Setabay Private Money Lender: How to Choose an Exit Strategy with Hard Money Lenders

Arizona Hard Money Lenders offer short-term loans that typically last no more than five years but can sometimes be measured in months. You should have an exit strategy in mind before you get started using this form of lending to fund real estate deals, though knowing when to pivot away from your initial plans is crucial to your success.

Many people in the fix-and-flip biz work with Arizona Hard Money Lenders because it enables them to get cash fast and credit is less of a concern. In these cases, selling off the property as soon as it’s completed is the traditional route, purely because it allows the investor to collect and move onto his or her next project. Sometimes, however, a market downturn can mean selling it right after completion is not the best choice. People also use alternative lending for fix-and-holds. If the property is generating income or is expected to increase substantially in value, then it’s generally advantageous to hold onto it for some time. Neither is wrong or right; they’re merely different investment strategies based on the goals and preferences. With the fix-and-flip, selling off the property is a natural exit. With a fix-and-hold, you’ll need to evaluate whether your ideal selling point will fall within the terms of the loan or if it makes sense to refinance.

All that said, an important first step is to determine how much you’re actually paying as you hold the property. Your loan and interest are only one component, as there are always additional costs such as upkeep and property tax. Create a detailed list outlining all expenses associated with holding, so it’s easier to determine whether it’s best to sell or collect rental income.

Interest rates can also help you determine when it’s time to get your initial loan paid off. You may have one year or even five years to pay off the balance, but if interest rates on your refinancing options drop, and it’s your plan to continue holding for years to come, it may also make more sense to do the refi earlier rather than later.

Learn About Multiple Exit Options and Know How to Evaluate When it’s Time to Shift

Depending on which Arizona Hard Money Lenders you work with, there may be absolutely no penalties for doing an early payoff. Some are glad to have you pay off the balance early because it typically means you’re moving onto another project they can fund. This in mind, it’s important to do a comprehensive cost-benefit analysis before you purchase a property to identify the best time and method to exit. You’ll also need to keep an eye on market conditions and interest rates as you hold the property to make sure your initial projections are still going to provide you with the greatest amount of profit.

The more data you collect, the more successful you will be.

Experienced real estate investors don’t rely on intuition to tell them when to sell. They use hard data and build projections based on that, then keep a pulse on market and interest conditions to make sure they’re still on track. This not only helps them get top dollar on each project, but makes them more appealing to Arizona Hard Money Lenders when they go in to request funding.

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

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: 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.
© 2019 Level 4 Funding LLC. All Rights Reserved.