Setabay Private Money Lender

Saturday, January 11, 2020

How Does ARV Determine Risk for Arizona Hard Money Lenders and Borrowers?

How does ARV influence the lending process?

When Arizona Hard Money Lenders consider granting a loan amount, they generally consider LTV and ARV. These two indicators help them analyze equity, risk, and return.

First, there is LTV. LTV is a loan-to-value ratio used to determine the amount of money a lender will lend. For example, say a home is worth $100,000 in each market. A borrower receives an acquisition loan from Arizona Hard Money Lenders for $50,000. In order to acquire the property, the borrower must match the lent amount of $50,000 with $50,000 of his or her own money. This establishes the LTV at 50%. Should, God forbid, the borrower fail to pay the lender and the property is foreclosed upon, then the lender will be buffered from loss upon liquidating the asset.

ARV, or after repair value, calculates the value of a distressed home after renovation. This ARV value helps Arizona Hard Money Lenders determine risk and equity regarding a property not only by understanding the current loan-to-value (LTV), but by looking at the after repair value (ARV). ARV is calculated by adding a property’s current value plus the value of renovations. To do this, one looks at the average price of similar homes in a neighborhood. These homes should have similar acres, rooms, features, and amenities. After this, the cost of renovating the house is evaluated, and finally the prices of renovated properties in the area are taken into account. As an example of this, say that there is a house worth $50,000 in a given neighborhood, and it will only cost $20,000 to repair it, summing up to $70,000 in total costs. However, after the renovations to the house, the property will be worth $100,000. This puts the ARV of the home at $100,000. The hypothetical profit is $30,000.

How Both Arizona Hard Money Lenders and Borrowers Benefit from ARV

Arizona Hard Money Lenders use ARV to set a cap for the amount they are able to lend. Generally, 70% of ARV is the maximum loan amount for Arizona Hard Money Lenders. Lending out more than this amount creates far too much risk for lenders. Nonetheless, the ARV establishes a ballpark idea of what lenders are able to lend by understanding how much is too much.

What is the maximum amount Arizona Hard Money Lenders will loan?

Aside from lenders, LTV and ARV help real estate investors calculate how much they can expect to receive from a hard money lender, how much they will need to put down, and how much risk they will face when trying to secure a profit. After looking at the figures, real estate investors will have a better idea if the investment is worth it to them. Will it give a good return on what they have put in? Will there be enough buffer room for them after the lender gets a cut of interest? Are the efforts of producing the renovations and marketing the property worth it in the end? Risk is at the heart of lending and borrowing hard money.

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.

Friday, January 10, 2020

How to Get Started with Arizona Construction Loans

If you’re building a new home or business, you’ll be looking for Arizona Construction Loans rather than mortgages. Get to know the basics beforehand, so you can move forward without delays.

Contrary to popular belief, getting approved for Arizona Construction Loans isn’t necessarily difficult, but the process is different than going to get a traditional mortgage. People use them all the time when they’re building new structures or doing major renovations, and you don’t need to have perfect credit or be a builder to get one.

Before you attempt to get approved, though, you’ll want to make sure you have three key things in place; the plans, a comprehensive budget, and permits. In other words, if you aren’t a builder or a contractor, you’ll need to have one on your team before you get started. All aspects of the build will need to be outlined with estimates from the contractors or subcontractors who will be handling each task. The plans will also be necessary to get permits, and the permitting process usually takes a few weeks by itself. Having an experienced contractor pays off here because someone who routinely works in your area will know exactly what the review process entails and what inspectors are looking for, so permits are issued promptly. However, the permitting process can stretch out longer if there are questions or if the project is especially complex.

You’ll also want to take some time to get your finances in order beforehand. Depending on how you go about getting financing, you’ll need to address how you’ll make a down payment, check your credit score, prove financial strength, and demonstrate that the build will be a financial success.

Find Out What Form of Lending is Right for You Before You Begin

It’s difficult to get Arizona Construction Loans through banks because they don’t make a whole lot of profit off them, and so they heavily restrict who they’re willing to lend to. You have to be an incredibly low-risk borrower in order to get approved, and even then, the terms might not be great. That doesn’t mean a bank won’t help you, only that it’s worthwhile to explore multiple funding options before your start paying for plans and permits out-of-pocket.

If banks won’t help, you can get your project off the ground with hard money.

One alternative to bank Arizona Construction Loans is hard money. With this method, you’ll still need to have some of your own cash in hand to get started, but you can get up to 90% LTV. Best of all, you can make interest-only payments on the loan during construction, and then either sell the property or approach a bank for a conventional mortgage after the build is complete, when they’re much more likely to help you out. You’ll still need to have plans, a budget, and permits to qualify, but things like your personal credit are less of a concern with hard money, so it’s much easier to qualify and get your project moving forward fast.

The Pitfalls of the Past: Dodd-Frank and Arizona Hard Money Loans

How has the Dodd-Frank Act influenced Arizona Hard Money Loans during and after the Great Recession?

It’s the mid-2000s. The housing market is on the rise as the price of homes increases. Due to this favorable uptick, more people are looking to acquire loans to buy houses. Lucky for them, there are less banking restrictions, and many people with subprime credit are getting funded. It seems great. The housing market continues to boom. Prices continue to rise. The economy’s strong. All of a sudden, Freddie Mac won’t accept dicey, subprime mortgages. This decision leads to peril for some major lending institutions who find themselves unable to get returns on their investments. Bankruptcy soon follows. As banks struggle and closely watch subprime borrowers, indirectly, the value of homes begins to fall. More banks go under, the housing market collapses, and the stock market takes a nose dive. Cue the Great Recession. So, in attempt to learn from history, or avoid the fate of repeating history, what does the government legislate? Answer: the Dodd-Frank Act.

Dodd-Frank changes the lending game, especially regarding Arizona Hard Money Loans. A portion of the Dodd-Frank Act lays out the Mortgage Reform and Anti-Predatory Lending Act. This act restricts the circumstances in which Arizona Hard Money Lenders may lend money to individuals desiring to purchase personal residential property. Other restrictions for residential loans are added as well. Those giving out Arizona Hard Money Loans must verify if the borrower is able to repay their loan.

As a result of this, Arizona Hard Money Lenders shift to focus on investors looking to rent, sell, or commercialize real estate. Mainly because the Dodd-Frank Act does not limit businesses in regard to hard money, instead, it is interested in protecting the US economy from experiencing another subprime and residential lending apocalypse.

Post Dodd-Frank: Arizona Hard Money Loans

While this creates challenges for individuals looking to receive help after struggling with bankruptcy, subprime scores, or foreclosure, it has become a boon for real estate developers, especially where conventional lending was scares in the past.

Who are some of the main recipients of Arizona Hard Money Loans today?

So, post-Dodd-Frank, if residential lending is limited, who uses Arizona Hard Money Loans today? Well, to start, flippers use Arizona Hard Money Lenders to finance renovations on outdated homes. Many flippers use hard money to cover acquisition costs of property. Other flippers purchase property with their own money and use Arizona Hard Money Loans to cover the cost of renovation, or a particular portion of renovation such as roofing, cement, or plumbing. After completing the flip, the property goes to market, hopefully bringing in a good return.

The next category of individuals is those who are looking to renovate to rent property. These individuals, like flippers, use Arizona Hard Money Loans to acquire properties or finance costly portions of the renovation process. Once the property is completed, it is marketed to the public in order to rent. After this category of borrowers, there are contractors who look to build and sell property and businesses that look to expand their property or projects.

Thursday, January 9, 2020

Where Banks Fall Short, Arizona Hard Money Lenders Close the Gaps

Arizona Hard Money Lenders offer more financing options to the public.

For most individuals, conventional lenders such as banks and credit unions are the primary means of acquiring property. Going through the real estate and mortgage process, finding the right sale price, agreeing upon a comfortable interest rate are all steps in the process. Acquiring a traditional residential property through the banks takes a 2-year work history, a decent to high credit, and a willingness to complete a long list of stipulations. Rigorous credit checks and paperwork required of potential borrowers. Months of negotiation between real estate agents, financing sources, appraisers, and loan originators. In the end, the reward for the wait is enticing: some of the lowest interest rates are available through home loans offered by banks. Acquiring a home loan in the low single digits is possible if the credit score, down payment, and market are right. On top of that conventional lending offers individuals long-haul financing, fifteen to thirty years are common loan durations.

While conventional home loans are great for those looking to live in the real estate they finance, they do not meet all the lending needs of the market. One of the main reasons for this is that conventional lending institutions often shun commercial borrowers. While conventional lenders are willing to lend on a property that is in great condition and that will be lived in, they tend to frown upon lending money on undeveloped or distressed property, property that individuals are unable to live in.

This is a tough pill to swallow for commercial borrowers who are looking to purchase property at wholesale value in order to renovate and generate a return. For example, a flipper may want financing to acquire a home, replace a plumbing system, and add coat of paint. By using financing, the flipper is able to make minimal renovations and maximize a property’s retail value by ameliorating its distressed status. However, banks will not lend on distressed property and another financing source is needed. Aside from the flippers, those who build spec homes to satiate general market appeal or those who renovate homes to rent fall in the same difficult category of acquiring conventional funding.

Arizona Hard Money Lenders Help Real Estate Investors Acquire and Develop Property

Where the bank fails to fund, another lending source has filled the void: Arizona Hard Money Lenders. By requiring different and simpler stipulations than the bank, Arizona Hard Money Lenders are able to furnish loans on distressed and barren property allowing commercial investors to acquire returns from business ventures.

Arizona Hard Money Lenders advocate those initially rejected by conventional lenders.

Hard money is quick and painless to receive. Arizona Hard Money Lenders allow borrowers to receive the money despite subprime credit, foreclosure, and bankruptcy. Talk to your hard money broker today at Level 4 Funding to see if receiving money from Arizona Hard Money Lenders is right for you or your business venture. Find the interest rate, term, and lien amount to set your profit-generating business idea into motion.

Wednesday, January 8, 2020

Why Arizona Fix and Flip Loans Are Becoming Increasingly Popular in 2018

With the upward trending of the real estate market, Arizona Fix and Flip Loans are on the rise.

According to a recent data study done by ATTOM Data Solutions real estate flip returns are down: “Homes flipped in the second quarter of 2018 yielded an average gross return on investment of 44.3 percent.” The article continues to state that these returns are “down from 47.8 percent in the previous quarter and down from 50.0 percent in Q2 2017 to the lowest average gross flipping ROI since Q3 2014.” In other words, flipping returns are at their lowest since 2014 according to recent data collections.

So, what is leading to the down turn in flipping returns? In answer to this, another publication from CNN states that “high home prices, hot competition and very, very few available homes to buy are combining to make this popular trade ever more risky.” In other words, the flipping market is getting oversaturated and there are not as many available houses as there used to be. Due to a limited supply of available housing, the market seems to be shifting towards building rather than flipping since retailing a spec homes can often hold a stronger return than flipping a home.

Adding to the difficulties for flippers, even the purchase of distressed property is down. Suggesting that it is harder to find these types of properties in the current real estate bull market. ATTOM Data Solution’s posting continues to iterate that: “32 percent of home flips purchased via distressed sale, down from peak of 68 percent.” Wow! That is a 36% drop in distressed purchases since 2010. This is concerning since the acquisition of distressed properties is often a great way to make a profit by finding real estate that needs minimal renovations to obtain favorable returns, rather than having to buy property at higher rates.

Why Are Arizona Fix and Flip Loans Becoming More Popular?

On the brighter side of things, financing is becoming more available to flippers which reduces risk and offers greater returns. ATTOM Data Solutions report goes on to state that in 2018 “39 percent of home flips [were] purchased with financing.” Over the past couple of years, the flipping market has seen an overall uptick in financing. The report reasons that this uptick in financing has to do with the fact that with higher market price for homes: “it’s now more difficult for investors to buy with cash than previously.” With the higher prices required to acquire property, it seems that it is more favorable for real estate investors to keep their cash flow and obtain Arizona Fix and Flip Loans from Arizona Hard Money Lenders.

Arizona Fix and Flip Loans help real estate investors to generate greater returns with less cash down.

While Arizona Fix and Flip Loans allow investors to maintain cashflow, this not the only reason real estate investors are financing. Real estate investors are getting consistent returns with less cash down. This means, according to ATTOM, that with the amount of cash to complete one flip, many flippers can net on average “$30,000 per flip after paying $5,000 to $10,000” in Arizona Fix and Flip Loans granting a net annual return of “$90,000.” Three for the price of one is not that bad!

Tuesday, January 7, 2020

Establish a Steady Income with Arizona Rental Property Loans

Use Arizona Rental Property Loans to start your business.

Anno Domini MMXIIV AD—Giovanni Concato moved to Southeastern Arizona to try his hand in the American mining business to make American money, good money—more money. For years of his life he had lived in northern Italy. He, like his father, grandfather, and great-grandfather, had come of age and worked in the marble mines in Carrara, Italy found in the northernmost part of Tuscany. His city was beautiful, nestled between the low mountains and the Mediterranean shore line. Cobblestone streets, stone cathedrals, and brick buildings abounded.

Upon reaching the age of 30, Giovanni grew tired of mining marble. He had neither a woman nor a child binding him to his town. Though he had few academic credentials, he could work large machinery, manage large groups of workers, and complete projects in a timely manner. His supervisors loved him. But overtime, Giovanni came in contact with an international contractor furnishing skilled labor for larger mining projects. Through this company, Giovanni found work in the copper mines of Arizona. A brisk application and relocation process followed.

Having learned English in grade school and possessing a working knowledge of and certification to run heavy machinery, Giovanni rose in paygrade quickly. Over the next few years he saved a considerable amount of that money and established citizenship. This was great. However, something irked him—Giovanni paid steep rent for such a small town, a town where general mortgage payments seemed to be considerably low. In fact, at the time, Southeastern Arizonan rentals nearly charged as much if not more than what a conventional, monthly mortgage was.

Arizona Rental Property Loans Help Establish Long-Term Rental Income

With his savings, Giovanni acquired a private lender offering Arizona Rental Property Loans. He paid 50% LTV on a property to be matched by the lender at the same amount. Giovanni’s investment grossed $25,000 a year less the $7,000 paid in hard money lending fees. He liked the return. He strengthened the return by refinancing the property with a conventional lender for a lower interest rate. Within a few years, Giovanni had paid off his investment and was receiving rental cashflow together with his mining income. The time came to acquire more hard money Arizona Rental Property Loans. After bridging these loans in favor of lower interest rates, his profits continued to grow.

Talk to your hard money broker to see if Arizona Rental Property Loans are right for you.

Eventually Giovanni hired a property manager to manage his property. Here and there, after paying off a loan or two, Giovanni took out more Arizona Rental Property Loans to receive more rental property returns. After a few more years, he had a strong side business that seemed as though it could last for years, establishing both rental cash flow and home equity simultaneously. Giovanni was happy with his business and with what he had built. Not only was he earning a good living working for the mine, but he was earning a good living with a business he had built from the ground up thanks to Arizona Rental Property Loans.