Dennis Dahlberg - It Can't Get Better Than This!

Wednesday, April 10, 2019

Texas Hard Money Loans and How to Use Them

If you want to get into investing in real estate, bank after bank might deny your application and Texas Hard Money Loans might be your only option, but what's the best way to use these loans?

Hard money is asset-based rather than credit based so it is easier to qualify for, especially for first-time investors who might be in tricky financial situations.

That doesn't mean hard money is cheap. Usually, these loans entail a double-digit interest rate, so you should pay them back quickly. Now think, what type of real-estate investment involves a quick turnaround?

You guessed it, house flips.

Advantages and disadvantages of using Texas Hard Money Loans for house flips

If you've binged watched HGTV, you probably know how flipping works in a fundamental sense.

1. You buy undervalued home

2. You rehab it and raise its value

3. Then you re-sell it for a profit.

Using hard money to flip houses offers many benefits, the main one being the potential for huge profits.

A single solid flip can pay off a boatload of personal debt. The average profit of a flip stands at about 30 K, so imagine how many credit cards you could pay off from just one successful hard money deal.

But there's another side if you chose to "flip," the coin.

Unless you’re Bernie Madoff, earning 30,000 dollars from any investment is going to take a lot of time and effort. Rehabbing a house is time-consuming, to say the least. If you have a full-time job, you might end up showing up to work the next morning covered in paint from the night before, or you might even have to quit your job.

But there is a less involved way to use hard money to invest in real estate.

Wholesaling offers the advantage of being a hands-off way to use Texas Hard Money Loans.

There's another approach to flipping called wholesaling. Here’s how wholesaling works:

1.Finance and close on an undervalued property

2. After you have the property under contract

3. You sell it to a flipper who has the time and money to turn it around

Think of wholesaling as flipping without all the blood, sweat and tears of a full-blown rehab project. A single wholesale can close in a matter of a weeks, and you probably won't have to quit your job.

Wholesaling takes less time and money up-front, so it is not as risky as a flip, but you'll also make less money in the end. The average profit on a wholesale deal is around 10 K which is nothing to sneeze at, but it is far less than you can earn from a flip.

So if you’re a first-time real estate investor wondering what the best way to use hard money is, know that:

• A single flip can earn you a lot of money but, it will also take a lot of time, and effort on your part.

• Wholesaling will earn you a decent profit, and will take you far less time but you'll also make less money in the end.

There are no right or wrong answers here, the best way to use hard money will depend on your financial goals and your specific situation.

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

Soft vs. Texas Hard Money Loans: Finding The Help That's Right For You

How should you go about financing real estate? Money is money after all, but there are different types of money. Whether you are a first-time real-estate investor or a long time player, what is the right source of money, and what’s the difference between soft money loans and Texas Hard Money Loans?

Hard money is secured, by hard assets that you can touch and feel, like real-estate. Your credit and income are a non-factor, which might sound too good to be true. Well, hard money is a bit more expensive, interest rates are usually above 10 percent, and loan terms usually entail a balloon payment after a few months.

Compared to hard money, everyone has experience with "soft money.” Soft money loan qualifications depend on "softer," more mutable aspects pertaining to a borrower’s financial situation. Aspects such your credit score, DTI or whatever vague metric the bank might want to impose. These loans offer low-interest rates and usually don't involve balloon payments.

Because soft money loans are less expensive, and don’t come with balloon payments, they might seem like the best option to finance real estate deals.

But things aren't always as they appear.

Texas Hard Money Loans can benefit first real-estate investors with unique financial situations, as well as veteran investors looking to close on the best deals.

If you want to get into real-estate to improve your financial situation, you might as well forget about going to the bank. If you have poor credit or a unique income situation, soft money is basically out of the question. Banks aren't willing to secure their loans if a borrower's finances are in the least bit unsteady.

Hard money is different because these loans are secured based on property values. If your finances are a bit off, but your deal is sound, a hard money provider will still hear you out.

Because it is easier to qualify for, hard money financing can be an ideal way for borrowers in the less than ideal financial situations to invest in real estate.

But hard money can also help veteran real-estate investors as well. Reams of paperwork are usually required to get an application though and bank bureaucracy can hold up loans for months on end.

For this reason, those who are serious about real-estate investment don't turn to banks to regularly finance their deals. A serious real-estate investor can't afford to miss out on an investment opportunity because the bank asks them for tax returns, circa 1987.

In contrast, hard money deals can close in days, as the approval process usually entails a quick appraisal. With hard money, the rapid approval process allows veteran real estate investors quickly to make competitive offers on the most lucrative investment properties.

Texas Hard Money Loans offer benefits to both first time and seasoned real estate investors.

So don't be overwhelmed by hard money's seemingly overwhelming initial expense.

If you have a less than an ideal financial situation, hard money can help you secure the purchase of your first property. If you’re a seasoned real estate pro and are looking for a way to make full cash offers on competitive properties, hard money remains your best bet.

The Benefits of 90% Texas Hard Money Loans

Online articles about Texas Hard Money Loans often cite that this type of financing entails a steep down payment, so is hard money is reserved only for cash-rich investors?

The first thing to discuss when it comes to hard money and down payments is LTV. LTV is the amount you can borrow, as a percentage of a property’s value. Most hard money mortgages have an LTV of 70, so if you wanted to finance the purchase of a property listed at a million, you'd need to have 300 thousand on hand for a down payment.

This steep down payment is one of the main gripes people have about hard money. As few but the richest among us have 300 thousand just lying around. But not every hard money provider is the same and some can even front up to 90 percent of the purchase price of your next property.

90% Texas Hard Money Loans can be the help you need if you’re a cash-strapped real estate investor.

Say there is a down and out apartment investor, who lost big on his last deal. He scouts out an apartment block up for grabs, and he learns that leases are up for renegotiation. If he can raise rents even slightly, he can resell the property at a profit without spending much of his own money.

But he doesn't 300 K to make the needed down payment. A quick internet search puts him in touch with another hard money dealer, who is willing to offer him 90 percent of the apartments purchase price.

Coupled with his limited savings this hard money deal lets him make a full cash offer on the apartments. He then boosts rents by a small amount, resells the property, pays back his loan, and earns a quick profit. His earnings allow him to get back into full swing when it comes to his real estate activities.

Now reading such a story might make you think, ‘hard money sounds like something only for real-estate investors,' but you’d be mistaken.

90% Texas Hard Money Loans can help homeowners as well

Say someone is selling their home and while looking for their next residence, they stumble upon a property that's 5 minutes away from their current job.

The open house was abuzz with offers from other buyers. If he wants to move into this new house, time is of the essence, and he can't wait for his current home to sell.

He needs the bank to approve him for a second mortgage. But because his current home remains unsold, his application gets denied.

He's heard about hard money, but all the lender's he gets in touch with ask for a lot in the way of a down payment. It seems he's out of luck, but then he finds a 90 LTV hard money provider online.

Coupled with his newfound hard money financing, and some money from his savings, he's able to make a full cash offer on his new home. After he moves, his old house sells, which pays off the balance of his 90 LTV loan, and allows him to refinance to a long term, low-cost mortgage.

Now it takes him only 5 minutes to get to work so he can sleep in, and he might even get to live an extra decade without all the stress of a long commute.

So hard money isn't just for cash-rich real-estate investors. If you are a real-estate investor and you got burned on your last deal or a cash strapped homeowner who wants to move quickly, a 90 LTV hard money deal could be just the help you need to make your dreams come true.

Tuesday, April 9, 2019

How to use Texas Hard Money Loans to Finance Rental Properties

When it comes to Texas hard money loans, one of the big factors banks will look at is your debt to income ratio or DTI. But what if you want to buy into rental properties to improve your income situation? If that is your case your pretty much SOL if you rely on the bank. But there is another way.

There is another way to finance rental properties called hard money. With hard money, if a deal is good enough, you can qualify even if you don't earn a "steady," paycheck.

Of course, hard money doesn't come cheap. These loans come with double-digit interest rates, so you need to pay them back quickly.

Given hard money's short term nature you might think hard money, and long term rental investments don't mix. But if you plan ahead and aim to refinance, hard money can be an excellent way to finance the purchase of a long term rental investment.

How to use Texas Hard Money Loans and the BRRR strategy to buy long term investments

There's a simple, profitable method to secure long term rental properties with hard money.

• Buy: buy a discounted property. Look for decrepit properties that need some work, and take on short term hard money financing which covers both the cost of purchasing the rental and most of the cost of,

• Rehab: Schedule any rehab work on the property within the term of your initial loan. Your goal here isn't a quick resale, as if you were flipping a house, but you want the property to appeal to potential long term tenants because the next step in this process is to,

• Rent: After the property is in decent condition seek out high-quality long term tenants. You should try to get them to agree to a long term lease because having a long term tenant is essential so that you can,

• Refinance: Having a renter on board and having a steady income from your rental property, will finally allow you to qualify you for a long term conventional loan.

Refinancing is the most critical step of this strategy. After you buy the rental, rehab it and get a renter on board you need to refinance before your initial hard money deal comes due.

So this strategy isn’t exactly risk free.

But, that bit of rehab you did should have boosted the properties appraised value enough so that refinancing covers your outstanding loan balance and any interest payments. After you refinance and pay back your initial loan, if you play the numbers right you can basically secure properties for free using this method.

With the above method you can use Texas Hard Money Loans to secure a steady source of income

In short, using hard money to finance rentals is as simple as BRRR. If the banks giving you the run around because of your income situation consider using hard money to:

• Buy a cheap property

• Repair it to boost its value

• Rent it out so that you can

• Refinance to pay off the initial hard money financing.

If done right you could pay nothing for your next rental property.

Rental Property Loans: Advice for the Self-Employed

Banks don't like to give Texas rental property loans to people with irregular incomes. So if your self-employed, you might think there is no way to buy into rental properties, but you'd be mistaken.

Because you can always use hard money, but if you do a google search for this term you might end up thinking to yourself, "so they don't care about how much money I make, and they charge over ten percent in interest, it sounds like a scam."

But hard money is a legitimate way to finance short term real-estate purchases. The high-interest incentives you to pay these loans back quickly, so hard money is often used to flip houses.

But what if you want to hold onto a property for a long time?

Using hard money as a source of rental property loans benefits the self-employed and those in unique income situations.

Say there is a freelance graphic designer. Every three months or so he earns a significant commission on his long term projects. Every month paying his bills remains a careful balancing act, but he manages.

Renting out a house seems like the perfect way for him to earn a steady income. He scouts out a cozy little two-story house in a comfortable suburban development.

Given his excellent credit score, getting a mortgage shouldn't be a problem right? Well, bank after bank denies his application, because on a monthly basis, he's not making enough to pay his bills. Nevertheless, he can pay his bills, so what gives?

It's just that on a month to month basis, his debt to income ratio doesn't meet the banks' standards.

He looks on real-estate investment forums about situations like his, and he hears about hard money. The initial terms scare him, to say the least, 10 percent interest, over 12 months with a balloon payment due at the end. Yikes, but just before he closes the tab he reads:

"You can use hard money to refinance to a conventional loan." Knowing there's a way out, he bites the bullet. Hard money financing allows him to buy the house, and he even has a little money left over to bring his rental into the 21st century.

The attractive interior attracts a long term tenant who is just so pleased with the condition of the home that they agree to sign a 24-month lease.

Once he's got a long term tenant under contract, he goes back to the bank and applies for refinancing. The contractually obligated monthly rental payments will cover the cost of the new mortgage, on a monthly basis, and so, at last, the bank is happy.

In fact, that little bit of rehab work he did boosted the property’s value. So refinancing allowed him to pay off his initial loan and covered those steep interest payments, which he was so afraid of in the beginning.

Don't overlook the benefits of hard money when it comes to rental property loans. It may be expensive at first, but you can always refinance later.

Hard money remains an excellent option if you'd like to earn a steady income from rental properties. No matter what your current income situation is, don't let the bank stand in your way and keep you from getting into the rental business.

The Benefit of Purchasing Rentals with Texas Hard Money Loans

Most in the real-estate investment game consider Texas Hard Money Loans to be best suited for house flips, but what about long term rentals? Why would you want to use hard money to buy a rental property? Since hard money is supposed to be paid off in a handful of months, it’s easy to assume this type of financing isn't meant for long term investments.

But hard money allows you to finance distressed properties based on their worth after their repaired. With hard money you can pay nothing for your next rental using a simple strategy: buy a distressed property, raise its value, rent it out and then refinance the property at the new higher value.

How you can use Texas Hard Money Loans to pay nothing for your next rental property

Using hard money if you can raise a property’s value enough through repairs, then refinancing will allow you to pay off your initial loan and maybe even earn a profit.

It might be helpful to illustrate how such a strategy would work with some specific numbers:

Say there is a disused house going for $70,000. Getting the property up to a livable standard will cost about $15,000. The first step is to take out a hard money mortgage for $85,000. After a few months of repair work, and after finding a long term renter, you are ready to refinance.

If your rehab raised the value of the rental property enough, refinancing should pay off your initial loan.

Here’s how the numbers work in this case:

Cost of the Property = $70,000 Purchase + $15,000 in rehab

Say you refinance at 80 percent of your rentals new appraised value of 125 K=

100 in refinancing - 85 K + interest payments= You secured a long term rental without spending any of your own money.

Here’s a simple formula:

• Hard Money= Purchase price + Rehab

followed by

• amount in refinancing - hard money= a free property

With Texas Hard Money Loans, if you can refinance for a large enough amount you could pay nothing for your next rental property.

You might wonder if you can use another less expensive type of loan to execute the above strategy. The key to this method lies in buying a distressed property at a steep discount, then refinancing the property at a higher value.

Other lenders and banks in particular don't offer financing for distressed properties and even if they did in the above case you’d likely only get 80 percent toward the initial purchase of that 70 thousand dollar shack, so in the end you would have to pay 29 thousand dollars out of pocket.

With hard money you can buy dilapidated rentals, boost their value and then refinance so that in the end you pay nothing out of pocket. Not spending any money, getting a steady source of income, now that’s the dream isn’t it?

So consider using hard money to buy your next rental investment.