Setabay Private Money Lender: February 2017

Wednesday, February 8, 2017

Can you use a residential hard money lender for construction financing?

Real estate, in general, can be a very expensive business to involve yourself in. If you work as an agent most likely you will have to pay for your tests and license. If you are in the business to fix and flip a property you will spend money on the home, as well as, local advertising. Maybe you are just a regular person that wants to buy a new home. Either way, you need money. Sometimes you may need help paying for some of your expenses.

For most people, this extra cash will come from the bank, however, if you are in a time crunch a residential hard money lender will work for you. A loan from a hard money lender would work great for contractors, as well. Think of all the instances where something went awry during the construction process. When building stops you lose time and potentially thousands of dollars.

On average, it costs about $125 per square foot under normal construction. This means if you were to begin building a 3,000-square-foot home it would cost about $325,000. Most likely this is before all the additional after-market enhancements you may want to add. This is where loans will most likely come in. If you choose the hard money route, most likely you will have to do a combination loan package.

Usually, contractors will apply for a construction loan that will likely last the duration of construction. The second loan is a permanent loan that is used to pay off the first loan. When shopping for two loans you must also remember to look for more than one lender. Some bank will not allow you to take out multiple loans at the same time. If this happens to you a residential hard money lender should be able to give you the money you need fairly quickly.

Be mindful of the hard money loans that you borrow.

When it comes to hard money loans, borrowing during construction can be very risky. Having the extra money can be helpful if you are in a tough bind. Usually, a residential hard money lender will let a client borrow a short-term loan that lasts from about six months to a year. In that time—if you plan to sell the property—you want to find a buyer fairly quickly. Depending on the progress of the project your timeframe can be pushed off. In some cases, construction can halt for a year or more.

If you are lucky you could possibly be able to have your interest rate lock for a specific amount of time. This is contingent on the lender being lenient and is based on the figures you have already given them. If something goes wrong, they could deny your request.

Do you need a hard money loan for construction?

Maybe you do need extra for the renovations that you want to do on your new rehab. Before you take on more expenses and bills make sure the property that you are working on will bring in revenue. You do not want to be stuck with a loan after all the work is done.

Happy senior business man making his notes at work Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: residental hard money lenders,residential hard money lender

Saturday, February 4, 2017

How Can A Bank Limit Risk In Commercial Lending?

Commercial lending involves a level risk no matter who the borrower is, but banks do have ways in which they can minimize risk.

Borrowers are always confident their idea can’t miss. They always think that their idea is the one that will make millions and that the bank would be foolish not to approve. If a borrower didn’t exude some level of confidence in their business model the bank would be foolish to approve them. If they don’t believe in it how can the bank?

But when you are in the business of commercial lending you can’t get caught up in the confidence and emotions displayed by the borrower. You have to remain detached and objective—but how?

Five C’s Of Credit Used In Commercial Lending

It is impossible to know beyond the shadow of a doubt whether someone is going to honor their loan agreement and pay it off in a timely fashion. People in the commercial lending industry just have to do the best they can when judging the level of risk that lies with approving a particular borrower.

How do they judge it? The apply the Five C’s of Credit:

- Character: Does the borrower have a track record of paying his or her bills in a timely fashion or do they have a lot of outstanding debt?

- Capacity: Will the borrower have sufficient income to pay his note every month? Are they entering a market with a lot of competition and not enough demand to go around?

- Capital: How much equity do they have in the venture? Is it enough to convince the bank they will do whatever it takes to succeed or will someone else be the big loser if the business fails?

- Collateral: an alternative source of payment for the lender should the borrower fail to abide by the terms of the loan.

- Conditions: also known as the loan structure; this will include whatever interest rate is being charged as well as any other things the lender feels are necessary in order to minimize their risk (i.e. loan-to-value ratio, debt service coverage ratio, financial covenants, the subordination of officer debt, borrowing base).

It All Starts With The Relationship for Commercial Lending

Commercial lending can be a nerve-racking business. You want to believe in people and help make their dreams come true, but at the same time, you have to be responsible to the bank's investors too. But you hate to be the one that has to crush someone’s dream. Does this mean you have to be ruthless?

Not at all! In fact, the best bet is to get to know the borrower as much as possible. Establish a relationship with the borrower, and you are more likely to “accidentally” discover red flags that they inadvertently let slip. It sounds dirty, but at the same time you can find out if they are a crazy dreamer with their head in the clouds are a practical and responsible business person.

Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial lending

Friday, February 3, 2017

Commercial Mortgage Basics

Interested in a commercial mortgage? If, so it never hurts to make sure you know the basics.

You might be surprised how many people consider a commercial mortgage or non-residential mortgage without truly know the basics. Sure, the right lenders and loan officer will gladly guide the way. But, nevertheless, it is still important to first-hand what you are potentially signing up for, right? Of course, it is that’s just common sense and good business. So, let’s get down to some of the basics.

For starters, just like anything else these days, there seems to be an overwhelming amount of information available for all things commercial mortgage. In fact, any standard internet search will more than likely yield you dozens of articles. But, assuming you are like most business savvy individuals you probably do not have the time to sit down and go through countless articles and that‘s perfectly okay. In all actuality, you can narrow non-residential mortgage basics down to around four major points—the purpose or use for a non-residential mortgage, where to obtain this particular mortgage, how to qualify and of course what are the terms.

Typically, the purpose or rather what you can use a non-residential mortgage for is large commercial properties like warehouses, office buildings or financing for company property improvements. You can also choose to use this particular kind of mortgage to refinance existing commercial loans. With that being said, when in the market for a non-residential mortgage your best lender options are generally banks, especially if you want to deal with the people who are originating your mortgage. Once you’ve decided on the right bank lender for you, the next thing that absolutely has to happen is finding the time to sit down with your commercial lender to go over the terms and qualification requirement in full, clear detail.

Commercial Mortgage - Where to Begin

Clearly, you should never get any mortgage without its terms and borrower requirements being fully explained. Nevertheless, it goes without saying that really no two non-residential loans will be alike. Thus, it makes sense to do the necessary research and ask the necessary questions that pertain to your business, your commercial project, and the actual property. In general, most mortgages that are used for commercial purposes have a repayment period of five to ten years with property improvement mortgages or loan needed to be repaid sooner rather than later. Lastly, no mortgage or loan comes without fees, thus, you should also make sure you are clear the closing costs and more.

Things to consider when figuring out if you Qualify for a Comercial Mortgage

Also a side note, when figuring out if you actually qualify for your business mortgage or non-residential mortgage remember lenders determine your creditworthiness based upon your business credit score, which often varies from company to company. Due to this fact, it is almost a necessity to have your business credit in order across the board because most banks see low or unfavorable business credit scores as a strong indication of your inability to make on-time payments and you never want to give off that impression when applying for a mortgage.

Technorati Tags: commercial mortgages,comercial mortgage

Thursday, February 2, 2017

Common Mistakes Brokers Make In Loan Applications Sent To Commercial Hard Money Lenders

Trying to get financing through a commercial hard money lender is not the same as from your traditional hard money lender. Many traditional brokers do not realize this and end up making some common mistakes.

In a perfect world, we would all have good credit and would have no problem getting approved for a commercial loan of any kind—but our world is far from perfect, much like our credit ratings. But to get approved for a traditional commercial loan you typically need to have a pretty good credit rating.

The importance of goo credit in getting a loan approved does not mean every business person out there has great credit. Chances are many of them do not. So how did they get a loan approved? They—or their broker--worked with commercial hard money lenders.

These types of lenders understand that they are taking on clients that are at a higher risk of defaulting. So they have the terms of the loan reflect the risk they are taking. While they may not be fond of them, if a borrower had a better option they would take it.

However, the process of getting approved for one is a little different than a traditional loan. If you are not careful, you may find your commercial hard money lender rejecting your application.

Things To Consider When Applying For A Loan From A Commercial Hard Money Lender

Filling out a loan application can be a confusing and difficult task no matter what it is for, but when you apply for one from a commercial hard money lender there are certain things you need to do that you probably did not in your application to the bank and credit union:

Tell your loan’s story. Don’t just tell your lender that you need the money. Since the risk is higher for them, they often want to know more. Tell them why you want the money, what you are going to use it for, and what you are hoping to accomplish with it. Give the lender the story behind the deal.

Don’t just submit a ton of information and data. Submit the right data. It is not uncommon for a broker to turn in an application that has way too much information and data in it, but not have the right stuff. For example, an application includes the borrower’s tax returns but fails to include the exact amount being requested.

Loan packages can be pretty big making it easy for something important to get overlooked. Including a summary of the major points and data with your application along with an executive summary can take care of this issue. This can also be a great way to get on your loan processor’s good side.

Everyone appreciates it when they don’t have to work as hard to get their task accomplished. Organizing your application can be a great way to earn brownie points with the loan processor.

Who doesn’t like brownie points?

Technorati Tags: commercial bridge loan,commercial lender,commercial lenders,commercial lending

Wednesday, February 1, 2017

Cyber Threats Are A Real Danger For Commercial Lenders

Just like a job application, it is only natural that you may want only to tell your commercial lender what you think they want to hear, but proper and honest communication can go a long way towards making the relationship a good one.

It sounds like such an easy thing, yet it is one of the most common reasons problems arise in so many aspects of our lives—communication. More often than not, if we just talked about something, answered a question honestly, or responded in a prompt manner, we could avoid all kinds of unpleasantness.

In many cases, proper communication can get a relationship off on the right track and make it even better than you thought it was. For example, communication is a vital part of getting a commercial lender to approve a loan.

So—what do you need to do to make sure you communicate whatever needs to be delivered to your lender?

We Could Have Done Something, Had We Known

If you have ever gotten so behind on a bill that the company was calling your house daily to ask you about it, then you have probably heard someone tell you, “If we only knew…” If you had only told them a number of days ago why you couldn’t pay the bill, something could have been worked out—but not now.

We may not want to talk to them or be completely honest, but often if we just communicate, problems don’t have to be as harsh as we think they are. So, when it comes to working with a commercial lender, keep these four things in mind:

- Talk To Your Lender: Get to know who your lender is before engaging the loan approval process. Get to know their strengths and weaknesses, what sort of loans they like to approve, and how much experience they have with what you want their money for. Go with someone that understands you better, and it will be easier to work with them.

- Respond to questions, queries, and requests in a prompt fashion. Chances are they are asking whatever it is for a good reason so the sooner they know your answer, the better. That way, if a problem arises, it can be dealt with.

- Communication is a two-way street. The commercial lender needs to be as upfront as possible with the borrower and address whatever concerns they may have. Failure to do will foster an environment of distrust and make doing business more challenging than it needs to be.

- Be honest. There is no reason to sugar coat, talk down, or fabricate information about anything. If you do, chances are when the truth asserts itself—and it always will—the consequences will be much more dire than they would have been.

It Can Only Help

Being honest about things is not always easy. We hate to put a bad foot forward in any regard. That’s why people lie on their resumes and leave facts out in their loan applications. But just like in the workplace, the truth will eventually come out with your commercial lender. When it does, the consequences will likely make you wonder why you ever thought proper communication was a bad idea.

Technorati Tags: Commercial lenders,commercial lenders,commercial loans,commercial lending