment will begin when construction is complete.

Moving into your Dream Home

Using Arizona Construction Loans to finally move into your dream home is a great option, but one that comes with hard work. Understanding everything that goes into planning, building and scheduling is important because of the way these loans are given out. Finding a strong team of home builders will be important because architects that can’t meet deadlines will hurt you in the loan process. It’s possible to get the white picket fence, but first comes work and planning.

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