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Wednesday, February 13, 2019

All About Texas Hard Money Lenders

You have probably heard about Texas Hard Money Lenders—but what exactly is hard money lending all about?

Texas Hard Money Lenders are private lenders who lend money using assets to back the loan. When a borrower needs funding quickly or when traditional lenders won’t approve a loan, a hard money loan is typically the best alternative.

When you apply for a loan, lenders require proof that you can repay them. Traditional lending institutions, such as credit unions and banks, are interested in your income and your credit score— this shows the capability to repay the loan and a solid history of responsibility. Banks use a debt-to-income ratio to be confident in a borrower’s chances of repayment. However, the approval time with a bank is typically a painfully slow process that can take months to complete—even with a fantastic FICO score and a great income. So, when you add poor credit to the mix the process becomes even longer and more agonizing—usually resulting in denial of the loan.

Texas Hard Money Lenders approach is quite different. They determine the loan approval by basing the borrower’s collateral to secure the loan. The borrower’s collateral puts the lender’s mind at ease because in the case of loan default, the lender can get their money returned by repossessing the collateral and selling it. To Texas Hard Money Lenders the value of the borrower’s assets are more important than their financial situation. Therefore, borrower’s with poor credit can still receive a loan.

ARE ALL TEXAS HARD MONEY LENDERS THE SAME?

Nope. Texas Hard Money Lenders differ just as widely as borrowers differ. Some lenders work nationwide—others stick with one geographic area. There are lenders that strictly lend to borrowers looking for a commercial loan and others that only work with residential properties—and there are some lenders that work with both.

Texas Hard Money Lenders also vary when it comes to their interest rates and fees. Certain lenders charge for preparing documents, while others include that in their services. Lenders work on a loan-to-value ratio, as traditional banks work on a debt-to-income-ratio. Lenders vary on the loan-to-ratio—some work with higher value numbers and others work with lower value numbers.

Along with those differences come even more. Some lenders charge prepayment penalties. That means if the borrower repays early, they will receive a penalty and will be assessed a fee. There is such a wide spectrum of differences when it comes to Texas Hard Money Lenders.

Because of the differences in lenders, it is critical that a borrower finds a lender that works for their unique situation.

Not only can geographic areas, fees, interest rates and penalties vary between lenders—so can the life of the loan. These are short-term loans and are usually between 6 months and one year. However, there are lenders that will authorize up to five year loan terms. If you are looking for a hard money lender, 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.

Understanding Hard Money Lending

Even experienced borrowers often have questions about hard money lending and how it works.

Hard money refers to capital available outside of conventional lending institutions such as credit unions and traditional banks. A hard money loan is secured by the borrower’s real estate. Hard Money Loans in Arizona are typically used by real estate investors to quickly obtain the funds needed to purchase or refurbish a property. These loans can be used as bridge loans until a time when the borrower can secure more traditional financing or until they sell their property.

Hard Money Loans in Arizona are short-term loans-typically with one year terms. Some benefits of hard money loans are the ease of the underwriting, fast approval and the emphasis on the borrower’s assets versus their credit. Texas Hard Money Lenders don’t to have to follow the same rules and regulations as conventional lending institutions, therefore allowing more flexibility in the loan terms.

WHAT ARE TEXAS HARD MONEY LENDERS?

Texas Hard Money Lenders are typically private financial groups with capital that is available for loans in certain geographical locations. These lenders have their own set underwriting policies and approve funds using a loan-to-value ratio.

Texas Hard Money Lenders are investors that are seeking better returns than typical investments allow. They approve riskier loans than conventional banks do. Because these are asset-backed loans, Texas Hard Money Lenders require much less documentation than traditional banks. Approval and funding can usually be completed within a week—unlike banks, who can easily take up to two months for funds to be available to the borrower. Texas Hard Money Lenders do not require tax returns to prove that the property is generating revenue. Many borrowers run into problems when attempting a conventional loan due to their properties not all being listed on their tax returns.

Texas Hard Money Lenders will provide funding for many types of properties, but they will not fund all types. Many Texas Hard Money Lenders will not fund owner-occupied hard money loans for residential properties— these situations are government regulated and will result in more documentation and involve federal regulations involving the borrower to meet a debt-to-income ratio. Texas Hard Money Lenders do not work on a debt-to-income ratio because they are asset-backed and do not typically lean on the lenders credit worthiness or income. However, lenders will typically approve loans for owner-occupied commercial properties. Lender rules and regulations are different in different geographic areas — and each lender can determine their own loan terms. There is a great amount of flexibility in hard money lending.

Hard money loan applications are painless and easy. There is a tremendous amount of benefits to working with a hard money lender.

Once approved, funds are dispersed in less than 10 days. A hard money loan can help when quick capital is required to obtain a deal. Perfect credit is not a necessity when applying for a hard money loan— in fact, a borrower’s credit score is not a top priority. These loans can also be used as bridge loans until a borrower can gain approval for a conventional mortgage. There are many advantages to hard money lending. Find a local hard money lender that will assess your situation and give you options.

Tuesday, February 12, 2019

All About Arizona Cannabis Dispensary Loans

With the legalization of medical marijuana in Arizona, the need for financing of cannabis marijuana business operations is booming .

In 2016 legal recreational and medical cannabis states generated between $16 to $18 billion. By 2021 it is projected to reach $68 billion. These figures do not include other cannabis related industries such as doctors and growers. There are numerous jobs that are being created due to the legalization of recreational and medical marijuana. These people then spend their money at other businesses. This money ends up paying local and state taxes—these businesses lead to benefits for real estate and construction, as well. The bottom line— legal marijuana is a booming business and one that could result in a lucrative investment.

HOW TO GET ARIZONA CANNABIS DISPENSARY LOANS

As of today, cannabis dispensaries cannot get small business loans through FDIC insured banks due to their regulations. Even though marijuana and cannabis products are legal in many states they are still considered a Schedule I drug by the DEA and the FDIC doesn’t approve of cannabis related business. Banks that approve loans to dispensaries will be subject to prosecution on the federal level. Private money or Hard Money Loans in Arizona are seemingly the only way to get a dispensary loan, as of now. Private loans can provide dispensaries with the capital needed to grow their business. Many investors will provide funding for growing rooms, marijuana kitchens, dispensaries and even websites.

Private money lenders look at investments in a different light than do traditional banking institutions. It is common for a private money lender to look at a project in a “what is needed in the community” way versus “is this too risky.” Private money lenders are not scared to take a risk, in fact that is what their business is all about—risks paying off.

There are various loans that can provide funding for marijuana cannabis dispensaries through hard money and private money lenders. A Bridge loan is a loan you can get through a hard money lender. You can use these for short term funding in order to expand your services. A hard money lender can offer you a short term, higher interest dispensary loan that will fund your company. Many investors will also be willing to take a stake in your company, as well. This could result in your loan being a larger amount and interest rates possibly being lower. Cannabis dispensaries are also allowed to raise up to $1,000,000 per year through crowdfunding. However, equity crowdfunding is unlike normal crowdfunding. Equity crowdfunding means the investors will be financial partners in your company and will get a piece of your company. The benefit is you won’t pay interest on the funds you raise. However, the backers will continue to benefit from your profits.

Arizona is relatively new to the legal cannabis business. Opening a dispensary can be a profitable business.

Because you will be receiving funds from non-traditional sources it is important you understand that these firms are taking a huge financial risk by approving funding to a cannabis based business. It is important to find an investor that has knowledge of Arizona cannabis dispensary loans and can guide you through the process.

Can You Get a Small Business Loan with Bad Credit?

If your credit has been damaged and you want to start a business—you can still get a small-business loan with bad credit.

The biggest reason lenders turn down small-business applications is the borrower’s credit. Banks consider bad credit anything below a 620 FICO score. Because of their past, applicants with bad credit are considered a high risk for defaulting on loans. Have no fear—there are still options out there for entrepreneurs that need a small-business loan.

HOW TO FIND A PRIVATE HARD MONEY LENDER

There are lenders out there that will work with you to get a small-business loan with bad credit. There are lenders that will provide options for borrowers with shaky credit. Typically, they require a FICO score of at least 500. And, believe it or not, there are lenders that have no minimum score requirement. These lenders will look at your business and determine if it is strong enough to be successful thereby giving them confidence that you will repay the loan.

A borrower with bad credit must realize that the lower their credit score is the bigger chance they have in having a higher APR—interest rate and fees that accrue on the loan. A borrower with a low FICO score, no collateral and a brand new business should look toward the option of business credit cards and secured personal credit cards. If you want to manage your cash flow and working capital, a line of credit will be your best bet.

Hard money lenders can help with small-business loans

If you need a small-business loan—even with poor credit, but you have collateral, a hard money lender can work with you. Hard money loans are collateral-backed loans that can give easy access to small-business owners. They are secured by real estate. Hard money lenders are less concerned with a borrower’s credit and more concerned with their hard assets. If a borrower defaults on a loan the lender can foreclose on their property.

Hard money loans offer an execution that is fast. A borrower can be approved within 24 hours and have funds in as little as 10 days. They also don’t have the regulations that traditional banks do. While a traditional bank must adhere to state and federal regulations, a hard money lender creates their own regulations. These lenders still have an underwriting criteria; they are just more lenient.

Why a hard money small-business loan may be for you

If you are an entrepreneur with a vision and you have collateral, but unfortunately your credit is damaged a hard money small-business loan may be the best option. Along with speedier approval and closing time, hard money lenders work with each borrower individually. They have more leeway with underwriting and the repayment schedule. All in all a hard money lender can be more flexible than a traditional bank loan. These private lenders are entrepreneurs themselves and want to help others with that same entrepreneurial spirit.

Which Private Money Lender Is Best?

The definition of a private money lender is a non-institutional individual or company that loans money. This money is secured by a note and deed of property for the funding of a real estate transaction.

Private money lenders care more about the deal than they do about your credit. Unlike traditional banks, their money is secured by a hard asset (real estate). They are protected by the deed of trust—the mortgage—on your property. Private money lenders also like to see a good track record. A lender is more willing to work with a borrower that understands the game.

What does that mean for a newbie with no track record? That’s where hard money lenders come into play. A hard money lender is one type of private money lender in Arizona and is more willing to loan to a brand new investor. It benefits the new investor working with the hard money lender by doing deals and gaining experience. A hard money lender can help a new investor start their portfolio.

THE DIFFERENCES BETWEEN PRIVATE MONEY LENDERS

There are 3 types of private money lenders:

* Primary Circle— This circle is made up of friends and family, the people that are closest to you. When an investor starts out in real estate he will most likely go to his friends and family because he feels safe there; and, more than likely, if they have the money, they will invest. Unfortunately, there is a huge downside to investing within your primary circle. They may not have experience in real estate and won’t know the difference between a good and bad deal. Also, if you lose money in the deal it may easily strain a personal relationship. Make sure you are clear about the risks when proposing money lending to your primary circle—just as in any investment this is a risk.

* Secondary Circle— This circle is your professional associates and colleagues of your primary circle. You know when you are on Facebook and you see “People You May Know”? That is your secondary circle. The negative part of working within your secondary circle is there is a lesser chance they will say yes. For this circle you will need a presentation ready. They will want details on this investment—they don’t know you well enough to just trust you the way your primary circle does.

* Third Party Circle: These are people found through advertising, through networking and also, accredited investors—such as hard money lenders. This is the circle that a borrower has no personal ties. This circle will have the largest pool of possible lenders.

Types of properties that private money loans fund

Private money loans can fund a variety of properties in both residential and commercial properties, such as:

* Apartments

* Condos

* Single-family homes

* Commercial real estate

* multi-unit properties (duplexes)

How quickly you need funding, what your hard assets equate, and your network will determine which circle of private money investors will work best for you.

Trying to borrow money fast? If you can’t qualify with traditional lenders and have a need for speed, hard money loans offered by private investors just might be for you.

Lots of people turn to traditional lenders like banks and credit unions when they need money. However, it doesn’t take a genius to know that traditional lenders have some tough requirements to meet. Having a great credit score and debt to income ratio can make or break you when it comes to qualifying for loans, often leading people to seek out alternative options.

Alternative loan lenders are not bad. They are untraditional, private investors that can usually offer money faster than traditional lenders. Because they can cater to a wider audience, their needs and expectations are often different. For example, they have different loan approval requirements, as well as steeper fees and interest rates.

Are You Eligible for Private Hard Money?

Qualifying for hard money loans is possible, even if a bank denies you. This is because Texas Hard Money Lenders consider property potential before they consider borrower potential. If you are working to obtain a property with high potential, it is likely that a private investor will provide you with funds to support your property. Private Texas Hard Money Lenders consider the LTV—the loan to value ratio. Sometimes, they can offer 65 percent of the property’s worth to you in funds. Additionally, because they work a little differently than traditional money lenders, the relationship is usually more transparent with a little flexibility. Usually hard money loans are paid off in 12 months, but can be expanded as long as 60 months, or 5 years. In this way, Texas Hard Money Lenders may seem “individualized,” making the loan process suitable to each individual that has been denied by banks due to high, generalized standards.

Borrowing from Texas Hard Money Lenders Successfully

If you think this sounds too good to be true, it probably is. While Texas Hard Money Lenders offer lots of benefits, they also have some cons that should be considered thoroughly—before making any rash decisions out of excitement. For one, Texas Hard Money Lender maintain very high fees. This is a stipulation of their easy approval process, and acts almost as a reliability buffer for them as lenders. Knowing if you can handle high fees and a short repayment period is important. Even if there is flexibility within the repayment period, you still want to be realistic. Researching a reliable lender will also be important. While Texas Hard Money Lenders typically provide good, transparent relationships with their borrowers, it is not unheard of for lenders to pull out at the last minute, or hide fees within the loan agreement. If you are feeling unsure of your hard money lender, you can always invest in a real estate attorney who can help you evaluate and understand the terms of the loan agreement, so that you can feel confident you will be making the best decision for you. Hard money loans are a great option for people who need money fast—just make sure that your need for a loan doesn’t overlook stipulations that could cause you trouble in the long run if you aren’t being realistic about all of your needs.

Monday, February 11, 2019

The Importance of Relationships in Private Money Lending

Private money lending is all about building relationships—building your network. This involves getting to know professionals in your industry and your discussing your investment with your circle of friends and family that may be looking for an investment. Another option is a hard money loan.

Your net worth is network. If you want to raise private money you have to network. If you are in real estate you need to get to know all the professionals in your industry—this can be everyone from title companies to attorneys. Referrals are key when it comes to private money. Ask your family, your neighbors, your pediatrician. You never know who is looking for an investment.

Make sure that you are prepared. You must be ready to throw your pitch at any moment, in any place, to anyone. You must be well versed on your company overview, your experience, your goals and why an investor should trust you with their money. Creating a video that you can easily share is ideal. Everyone is visual. You can talk about it or you can show it— showing it will win every time.

SELECTING YOUR PRIVATE HARD MONEY LENDER

Finding a private lender is easy—said no one ever. Although, you will be making a pitch to potential investors, remember at the end of the day it is more important that they meet your needs. It is imperative that you ask them questions:

* What is their proposed loan term

* What is their interest rate

* Will they make their loan based on the property’s current value or the ARV

* Fees they will charge

* How quickly will you receive the funds

* What experience do they have

This information will allow you to pick the most ideal lender. It is important to be on the same page as your lender.

Although, private money lenders can be anyone from your best friend to your orthopedic surgeon you can also choose a hard money lender. Why choose a hard money lender?

Depending on your situation, a hard money lender may simplify your life. Hard money is a way to borrow without using a traditional lender or getting into business with family or an acquaintance. This is ideal when a traditional lender won’t approve a loan or when a borrower needs the funds quickly.

Loans require that you show proof you can repay. Traditional lenders will base this on your credit score, your income and your debt to income ratio. The downside of a traditional loan is even with a fantastic FICO score, a large revenue stream and a low debt to income ratio— it may take months for the funds to be released to you.

Hard money lenders use a different approach. Their lending is based on assets; that means the borrower’s collateral secures the loan. This means regardless of your credit or monthly income if push comes to shove they will get their money back by taking your assets and selling them. Yes, that sounds terrifying—however, a good hard money lender will work with you—as long as you find the right lender and build a trusting relationship. It is also possible to refinance a hard money loan into a conventional loan. The hard money loan will get your approval and funds quickly. This gives you time to work on your credit and get your revenue streams in order. Hard money loans typically are from 1 to 5 years.

There are options when it comes to private lending. What is crucial is that you work with an investor that has the same vision as you and one you can trust.

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.