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Friday, April 19, 2019

3 Exit Strategies Residential Texas Hard Money Lenders Will Approve

When you approach residential Hard Money Lenders in Texas for funding, you’ll need to explain your exit strategy. Develop a plan around one of the three common exit strategies to keep your application moving forward.

There are quite a few contrasts between working with residential Hard Money Lenders in Texas and taking out a conventional loan. One key difference is that the principal is typically due in one lump sum at the end of the term. Although you’ll still make monthly payments, they’ll be smaller and will be interest only. Because of this, you’ll need to map out in advance how you plan out your exit strategy, or how you’ll pay off the balance, before you get funded. There are three main ways to do this, and the right choice will vary based upon your circumstances and investment strategy.

1. Sell the property. If you’re doing a fix-and-flip, selling the property is a natural end. You’ll handle all the repairs, put the home on the market, sell it for a tidy profit, and then pay off the loan.

2. Refinance. More often than not, refinancing is done with the fix-and-hold strategy. The loan is taken out either because the property is in poor condition and won’t qualify for a conventional option or the borrower needs to move faster than a bank loan can get funded. In these cases, the borrower can approach a bank at a later date and get a conventional loan. Sometimes borrowers refi down the line for other reasons too. For example, their credit score may not be good enough for a bank or they might have too much personal debt.

3. Payoff. Occasionally, a borrower has cash tied up in other projects and can’t get it out in time to fund a deal. This happens more often with a seasoned investor who has a larger portfolio and wants to keep growing it. He or she may have another property ready to hit the market a month or two down the line and will pay off the balance using the earnings from the other sale. The funds can come from virtually any source, such as an inheritance or other major payout, but the lending team will want to verify that the payoff plan is a sure bet.

Successful Investors Always Have a Backup Plan

Unexpected delays in a fix-and-flip project or a delay in incoming funds earmarked for a payoff could require you to refinance the loan at some point. Because of this, it’s a good idea to establish refi options at the onset of a project and be prepared to leverage them in the event your final payment to your residential Hard Money Lenders in Texas becomes due before you’re able to cover it.

Continue to evaluate your exit strategy throughout your project.

Even after you get approval from residential Hard Money Lenders in Texas, you’ll need to keep tabs on your exit strategy to ensure it’s still within reach. Monitor your timeline and funding as you move forward and be prepared to pivot when needed, so you can avoid complications and make the most of your venture.

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.

Top 4 Pitfalls of Owner Occupied Texas Hard Money Loans

True owner occupied Hard Money Loans in Texas are relatively unheard of in the industry. If you’re looking for one of your own, it’s important to become familiar with some of the drawbacks before you commit.

1. You, personally, must live on the property. Many people seek out owner occupied Hard Money Loans in Texas in the hopes of getting a better deal on financing, simply because most “owner occupied” lending options do have better terms. The logic behind this is simple: people will fight tooth and nail to keep their home. There’s less risk for a lender, so the lender will usually offer more favorable terms. The problem is, the borrower is the one who has to live in the home; not a family member and not a renter. Furthermore, it has to be the borrower’s primary residence.

2. Your income must be scrutinized. The Truth in Lending Act changed things in this respect. Because the government now sees the property as your primary residence, it sticks its hands into it too. The aim is to protect you to ensure you don’t wind up borrowing what you can’t repay, so the requirement then becomes that a third party has to look into you and your income.

3. Property taxes and hazard insurance have to be impounded if it qualifies as a “high-cost loan.” That means your lender has to collect extra payments from you for at least the first year you borrow. Furthermore, it’s up to you to be mindful and cancel it when it’s no longer required. Your lender isn’t allowed to do it for you.

4. You’ll get funded slower. Whereas a traditional private loan can close in a matter of days, you’ll need to add weeks or a month or more to this timeline if you’re borrowing as a primary residence. This, too, comes down to the added government regulations.

You Can Avoid Excess Regulations with Commercial Lending

While the above impacts you, directly, there are further regulations which cause headaches for the lenders too, which is why most will not provide owner occupied Hard Money Loans in Texas Instead, commercial or non-owner options are offered. With these, you are not expected the home. The requirements to qualify are different too. Instead of you being scrutinized, it’s mostly the property that’s of concern. Naturally, that’s a slam-dunk when it comes to things like fix-and-flips or fix-and-holds, but it can be extended to other circumstances. For example, if you’re adding a home office to your own property, technically the funds are for a business use. The key is that the funds cannot be used for you, your family, or your household.

Seek advice from an experienced broker to find the solution that’s right for you.

Chances are, you will not find owner occupied Hard Money Loans in Texas because of the red tape involved, but you probably wouldn’t want to anyway because it causes headaches for you too. A broker can walk you through funding options that are ideal for your particular situation, so you can get funded quickly and move on with your project.

Thursday, April 18, 2019

How to Use a Cash-Out Texas Bridge Loan to Grow Your Portfolio

A strong real estate investment portfolio can pave the way to a comfortable lifestyle, but sometimes plans stall out due to lack of capital for the next purchase. A cash-out Texas Bridge Loan can be the tool that gets your plans back on track.

Developing a real estate portfolio, as opposed to focusing purely on fix-and-flips, can give you a steady stream of reliable income. The difference is, with fix-and-flips, you get a sizable amount of cash at the end of the deal, which you can then turn around and apply to your next property. When your funds are tied up in a property you plan to hold, it’s not always easy to move onto the next project. This is where a cash-out Texas Bridge Loan works wonders.

If your existing property is paid for or you have a considerable amount of equity in it, you can tap into that equity to fund the next project, but chances are you’ve never heard about this because the banks don’t like to do it. They will, at times, offer a similar option, but they expect you to spend the money on the property you’re borrowing against, which isn’t particularly helpful if that one’s already up and running and generating revenue.

So, without the banks helping you, where do you get the cash? From a Texas Hard Money Lender, of course. While a Texas Hard Money Lender will still want to know how you plan to spend the cash and will want to be assured you’ve got a solid exit plan mapped out, you aren’t tied down to using the money on the property that’s being leveraged.

Cash Out Can Help You Buy and Hold or Buy and Flip

Most Texas Hard Money Lenders will do a cash-out Texas Bridge Loan for up to 65% LTV (loan-to-value), meaning you can pull out as much as 65% of the value of one of your existing properties and use that cash toward the next project. However, if you know where to look, you can sometimes get as much as 90% LTV. People use cash-out options for different applications. In some cases, they take the full lump sum and apply it to the purchase and repair of a property. When the repairs are complete, they may sell it and pay off the balance or they may hold it and refinance. There’s also the option of using it to help cover what another loan won’t. If, for example, an investor gets funding for the purchase of a new property, but doesn’t get enough to cover the repair, the cash-out option will work there too.

If you’re eager to build a portfolio, you don’t have to wait any longer.

Naturally, it’s important to be mindful of how much you’re tapping into your portfolio to ensure you’re not overleveraging it. However, if you’ve got at least one revenue-generating property with solid equity, you can continue to grow and increase your earning potential with a cash-out Texas Bridge Loan.

Can You Really Be Mortgage-Free with Texas Private Money Lenders?

The mortgage-free lifestyle is the stuff dreams are made of, but many people believe it’s not within reach. There are actually many ways to accomplish this, and Texas Private Money Lenders can help set you on the path to financial freedom.

Data from Forbes Magazine concludes the average person is now leaving school with close to $40,000 in debt and one-in-ten with student debts is in default. On the other side of things, Value Penguin places the average amount of credit card debt at over $9,000 for balance-carrying households, while CNBC concludes nearly three-quarters are in debt and the majority believe they always will be. Nearly 80% of full-time workers are living paycheck-to-paycheck, and those with six-figure salaries are not immune, with close to 60% saying they were in the red.

It’s statistics like these which cause people to either make dramatic life changes or, at the very least, seek out alternative income streams. The good news is, there are many ways to approach this, depending on one’s personal style, and you don’t even have to have good credit to make it happen. It’s more a matter of identifying which strategy is right for you and pairing up with the right Texas Private Money Lenders to make it happen.

Live the Debt-Free Lifestyle with Savvy Investing Strategies

Generally speaking, property investing falls into two main categories; fix-and-flips and fix-and-hold. With the fix-and-flip variety, investors purchase an inexpensive property, upgrade it, and sell it rapidly for a profit. In most markets, each flip generates $20,000 or more, though some of this depends on the prowess of the flipper. With fix-and-holds, the investor keeps the property after repairs, either holding it until the market increases its value naturally or for the sake of renting it out to gain an income stream. There is a hybrid with this in which the flipper also lives in the home as repairs are being made as well. It’s an option worth exploring for those who don’t mind moving around a bit and can establish loan terms which allow it. Yet, these aren’t the only approaches that are being leveraged. As the housing market has shifted, there have been more people approaching Texas Private Money Lenders to get loans for Airbnb properties and even tiny houses too.

Take the first step and make your dreams come true.

Once you decide which strategy is more in line with your comfort level and goals, you can explore your options with Texas Private Money Lenders. Using this form of lending, also sometimes referred to as hard money, the property you purchase serves as collateral and you’ll usually make interest-only payments until the term is up. That gives a bit of breathing room to work through your project and enables you to qualify even if you wouldn’t normally get approved by a bank. Considering the average mortgage payment in the western United States exceeds $1,200 per Value Penguin data, it’s easy to see how eliminating the expense can totally change your life.

Why Smart Texas Private Money Lenders Insist on Title Insurance (And You Should Too)

Most Texas Private Money Lenders require title insurance in order to fund a deal. Although there’s some debate on the merit of this practice, it’s essential because it protects both you and the lender.

Although land and property transactions began occurring in the United States for almost all recorded history, the concept of title insurance is relatively new. Initial transactions were simple for obvious reasons. There was virtually no chance anyone else could lay claim to a property because so little of the country had been settled.

Because of this, the conveyancer system was used. Conveyancers worked similarly to title insurance companies in the sense that they carried out diligence, but they offered no guarantee that a property was free and clear. They weren’t lawyers, but rather, were local experts who could carry out research on any given property. They’d craft reports and sign off on them, which would give buyers/ borrowers and those financing purchases more confidence, but the transactions were still risky.

Watson v. Muirhead in 1868 changed this. Muirhead was a conveyancer hired by Watson to check into a Pennsylvania property. After finding a lien on the title, Muirhead consulted an attorney. The attorney told him the lien was invalid and Muirhead decided to certify the property was clear. Watson purchased the property, but it was later put up for a Sherriff’s sale to pay off the lien. The sale was legal. Watson lost his property and his money. He attempted to sue Muirhead (thus the groundbreaking case of Watson v. Muirhead), but he lost. At the time, Muirhead could have only been held liable if he had been negligent, and because he consulted an attorney and acted upon the attorney’s advice, Muirhead was not in the wrong from a legal standpoint.

The following year, the first title insurance company was formed. Today, Texas Private Money Lenders and virtually any entity handling the financing of a property requires that a title insurance company be involved in the transaction.

Title Insurance is a Win-Win Solution

While many people think title insurance is purely in place to protect the Texas Private Money Lenders, this early case highlights how important it is from a buyer or borrower standpoint too. The insurance company not only carries out the research, but pays out if, for some reason, a mistake on their part results in financial losses. Ergo, it will address things like unpaid taxes or liens that could become a problem later, existing loans, active or pending foreclosure, active bankruptcy by the current owner, undisclosed or missing heirs to the property, errors, fraud, and more.

You’ll risk less by having title insurance and can protect your own assets.

As a borrower working with Texas Private Money Lenders, you’ll have some skin in the game too. Although title insurance is not a 100% guarantee there won’t be an issue with the property later, purely because the title insurance company is using public records to certify, their willingness to pay out in the event there’s an issue protects your investment and the money that your financers are putting in as well. Simply put, getting title insurance is one of the smartest things you can do when you purchase a property.

Wednesday, April 17, 2019

Top 4 Tips to Get Your Texas Hard Money Loans to Close Faster

One of the biggest benefits to using Texas Hard Money Loans is that they can get cash in your hands quickly. To keep the process moving smoothly, come to the table prepared.

1. Establish a main point of contact. Most lenders will pair you up with someone, be it an account manager, broker, or assistant. It’s important to develop a relationship with this person and ensure the lines of communication are open, so they can follow up with you as needed and keep you informed of the progress. If you aren’t given a main point of contact, find out who you should be keeping in touch with.

2. Find out what documents you’ll need in advance and have them ready to go. Each lender will have a different set of requirements for approving Texas Hard Money Loans, but you’ll typically need to supply details on the property, an appraisal, an outline of your plans, a budget, a timeline, and documents related to your business and financials. Oftentimes, the team cannot even begin processing an application until after everything is submitted, so delays in getting the paperwork to the finance team will naturally slow the approval process.

3. Don’t overwhelm your finance team with unnecessary paperwork. It can be tempting to send in everything you have related to your project, but your lending team will have its own processing methods and if extra things are sent in, that simply makes it harder for them to find what they need in your stack of papers.

4. Be prepared to supply additional details. If something is missing or is unclear, the team will need a prompt response from you in order to continue moving forward. Ergo, if you had a stack of papers you held back from the initial submittal, keep them close at hand just in case they’re needed.

Demonstrate Eligibility Early and Have Cash in Hand in Days

Traditional bank loans have regulatory red tape that slows the approval process, dragging the funding out for a month or more. This isn’t true with Texas Hard Money Loans. If your initial application is comprehensive and you supply all requested documents promptly, you can literally close on your financing in a matter of days.

When you work with a good team, they’re there when you need them.

The process will be different depending on where you’re sourcing your Texas Hard Money Loans from, but an experienced funding team works like a well-oiled machine. That’s part of the reason they’re able to stay in business. By taking care of you promptly, they’re not only creating a happy customer who will return for later deals, they’re freeing themselves up to complete other deals. They do this day in and day out, so it’s a smooth and straightforward process. Follow their lead, stay connected with them, and you’ll close faster than you ever thought possible.