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

Tuesday, April 16, 2019

Why Do Texas Hard Money Lenders Prefer to Work with LLCs?

Some Texas Hard Money Lenders will only work with LLCs or Limited Liability Companies as opposed to consumer borrowers. The good news is this doesn’t have to be a barrier to your success; establishing an LLC is easy.

Consumer loans are subject to different regulatory guidelines than commercial loans are, so it’s quite common for Texas Hard Money Lenders to focus on just one area. By homing in on the commercial sector, it’s easier to work deals without getting caught up in governmental red tape and success rates are improved. In fact, there’s actually a huge difference in the outcome between consumer and commercial loans. Data gathered by the Federal Reserve Bank of St. Louis concludes that 3.01% of consumer mortgages default, while 2.49% of personal credit card accounts do as well. When it comes to the commercial side, defaults drop down to just 1%, so it makes fiscal sense for investors to apply their funds to an area that’s more likely to give them the return they expect.

Whether you’re doing home rehabs, working commercial projects, opening an Airbnb, or launching another type of business, operating under an LLC demonstrates that you’re a professional and makes it clear you’ll be using whatever funds you receive for business purposes.

There are also benefits to you for getting established as an LLC. The most obvious is that it limits your personal liability if something goes wrong with the business. You’ll also get to choose whether you’re taxed as a “C” corporation or an “S” corporation. As an “S,” earnings are taxed only once, whereas with a “C,” earnings are taxed before being divvied up amongst owners and upon receipt, so the right structure can minimize your tax burden as well.

Starting an LLC is Easy, But Get Advice from a Pro If You Haven’t Done It Before

You’ll need to file your LLC’s articles of organization. The paperwork is straightforward, though you’ll need to have your name and a registered agent (person who will receive all communication) selected. Fees vary by state for filing, but most range from $50 to a less than $150 for the initial filing and then have a small annual fee to maintain it. You will also likely have to publish a notice in the newspaper and obtain any necessary permits or licenses to operate. From there, it’s typically just a matter of opening up a business bank account, so you can keep your personal and business funds separate. Once you have these steps taken care of, and have your business plan ready, you should be able to approach Texas Hard Money Lenders with confidence. If you get stuck along the way, touch base with an attorney who specializes in business law or talk to an accountant about which designations are right for you.

If you can use a computer, you can start an LLC.

Most states provide the paperwork for starting an LLC online, so getting yours going is really only a matter of ticking off a few boxes once you’ve chosen a name and keeping up with the annual renewal. If you’re serious about starting a business or taking on a new project with the help of Texas Hard Money Lenders, getting an LLC set up is a simple and smart first step.

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.

Getting Started with Real Estate Investing

You watch television, listen to your neighbors chat, and read about it— fixing and flipping properties. And from everything you see and hear it looks and sounds glamorous and like the fastest track to wealth.

Glamorous? Probably not. It takes a lot of sweat and tears to become successful in the real estate investment game. Fast track to wealth? It’s definitely a track to wealth, but how fast you get there is up to the time you have to give and how quickly you learn. The first thing as an investor you have to do is find a distressed property that you can fix up and sell for a profit. The second thing you have to do is find financing.

So, you search hard and find a perfect investment property. You have never done this before and you need a loan—so, where do you go? Duh, the bank of course. Unfortunately, after meeting with the loan officer you learn that banks frown upon lending to investment properties. It is just too large of a risk. Enter Arizona Hard Money Lender.

Arizona Hard Money Lenders are the Knights In Shining Armor for Investors

Arizona Hard Money Lenders are not banks. They are firms or individuals that have borrowed money from other investors. They lend this money to real estate investors on short-term loans. Arizona Hard Money Lenders, unlike banks, will loan on any property—no matter how distressed it is. They are in this business with you. Arizona Hard Money Lenders can look at a shack and see a cozy fairytale cabin. They are able to see what banks can not.

Banks will require a large down payment—Arizona Hard Money Lenders lend on an LTV (loan to value) or an ARV (after repair value). The LTV ratio is calculated by dividing the amount borrowed by the appraised value of the property as a percentage. If you find a property that appraises at $200,000 and make a $20,000 down payment, you will be approved for $180,000 resulting in an LTV of 90%. An ARV estimates the future value of a distressed property after it has been repaired. If you find that same property that appraises at $200,000, but after repairs it is assessed to sell at $300,000. The Arizona Hard Money Lender approves 75% ARV—that means the loan amount would be $225,000. That leaves you with $25,000 to put towards repairs.

Each Arizona Hard Money Lender will have different terms and handle each deal differently. They are not banks that treat their customers as a number, they realize you are human. Investors have a one-on-one relationship with their lenders. Because they are private money lenders they have flexibility. What that means is they can work with you. When things come up, call them— talk with them and find a solution together.

Arizona Hard Money Lenders have gotten a bad reputation as sharks that charge outrageous interest rates and hunt down borrowers after one late payment.

In reality that couldn’t be further from the truth. Investors and Arizona Hard Money Lenders form unique relationships. No one wants the investor to succeed more than the lender because that equates repeat business for the lender and security for the borrower.

Why Use An Arizona Hard Money Loan?

One type of loan you need to be familiar with, as a buyer or a real estate investor, is an Arizona Hard Money Loan. These are short-term, higher interest loans that can be used when traditional financing either is unavailable or won’t work for your situation.

A typical Arizona Hard Money Loan will run you anywhere form 7.99% to 15% and anywhere from 3-7 points. Points are an upfront fee of the loan amount. Unlike traditional financing Arizona Hard Money Loans are short-term loans, which make them perfect for a fix and flip. These loans generally run from 6 months to 3 years, but depending on the lender can be stretched out to five years. Because of the higher interest rate and points an Arizona Hard Money Loan, per month, will be more expensive.

So, why would anyone use an Arizona Hard Money Loan? There are many reasons an Arizona Hard Money Loan will actually make you more money. Buying a distressed home that you plan on fixing up and selling is a prime example of a reason to use these loans. Banks do not typically lend on fix and flip properties; there are many reasons for this—first and foremost, if the investment property doesn’t work out, it is much easier to walk away from an investment than it is your primary residence. Bank loan terms are longer and they have lower interest rates—this is great if you are buying the home you will reside in, but why would you take a 30 year loan out on a home you are planning on selling within a year? Also, banks will not finance repairs. That means you will have to come out of pocket for any and all repairs. Banks also will not finance until all inspections have cleared—if something needs to be fixed, you either have to bargain with the seller to fix it or it comes out of your pocket. Banks require large down payments—20-25%. An Arizona Hard Money Lender finances on ARV (after repair value) or LTV (loan to value)—either way you are not looking at anything near what a bank requires.

Reasons for Getting an Arizona Hard Money Loan Over Traditional Loans

The fix and flip example is the most popular reason investors use Arizona Hard Money Loans. There are more:

1) You have bad credit: Unlike banks, who approve based on credit scores and income—an Arizona Hard Money Lender bases approval on hard assets—the property.

2) Fast approval: Arizona Hard Money Loans can be approved within a day and financing available generally around 10 days or less. This is important to people wanting high demand properties. A seller will choose to work with hard money versus a bank—banks typically take a minimum of 30 days to close and can easily take 90 days. This quick close helps the buyer negate a lower purchase price.

3) Arizona Bridge Loan— You are selling your home, but don’t want to wait on it to sell to buy your new home. A hard money Arizona Bridge Loan can cover that—these are interest only loans, meaning you won’t pay a large payment until your house sells—when you have the money. These loans make it possible to own two homes, but pay one mortgage.

4) Obtaining financing when a bank won’t provide additional loans: Most banks cap the amount of loans to a borrower at four. Arizona Hard Money Lenders do not have to adhere to federal regulations and so there are not these types of limitations.

Working with an Arizona Hard Money Lender is A Partnership.

Arizona Hard Money Lenders want their deals to go as smoothly as possible. These lenders have flexibility that banks do not and so it is easier to work through a problem and find a solution with your lender. A reliable and experienced Arizona Hard Money Lender will always be honest in their opinion concerning a project—they want it to succeed as much as the investor.

Monday, April 15, 2019

The Differences Between Arizona Hard Money Loans And Bank Financing

To be successful in real estate, there are two components you have to have: management and financing.

When speaking of financing an investor has to work towards as little money down as possible. Less money down means more profit. To understand how important this is let’s take a look at an example: You, the investor, find a property that is selling for $110,000. You have $40,000 in repairs. The after repair value (ARV), because of the large amount of repairs, will be $200,000. What this means is that this home will have $50,000 in equity minus the closing costs. After finding this property the next thing an investor must do is find financing for this deal.

Usually, the first place people think to go, when they hear financing, is the bank. Because that’s what everyone does; you need a loan, you go to the bank. However, that is a rookie mistake. A bank is going to require a minimum of a 20% down payment; that is based on the appraised value of the home or the purchase price. In this scenario we will use the purchase price of $110,000. The minimum down payment would be $22,000. The bank will not roll the closing costs into the loan—you will be responsible to pay that upfront. Let’s assume the closing costs are $5,000; that includes title, underwriting and all fees associated with your deal. The bank also will not lend you money for repairs. So, you will have to come up with that out of pocket expense, as well. So far, you are looking at $45,000 for the closing costs and repairs—and let’s not forget the down payment of $22,000. That is $67,000 you will have to come up with to flip this house. Banks also require inspections—meaning that if the property doesn’t pass all inspections, those will have to be repaired and handled before the bank will finance. Sometimes the seller will fix this, but often—especially in the cases of foreclosures, that doesn’t happen. Also, a bank can easily take 60 to 90 days to close. It is a minimum of 30 days to close. Sellers, of houses that need rehabbed, do not want to wait for 30 to 90 days. They’ll sell it to someone who has the cash.

Arizona Hard Money Loans

Arizona Hard Money Loans are short-term loans that come from a specific source meant for real estate investors. There are no inspections required. Arizona Hard Money Lenders will loan on a property in any condition—they know you are buying it to rehab and sell. Another nice thing about Arizona Hard Money Lenders—they will include the repairs in your loan. Arizona Hard Money Loans are quick-close loans. Investors typically have their money in less that 2 weeks. Sellers love working with investors using hard money for this reason alone. Hard money financing works differently. Arizona Hard Money Lenders lend on ARV (typically 70% of ARV). In this situation the ARV is $200,000. The loan amount for the property alone would be $140,000. The purchase property is $110,000. That leaves you with $30,000 extra for repairs.

Bank financing works for a primary residence—one you will live in for 30 to 40 years.

However, bank financing makes no sense for a property that will be rehabbed and sold. An investor actually loses money using a bank loan. Numbers don’t lie. Contact us for information on real estate investment loans at level4funding.com.

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.

How Arizona Hard Money Loans Work

Arizona Hard Money Loans work similar to conventional loans—with half the hassle and much more flexibility.

Just like a traditional bank, borrowers must apply for an Arizona Hard Money Loan. However, instead of waiting weeks, if not months, to find out if you are approved—you find out typically within a day or two. Unlike banks you are generally financed within two weeks. This is helpful for investors who have found a property and don’t want to lose it to an all cash buyer.

Like traditional loans, Arizona Hard Money Loans have an underwriting process. The good news is Arizona Hard Money Lenders do not dig deep into your financial history and the terms can be negotiated and so this underwriting process is leaps and bounds faster than a bank. Once you are pre-approved and have given the lender the information on the property an appraisal will be ordered. As long as the property meets the lender’s criteria and the borrower has purchased the necessary insurance the next step is closing and receiving the funds to purchase the property. It is a very quick process; unlike banks, where it can easily take up to 90 days to receive financing. Unfortunately, in these cases many times borrowers have lost the property due to hang ups with the bank.

How to Find The Right Arizona Hard Money Lender

If you are an investor, speak with other investors and find out which lender they work with. Word of mouth is the biggest way Arizona Hard Money Lenders receive clients. Because real estate investors are the primary clients of Arizona Hard Money Lenders, lenders work on reputation.

There are also many websites that can direct you to a lender that works in your area. Bigger Pockets and Arizona Hard Money Lender Directory are both websites where Arizona Hard Money Lenders are listed. As always, there is google; simply type your city and Arizona Hard Money Lender to find a list of lenders near you.

It is vital that you choose a lender that not only has a good reputation, but also has a solid track record. Because lenders make their own terms and requirements it is essential that you ask many questions when speaking to lenders. Find out about their origination fees (points). Do they have prepayment penalties? Ask the lender if they loan on LTV (loan-to-value) or ARV (after repair value). Depending on what your loan is for—this will make a considerable difference. Many lenders will finance the repairs of the property; find out if the lender you are speaking with does. Another question to ask is if there is someone in the office that can help you along the way—or are you alone on this venture?

Finding the right lender can turn into a future business partner.

Arizona Hard Money Loans are a win-win situation for investors and lenders. Once a borrower finds a lender they can work with there is opportunity for a long-term relationship. Finding the right lender can take your investments to an entirely new level.

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.

Fix and Flip Loans

With house flipping at its highest level since 2007, dues to rising home prices and more availability in financing, it’s a terrific time to get involved in real estate investments.

Buying and selling houses is the new fad. You will see it on television and read about it on the internet. But, why? Well, if you are an investor, it is one of the quickest ways to make a profit. And while buying, fixing and reselling property can be fruitful— it takes time, effort and money. You need money to buy the property and you also need money to rehab the property. Ahhhh… and let us not forget you need the money to cover property taxes and insurance until the property sells. So, the big question is, “where do I get all that money from?”

Back in 2005 anyone with a pulse could qualify for a mortgage through a traditional ban—however, this is 2019 and that just isn’t the case anymore. If you don’t have money saved up then house flipping will take some planning. If you are approved for a conventional mortgage you will still end up paying more than you did on your primary residence. Banks are not comfortable lending on a flip house. The bank’s main concern is they are repaid the loan. Knowing that this is an investment property that could potentially fail, leaving the borrower possibly walking away, makes the banks uneasy. Banks do not work with risky deals. However, there are lenders that want to work with risky deals because it’s how they make their money.

Arizona Hard Money Lenders and Fix and Flip Loans

Arizona Hard Money Lenders are not banks. They are individuals that lend money out to investors at a slightly higher interest rate than a traditional bank. The interest rate is higher for two reasons: they are borrowing the money from investors themselves and have to pay an interest rate and they are lending on riskier deals than banks will. Arizona Hard Money Loans have different terms than banks. Their interest rates are typically between 7.99%-15.99% plus two to five points. A point is equal to 1% of the loan amount. With a conventional mortgage a borrower will pay points at closing; with an Arizona Hard Money Loan a borrower does not have to pay the points until the Arizona fix and flip property sells.

Arizona Hard Money Lenders typically base the amount you can borrow on the property’s after-renovation-value (ARV). This means that the lender will finance the property based on what it will sell for after the repairs and renovation have been done. To give you an idea of what this looks like imagine finding a property selling for $75,000. Once it has been determined what repairs need done and a value has been assessed on the price you will sell it for, the lender will finance you for 70% of that price. So, this $75,000 home will sell for $120,000 after rehab-the Arizona Hard Money Lender will loan you $84,000. That leaves the borrower with $9,000 to use towards the rehabilitation of the property. That is $9,000 that you, the borrower, do not have to spend out of pocket. Yes, you may have to spend a small amount of money. However, it is highly likely that you may not have to spend your own money at all.

Another benefit of an Arizona Hard Money Loan is the terms are flexible. Because these are individual lenders they are not required to follow any federal requirements—they make their own. Which means all terms can be negotiated—from the interest rate to the life of the loan.

A real estate investor not wanting to spend very much of their own money on a fix and flip should seek the help of an Arizona Hard Money Lender.

Not only will a good Arizona Hard Money Lender work with you on terms, they also are not focused on your credit or income. Arizona Hard Money Loans are based on hard assets which will be the property the borrower wants to finance. Yes, these loans have higher interest rates than a conventional mortgage. However, these are typically interest only loans with a balloon payment due on the last payment.

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.