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

Sunday, April 14, 2019

Financing For Rental Properties: Conventional Mortgage Or Hard Money?

Buying a rental property is a fantastic way to get additional income. However, it doesn’t come risk-free.

Every investment comes with risks, weighing the pros and cons of buying and managing rental properties one will see that if the market is good and the investor is skilled—rental properties are a great way to attain wealth.

Of course, before diving head first into becoming a land lord you should have enough information to decide if the income stream is a good fit for you and you need to understand the choices when it comes to financing.

Financing For Rental Properties

The first thing an investor needs to figure out is how they will obtain financing for rental properties. It is not as simple as getting approved for the mortgage on your primary residence. There is a reason lenders are skeptical of financing rental properties. Lenders know that if a borrower runs into financial difficulties they are much more likely to walk away from an investment property than their home.

If a borrower is determined to obtain financing through a conventional mortgage they must prepare themselves to put down a minimum of 20%-25% of the purchase price. Fannie Mae requires a minimum of 15% down, but the majority of lenders require even more. A borrower will also need a strong credit score and monthly income. Along with all this—borrowers will also be required to hold higher cash reserves. Reserves are liquid assets that are available after paying the down payment. Examples of these reserves could be: the cash value of insurance policies, checking and savings accounts and investments in any CD’s or stocks and bonds. Most banks will not approve borrowers if they have more than four mortgages. Also, expect when working with a traditional lending institution on rental property mortgages, to double the required documentation and paperwork as you did for your mortgage on your primary residence.

If you don’t have a 25% down payment, don’t have perfect credit, own four or more rental properties or just don’t want to deal with the paperwork from the bank there is another option.

Arizona Hard Money Lenders will lend on rental properties. Unlike banks, they are not required to follow the strict federal guidelines. A borrower does not need perfect credit. The underwriting process from an Arizona Hard Money Lender is minimal in comparison with the banks. Because Arizona Hard Money Lenders are individuals that make their own terms they are able to approve you quickly. Arizona Hard Money Lenders do not need liquid assets because they back loans using the borrowers hard assets— property. Not only can a borrower be approved within 48 hours; they are able to receive their money in two weeks or less. Arizona Hard Money Lenders are flexible and able to negotiate deals because there are no set lending requirements. An investor will likely have lower closing costs associated with the loan, as well. If you are a seasoned real estate investor, none of this is news to you. However, if you are just sticking your toe in the rental waters to see what it feels like—make sure you research all your options.

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.

Saturday, April 13, 2019

Saved By an Arizona Bridge Loan

I had just turned 40 when my father died and I inherited his home. It was a difficult time for our family. And to add to the stress, I had just recently decided to purchase my first home.

Along with the sudden death of my father I was also thrown into a whole slew of new financial responsibility. Being an only child, with an extremely small family, I inherited my father’s home. This had been my childhood home and along with many good memories came the wear of those memories. The house hadn’t appraised for much and needed an enormous amount of rehabilitation.

Because I now owned this home that had numerous mortgages taken out on it, and still owned the bank money, I was told by the bank I would not qualify for a second mortgage and would need to sell my inherited home before applying for a mortgage. I was mortified. I had outgrown my small apartment and saved for a small down payment. I couldn’t live in my childhood home because it wasn’t even safe to live in. I had found myself in quite a pickle.

How You Can Buy A New Home Before Selling Your Old Home

After talking to more attorneys and loan officers than any sane person would want to experience—I was given some gold information. The last loan officer I spoke to asked me if I had considered an Arizona Bridge Loan. He explained that it was an interest-only loan that I could take out while making repairs and selling my father’s home. It sounded perfect and I could not believe no one had offered me this until now.

However, because of a recent bankruptcy I did not qualify for the Arizona Bridge Loan. I was so disappointed and was feeling helpless. I began Googling Arizona Bridge Loans to find out if another bank may qualify me. As I began googling I found myself reading about Arizona Hard Money Loans. I had always though Arizona Hard Money Lenders were sharks. They were the guys in all the gangster movies. Well, come to find out—they aren’t. They are actually nice, normal people that have money to loan and will do so, regardless of a borrower’s credit or income, if they believe it will make a good return. They are simply investors—just as the people that invest on Wall Street.

I was approved within 24 hours for an Arizona Bridge Loan.

Because an Arizona Hard Money Lender determines a borrower’s eligibility based on their assets versus their credit and income the approval time is very quick. I was funded within a week after finding my new home. The Arizona Hard Money Lender based his decision on my hard assets—which were my properties. I was able to pay the interest only on my father’s home which left me with enough to pay my new mortgage. I was also able to tack on financing for the rehab of my father’s home—making it possible to sell. Once, I sold my father’s home I was able to pay the Arizona Bridge Loan off without penalty and profited what was left over. If it wasn’t for my Arizona Hard Money Lender helping me, I would very easily have been living in my childhood home for many years.

You Can Own Multiple Rental Properties With Less Stress

Most banks will tell you that four investment, or rental, properties is the maximum amount of properties a borrower can finance. However, that is not 100% true.

There are ways an investor can finance multiple rental properties (more than four). Banks are skeptical of lending to more than four properties. Truthfully, there are some banks that will finance more than four investment properties, but it takes a lot of energy and research to find these banks.

Technically, Fannie Mae guidelines state that investors are able to get loans on up to 10 properties. However, banks will tell you they cannot authorize a fifth mortgage, let alone a sixth or seventh. The reason behind the banks creating their loan stipulation is that beyond four mortgages is just too risky. Even if you find a bank that is willing to work with you through financing over four mortgages most banks will only allow a 70% loan to value ratio and most likely will not allow the borrower to take out any cash when or if they choose to refinance these properties.

So Where Do I Go When The Bank Says No To Financing Multiple Rental Properties?

If the bank has said no or can’t give you the terms you need and you don’t have a substantial amount of cash upfront to purchase the properties, an Arizona Hard Money Loan can open up an avenue of lending you may have not been a part of before.

Arizona Hard Money Loans are short-term loans that many investors use to finance a real estate investment project. There are many advantages in using Arizona Hard Money Loans. The convenience of the loan application process can be a project saver. Applying for a conventional mortgage is time consuming. It can easily take months to close on a loan from a traditional lending institution. After approval hard money is typically funded within 2 weeks. Along with the ease of the loan process—Arizona Hard Money Loans have flexibility. Unlike, banks Arizona Hard Money Lenders are able to use flexibility in their loan terms—meaning there can be some negation of the loan terms. An Arizona Hard Money Lender is one person. That means you are dealing with only one person versus an entire team at a bank.

Arizona Hard Money Lenders have no regulations stating how many mortgages they are allowed to approve to a borrower. As long as the borrower has the collateral they will continue to be approved by an Arizona Hard Money Lender. The collateral is typically the collateral the lender uses to secure the loan. There are some lenders that approve of retirement accounts and personal assets to secure the loan. Again, there is flexibility. Once an investor works with the Arizona Hard Money Lender, and they create a personal relationship, terms can improve—this is based on personal trust.

An Arizona Hard Money Loan allows an investor to continue to grow their portfolio.

Real estate investment is an avenue to wealth. Understanding how Arizona Hard Money Lenders operate and forming a relationship with a lender can change your financial world.

The Real Deal on Hard Money

You’ve heard the term “hard money.” But, what exactly is hard money? In simple terms, hard money is a loan that is secured by the borrower’s real estate from a non-traditional lender.

Arizona Hard Money Lenders play an indispensable role in financing a variety of real estate deals. Arizona Hard Money Lenders are private lenders that have money and lend to investors at a slightly higher interest rate. The lenders are not insured by the FDIC, as traditional lending institutions are. Therefore, they charge a higher interest rate in place of the void of insurance.

Compared to traditional banks, Arizona Hard Money Lenders not only have higher interest rates, but they have shorter terms. Arizona Hard Money Loans are for short-term use. The vast majority of these loans’ terms are between six months to a year—however, depending on the situation can often have a three to five year agreement.

What’s The Benefit Of An Arizona Hard Money Loan?

You may be asking yourself, “why would anyone use an Arizona Hard Money Loan when they can just as easily get a loan from the bank and receive lower interest rates?” Well, there are a plethora of reasons borrowers turn to Arizona Hard Money Lenders.

Arizona Hard Money Lenders can approve and fund a borrower much faster than a bank. It can take weeks and often months to be approved by a bank—and even after that, you can easily wait up to 90 days to close. An Arizona Hard Money Loan can be approved in as little as 24 hours and disperse funds in under 10 days.

The underwriting process is much more lenient because Arizona Hard Money Lenders do not have to follow federal guidelines. This speeds up the approval process; often a third party appraisal is not required to purchase the property.

Very few banks will touch a fix and flip property. Because these are homes that are distressed and will not be inhabited by the borrower the banks view these rehab projects as too risky. However, a fix and flip loan is a fantastic option for an Arizona Hard Money Lender to lend work with—fix and flip projects are very short-term making the loan terms of an Arizona Hard Money Loan valuable.

Banks rely heavily on the borrower’s credit score and income; whereas an Arizona Hard Money Lender’s focus is on the value of the property. The value of the property is what is backing an Arizona Hard Money Loan. The hard assets insure the lender will have their money returned. In case of default the Arizona Hard Money Lender can sell the property and make their money back.

The benefits of hard money are vast. For a borrower with good credit, employment and a high enough income looking to purchase their primary home an Arizona Hard Money Loan wouldn’t necessarily benefit them.

However, if a borrower needs money quickly to compete with cash buyers, if they are real estate investors or they need a chance to clean up their credit— an Arizona Hard Money Loan could aid them immensely. Hard money is not for everyone but, it is very useful for those borrowers in need.

Friday, April 12, 2019

What Is An Owner-Occupied Property And How Can An Arizona Hard Money Lender Help?

An owner-occupied property is the primary residence one lives. A property with up to four units, as long as the owner lives in one, is also considered an owner-occupied property. A vacation home that is outside of the county a person lives is also identified as an owner-occupied property.

What exactly is an owner-occupied loan? These are loans where the borrower lives in the property for which the loan is being obtained. There are tighter regulations involved and longer waiting periods for mortgage loan approval when working with a traditional bank. Banks also focus solely on a borrower’s credit worthiness and income when determining loan approval. Most people are familiar with the immensely long process and never-ending paperwork when trying to obtain a conventional mortgage. If the borrower has had a recent loan modification, is self-employed or has less than two years at their current place of employment a bank will likely deny their application.

For these many reasons many borrowers choose to work with a hard money, or private, lender. Not only do borrowers use Arizona Hard Money Lenders because of deficits or marks in their financial history—many times it is for the speed of the process. Arizona Hard Money Loans can also help assure the buyer they will not miss out on an opportunity due to losing the property to a cash buyer.

Terms Of Owner-Occupied Arizona Hard Money Loans

Owner-occupied Arizona Hard Money Loans are intended for short-term use—usually three to five years maximum. The rates on an owner-occupied Arizona Hard Money Loan can vary. Typically, they run between 9.99% to 14.99% with 2-6 points on the loan origination fee.

There are some standard requirements for Owner-occupied Arizona Hard Money Loans. Income must be verified by a 3rd party and hazard insurance and property taxes must be impounded for the first year. Depending on the lender they may be a prepayment penalty and there are disclosure laws that give the borrower awareness of the loan terms before documents can be signed. Most lenders require at least a 20% down payment—however, each lender is different in their terms.

If you are in need of financing for your owner-occupied property and either don’t qualify for conventional lending or you need the financing quickly make an appointment to speak to a local Arizona Hard Money Lender.

There are several reasons a conventional mortgage may not work for you. However, that shouldn’t hinder you from buying if the time is right. Arizona Hard Money Lenders can give you many options and will help you determine which one is best for you. Don’t give up on what you want because the bank said, ‘no.’ Banks are not the only options and many times they aren’t the best option.

Why Use an Arizona Hard Money Lender?

Arizona Hard Money Lenders are individuals that have money to lend to projects. They will finance a borrower’s who bring projects to the table that an Arizona Hard Money Lender can anticipate will have a large return.

Why would anyone need an Arizona Hard Money Lender when they have a bank? Great question! There are many reasons to use hard money. A huge advantage to working with an Arizona Hard Money Lender is they do not focus on your credit report or your monthly generated income. Their focus is on your assets. Why? Because banks and individuals want to know they will have their money returned to them—while banks focus on “if” a borrower can pay the loan back, an Arizona Hard Money Lender focuses on “knowing” the money can be paid back. In plain language—your assets are their insurance. If a borrower defaults the lender can repossess the property and sell said property.

Arizona Hard Money Loans are short-term loans and, although there are situations where people in need of long-term financing use these loans temporarily, make the most sense for fix-and-flip investors. Fix-and-flip investors buy a property, quickly rehab it and sell it for much more than they purchased. These investors usually are in need of financing for only a very short period. Typically, Arizona Hard Money Loans are interest only loans with a balloon payment due at the end of the loan term. Most Arizona Hard Money Lenders do not impose an early payment penalty—meaning as soon as the property is sold the borrower is able to pay back the loan which decreases the pay back amount.

Benefits Of Using an Arizona Hard Money Lender

Arizona Hard Money Lenders can be more flexible in their loan terms than traditional banks can. These lenders do not have a standardized underwriting process. Each deal is appraised individually. Because of this flexibility lenders are able to adjust repayment schedules. An Arizona Hard Money Lender is one individual the borrower will work with— versus a team of people the borrower never sees at a traditional lending institution.

Arizona Hard Money Loans are closed quicker than conventional mortgages. Because their underwriting is much more lenient than a bank’s they don’t spend as much time on the loan application. They are focused on the collateral.

Arizona Hard Money Lenders work using a loan-to-value ratio. They keep this ratio anywhere between 50%-75% usually. However, in certain situations it can be up to 100%. If the borrower is buying an investment property, the lender will lend as much as the property is worth. Using this formula ensures the lender that in case of default the property can be sold back for the loan amount.

To find an Arizona Hard Money Lender you can do a simple google search of your geographic area.

If you are a real estate investor or plan on becoming one it will benefit your business to find a Arizona Hard Money Lender you work well with. Being connected to an Arizona Hard Money Lender will prove priceless, especially during times where fast cash is needed.