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

Wednesday, April 17, 2019

Can You Really Use Texas Hard Money Loans to Flip Hoarder Houses?

Hoarder houses can be such a disaster that it’s difficult to assess what needs to be done before it’s cleared, but that doesn’t mean they’re not good investment properties. You can use Texas Hard Money Loans to fund the deals as long as you’ve prepared a solid plan.

Under ordinary circumstances, you’ll have a good idea of the amount of work necessary to complete any fix-and-flip. While you should budget for unforeseen expenses because just about every house has an oddity, chances are your whole project won’t be derailed by a surprise finding. Hoarder houses are different. They can be packed solid with debris from floor to ceiling, totally obscuring the condition of the property.

The medical community is still trying to establish what happens in the minds or hoarders. Initially, hoarding was believed to be an offshoot of obsessive-compulsive disorder, but scans show these individuals have abnormally high brain activity when they’re faced with a decision to throw something away, even when they know it’s junk. This stimulates them to the point where they’re paralyzed from making a decision, and so their clutter grows. Their isolation and depression tends to as well.

Adding to the challenges, there are often infestations and animals kept in the homes. The hoarder, genuinely unable to make the decision to so much as toss a piece of junk mail, cannot manage these issues either. Ergo, the homes are not only packed with debris, but are also unsanitary and unhealthy. It’s no wonder that when TV shows depict the big clean-out, the crews going in wear hazmat suits.

Risk Less by Planning for a Complete Teardown

Part of getting Texas Hard Money Loans involves demonstrating your plan for the property, but if you can’t even see the walls, it’s impossible to determine the condition they’re in. They could have holes, mold, damage from infestation, and more. In other words, the only way you can be sure you’re going to have success with the project is to plan for a worst-case scenario; tearing everything inside the home down. Other costs worth factoring in are pest control and professional junk removal. The latter is beneficial because these people do removals every day. They have the equipment, materials, and expertise to get it done quickly and cost-effectively, as opposed to your regular contractor who may or may not have ever worked on a hoarder home before. It’s worthwhile to get estimates from more than one company for this.

Set Your Expectations Based on Real Numbers to Be Successful

Anytime you apply for Texas Hard Money Loans, you have to demonstrate that your plans make fiscal sense. That’s a given. When it comes to hoarder houses, you need to work backwards, starting with what the finished property will be worth, then subtract all your expenses (remember, you’re going down to the studs and there will be additional costs too), remove a portion for yourself, and then determine what price the property is worth. This is one situation where it may be incredibly difficult not to make an emotional decision, particularly if you’re negotiating a price with the hoarder, but it’s important to focus on the numbers. Only then can you put Texas Hard Money Loans good work by giving this person the chance to walk away and start over, help the neighborhood, and invest in your future too.

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.

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

If you’ve worked with Texas Hard Money Lenders before, you know how they operate, but if you’re applying for a loan the first time, it can be difficult to know what to expect. Arm yourself with the information you need to spot a bad deal, so you can have a successful venture.

Outright scams are incredibly rare when it comes to Texas Hard Money Lenders. The only news-worthy case in recent history involves investors who believed they were funding deals and unfortunately lost $1.2 billion, according to a Mortgage Professional America report. On the borrower side of things, similar events are largely unheard of, but the story highlights a major point. When you’re borrowing from Texas Hard Money Lenders, you’re usually being funded by private individuals. The regulations regarding the loans are different compared to what you’d find with a traditional business loan and the approval process is unique too. How can someone with little experience stay protected in uncharted waters?

For starters, it pays to watch for offers that promise way more than others are doing. For example, ultra-low interest rates can signify there are hidden fees or a promise that the group will fund any deal should raise red flags. Realistically, no investor could fund all deals because not every borrower is a safe bet.

Secondly, serious investors are going to investigate you and your proposals. More often than not, people turn to alternative funding because a bank loan isn’t going to cut it, so investors must be incredibly diligent about checking into things before funding. If they don’t personally check out a property or business site or send someone out whom they trust prior to approving, that’s also a red flag. They should be going over your application with a fine-toothed comb too. If you have a broker helping you through this process, you might not notice any hitches because he or she will likely catch anything before an application is submitted, but it’s something to be aware of if you’re going it alone.

If You Can Run a Web Search, You Can Identify the Real Deal

Thankfully, it’s usually easy to tell who’s legit and who’s not. Authentic Texas Hard Money Lenders will have an established web presence going back many years. Anyone who isn’t doing business on the up-and-up can’t keep using the same name because it will get tarnished fast. While every company that’s been in business for an extended period of time will likely have a couple negative remarks purely because they’re coming in contact with the general public, you should be able to identify an overall trend in the business reputation.

A reputable financing team will find a win-win solution.

Whether you’re working with a broker or directly with your investors, the aim is always to cultivate lasting relationships. When you’re successful, they’re successful, so they want to fund your deal and have you come back again. Even if a team cannot help you this time, they will still treat you with respect with the hopes that they can help you the next time.

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.

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.