When Is It Time To Sell A Rental Property?

You’re thinking about selling your rental property. But is it time? You’re right to be hesitant. Every investment has hard times. It’s not always wise to drop an investment too quickly. Let’s take a look at when you might want to sell a rental property.

You Can Make a Lot of Money By Selling

“A lot” is, of course, variable.

But there are times when a market can rise very fast (essentially, bubble). At that time, you might find yourself aware that you have the opportunity to cash out. Cashing out might be a good idea, especially if you have another area in which you want to invest. You can talk to a real estate agent about the local market.

Alternatively, Your Value Is About to Drop

Let’s say they’re about to put a highway right by your rentals. Your rental value is going to drop and your tenants are probably going to flee.

It’s a good idea to think about the future of your property. If you think your value is going to drop significantly in the future, it may be time to sell to someone who might not care as much (such as someone looking more for a home than an investment).

Your Rental Income Has Dropped Precipitously

A good rental is a combination of factors: location, upgrades, budgeting, and more. But there are some situations that are out of your control. What if a gas station is built directly next to your rental? What if the city industry has shifted? If your rental income has been dropping, it may be time to sell your rental property.

But keep in mind that some rental drops are temporary. If it’s a seasonal issue and the first year you’ve held your property, you shouldn’t worry. 

Your Life Situation Has Changed

Maybe you can’t manage your rentals anymore. Or, maybe you can but you just don’t want to. Sometimes investors just want to cash out and switch to completely passive income. You could find a property management company… or you could just cash out your rentals.

This frequently happens when someone moves. You may move to another state and not want to manage rentals in another area. You can use a 1031 exchange to sell your existing properties and purchase new rental properties in a new area.

You Need the Cash

What if you just need the cash? Actually, this is one reason you might not want to sell your property. You can usually leverage the equity of a property for cash rather than selling the property altogether. There are a lot of advantages to doing this if you still want to maintain the rental. 

Sometimes it’s better to sell a rental property that you’re unsure of to purchase a property that you’re more certain about. Consider getting a hard money loan from Hard Money Lenders AZ if you want to continue your investments.

House Flipping? What Is The 70% Rule?

In house flipping, you may have heard of the 70% rule. Or you might just be wondering about how much you should invest in your next property. The 70% rule isn’t a hard-and-fast rule, but it’s excellent guidance.

What is the 70% Rule?

In short, you should never invest more than 70% of the property’s after-repair value — less any repairs that may be needed. 

Let’s take a look at this in practice.

You have a property that you think you could sell for $160,000. But it needs about $30,000 worth of repairs. That leaves $130,000 — the amount of money that you would net. You should not buy the property for more than $91,000. If you’re completely correct and sell the house for $160,00, you’ll have made $39,000.

The 70% rule doesn’t, however, tell you that you will make $39,000. It provides a buffer. Many projects don’t go exactly as you’d expect. Because of that, you need to compensate and make sure you’ve left yourself enough space for delays.

Should You Always Follow the 70% Rule?

The 70% rule isn’t always used by professional house flippers or professional renovators. Many experienced professionals simply run the numbers and see if the property is profitable to them.

In the above example, let’s say that those $30,000 of repairs were pretty minor repairs and you were certain that you could complete them under budget and that you could complete them within a month. In that situation, $39,000 is a pretty hefty buffer.

Alternatively, let’s say that you thought those $30,000 repairs might spiral, or you were uncertain about the property and its real value. You might bid much, much lower to leave space for that uncertainty.

Over time, most professionals start to develop a feel for what they can borrow for a house. But the 70% rule is a great rule of thumb for those who are starting out or for those who just want another metric to consider. Following the 70% rule is going to be safe for most projects. And when it comes to house flipping, you want to be safe.

Do Lenders Use the 70% Rule?

Lenders use different rules. For the most part, lenders will lend up to a certain amount of the future value of the property. So, if they think the property will be worth $160,000, they may be willing to loan a percentage of that. But you will need to be able to show that the property could be worth that. 

Of course, whether you’re investing 50% or 70%, you need a lender. If you’re interested in getting a loan for your next investment property, contact the experts. Connect with Hard Money Lenders AZ today.

A Smart Move: Real Estate Investing

Investing your money is all about striking a balance between risk and reward. One of the best ways to protect the money you put into your investments is to diversify where that money is going.

There are a lot of misconceptions about investing in real estate. People often consider real estate to be too expensive for them or they see it as being unnecessarily risky. However, real estate is one of these smarter and safer Investments and you can make.

Here’s why investing in real estate is a smart move. 

It’s All About Leverage

There’s not a lot of leverage that your dollar can acquire in the stock market. An investment of $15,000 in stocks only gives you access to $15,000 of that stock. Whether that stock goes up or down over time is beyond your control.

Real estate is a different game. A $15,000 down payment on a piece of real estate can ultimately net you $150,000 in real estate property. Unlike stocks, the value of your real estate is going to go up over time as you continually make payments and move towards ownership. 

Appreciate Real Estate Appreciation

 
Stocks don’t naturally appreciate over time. This means that the value of your stocks changes based on the market, and not based on the stock’s becoming inherently more valuable. Real estate has a natural appreciation of around 3 to 5% every year.

The appreciation of your real estate can also be directly under your control. You can make renovations, improvements, and develop your property to increase its overall value. 

Improving Your Long-term Cash Flow

Real estate can also start increasing your cash flow long before you fully pay off the property.

Whether you’re renting commercial or residential, you have the potential to rent out your property to new tenants. This is a way that you can get some monthly cash flow coming in.

There are a variety of companies that can help you with this process. 

Tax Benefits

There’s a whole host of tax benefits that come with being a property owner. These are going to change based on your relationship to the property, but you can expect to have access to a wide range of benefits.

You can deduct things like the properties depreciation, interest paid on the loan, and even homeowners association fees. There are fewer tax incentives for investing in stocks than there are for investing in real estate. 

Financial Security for Your Future

  
Real estate investments can be more resilient to the changes that can throw the stock market into chaos. Real estate is a great option for diversifying your investments and protecting your financial future. Contact Hard Money Lenders Arizona for more information.

Condos: Are They Worth the Investment?

Purchasing real estate is one of the largest financial decisions one can make in your lifetime. If you are considering purchasing a condo, you will need to consider the pros and cons of the investment. We have put together some of the pros and cons to consider before investing in a condo. 

Pros of buying a condo

Less maintenance 
One of the biggest pros of investing in a condo is that you are not responsible for the maintenance. The monthly fee you pay goes towards the management company to cut the grass, shovel the snow, and make repairs to common areas. A condo could be a good investment if you are a busy person who does not have time for home maintenance. 

Amenities 
Condos tend to have more amenities than single-family homes. People who enjoy a pool, fitness center, community center, or rooftop BBQ might want to consider a condo with high-end amenities. If you like to socialize, the amenities tend to be a great place to get to know your neighbors. 

Walkability 
Condos also tend to be located closer to downtown areas. So, if walking to restaurants, stores, and coffee shops is an important factor for you, a condo purchase would be a worthwhile investment. 

Cons of buying a condo

 
Monthly HOA fees
While you may be enjoying those amenities, they come at a cost. When you purchase the condo, you will know the current monthly fees, but you don’t know what the future increases might be. Condos fees will increase over time. In addition, if the condo needs to do a large improvement project such as a new roof, you could be hit with a one-time special assessment to help cover it. 

Slower to grow in value 
A condo will typically take much more time to grow in value than single-family homes in the area. So, if you are not planning on holding the condo for a significant amount of time, you may not see your value increase.  

Rules and Regulations 
If you do not like following the rules, a condo purchase may not be the right choice for you. The HOA will have a rule book that you will need to follow. These rules can include the rental policy, the pet policy, and the BBQ policy. If you consider purchasing a condo, you will want to read the HOA rules very carefully to make sure they will work for you. 

Difficulty with financing 
Sometimes it can be difficult to sell a condo because the lender will no longer issue a mortgage for a particular condo. Oftentimes this is because the building has too many units occupied by non-owners. In other words, a lender will not lend on a building if there are too many rentals. Check with the HOA and see if they have a cap on the number of units that can be rented simultaneously. 

Reality vs. TV Shows: Fix & Flips

Reality fixes and flip TV shows have given the real estate investment industry a boost. However, what you see on reality TV shows isn’t exactly what you could expect in reality. Understanding the differences will help you decide if this type of venture is right for you.

How Easy Is It to Sell?

If you’ve watched fix and flip reality shows, they make it seem like there’s always a buyer waiting in the wings when the project is over. It’s important to remember reality show hosts are well known, and people are eager to buy from them. For most real estate investors, you will likely need to aggressively market the home to reach potential buyers. Prepare to wait months to complete the sale.

How Common Are Big Surprises?

Fix and flip shows almost always discover some big surprise while renovating a house. It makes for engaging TV. There’s also the possibility they are already aware of these “surprises,” and it’s all an act. When completing your own fix and flip, it’s essential to look carefully at a home before buying. Look for severe problems like pests, faulty wiring, water damage, and foundation issues. It will save you money in the long run.

How Fast Is It Done?

It’s essential to remember fix and flip reality shows are taped over a long period and consolidated into the appropriate time frame. Some of these shows even use rapid flips as part of their appeal. For most real estate investors, however, renovating a home to make it profitable takes time, often weeks or months. If you’re not prepared to work over the long haul, fix and flip investments aren’t right for you.

How Easy Is It to Find Properties?

Fix and flip shows frame buying a home as a fast process. They may talk to fellow investors or real estate agents, browse through listings, or attend auctions, but you need to remember much of the time spent ends up on the cutting room floor. It’s unlikely you will find the most appropriate property in a short time. It’s essential to choose carefully, so you don’t end up working on a home you don’t have the money or time to complete properly.

What Kind of Funding Is Available?

Funding is one of the most essential aspects of a successful fix and flip. Few real estate investors have the capital available to handle financing on their own. Celebrities featured on fix and flip shows often use their own money or get funding from sponsors, making their tactics unrealistic for most investors. Instead, many real estate investors have to turn to options like a hard-money loan to afford the purchase and the renovations they need to do. This is often the best lending option available to real estate investors interested in the fix and flip process. You can make payments while renovating the home and pay off the remainder of the loan when it sells or roll it over into a new investment.

If you’re thinking about getting involved in the fix and flip real estate investment options, contact us. We can help you get the funding you need for your project.

Extending vs. Refinancing Your Hard Money Loan

Also referred to as a bridge loan or a fix-and-flip loan, hard money loans are essential for short-term real estate projects. Whether an individual or business is seeking to establish an effective fix-and-flip business, they will need to understand how to deal with their loans as they mature. Most hard money lenders tend to focus on short periods of time per loan, creating issues down the line if the receiver cannot fully repay their loan.

When dealing with a maturing hard money loan, it becomes important to understand your options. Today, we are going to highlight the age-old question: should you extend or refinance a hard money loan?

Pros & Cons: Extending a Hard Money Loan

Extending a hard money loan is often the easiest way to get the ball rolling with your debt. A hard money loan gets quicker approval thanks to the pre-existing relationship between the lender and their client. Additionally, extending a hard money loan is typically done after creating a steady and positive payment history between both parties.

Benefits of Extending a Loan

-Based on Established Relationship
-Quick Approval Process
-Positive Repayment History

Even though extending a hard money loan can be a frictionless approach, there are downsides to this effort. The primary reason fix-and-flip investors may want to avoid extending a loan is that the extension likely won’t be long enough to tackle the entirety of the debt. This creates a problem pertaining to timelines, so it is imperative to have a plan in place before extending your loan.

Negatives of Extending a Loan

-Short Term Extensions 
-Harder to Cover

Pros & Cons: Refinancing a Hard Money Loan

On the other side of the coin, investors may want to consider refinancing the entirety of their hard money loan. Working with groups like Hard Money Lenders AZ, clients can acquire a better interest rate while pursuing more convenient cash-out opportunities. Refinancing a new hard money loan will allow you to also bypass any extension fees that you might have struggled paying. Finally, refinancing a loan may lead you to better terms, particularly if your credit and cash flow has changed.

Benefits of Refinancing a Loan

-Get Better Interest Rates
-Avoid Paying Extension Fees
-Convenient Cash Out Options

Refinancing a loan helps in many situations, but that isn’t always going to be the case. When refinancing a hard money loan, you will have to work with a lender to complete an entirely new underwrite. You will also have to find an entirely new hard money lender, a process that can create some frustration and tension as you navigate the many options available to you.

Negatives of Refinancing a Loan

-Complete New Underwrite
-Find New Hard Money Lender
-Negotiate Completely New Terms

Contact Hard Money Lenders AZ!

When the time comes to refinance your hard money loan, make sure the team at Hard Money Lenders AZ is on the job. As the top-rated Hard Money Lender on Google for the state of Arizona, clients have enjoyed fast funding, proven results, and effective communication through a team of industry-leading specialists.

Contact Hard Money Lenders AZ today to see if you are approved!

How Hard Money Loans Can Help Grow Your House Flipping Business.

House flippers are some of the hardest working and most opportunistic people in the real estate industry. The talent it takes to evaluate a home, find the funds to repair it, and then flip the property for a profit can be staggering to consider. Yet, all the talent in the world won’t overcome a lack of financing.

Today, we want to underscore how hard money loans can help you grow your house-flipping business.

Gain Flexibility While Flipping Houses

If you are looking to become more than a one-property fix-and-flipper, you are going to want to familiarize yourself with hard-money loans. To grow your company and extend your reach into the market, borrowing capital will give you the means to purchase and restore multiple homes. If you work intelligently with a larger loan, you can improve your cash on cash ROI, allowing your money to work for you while you work on the homes that will fund your retirement.

Not only will you gain more flexibility as you flip houses, but your company’s projected growth will exceed that of a cash-only business. The more you put into your company, the more you will get out of it. Pretty nice, right?

Better Leverage Your Finances

If you are serious about growing a house-flipping business, you need to rely on more than just your own strict cash reserves. What does this mean in a practical sense? For someone who moves beyond their own capital reserves, acquiring a loan will allow them to leverage their cash, building bigger projects as the years go by.

As an example, let’s say that you borrow $100,000 to spend in your market. This will allow you to fix and flip three properties, realizing a net return of $50,000. Now you have $150,000 to spend in your market. Repeating this process will allow you to scale your business efforts to the growth within the market that you are experiencing.

Continued growth is integral to capitalizing on hot markets. With Arizona’s real estate industry primed for a huge 2021 and beyond, properly scaling your hard money loans to your anticipated efforts can lead to serious success. Remember not to outkick your coverage and only to chew what you can handle swallowing. There is no point in failing from overworking yourself.

Grow Your Business With Hard Money Lenders AZ

In March 2020, Arizona saw its home-flipping market reach an 8-year-high. As the market continues to grow and improve in the post-COVID landscape, Hard Money Lenders AZ makes itself available to savvy fix-and-flip investors looking to acquire hard money loans.

Hard Money Lenders Arizona is based out of Phoenix where it focuses on providing private funding experience in every aspect of real estate. From refinancing and bridge loans to your next fix-and-flip project, Michael Iuculano and the team can support your business endeavors.

Contact Hard Money Lenders AZ to discuss your project, today!

What You Need to Get Your Hard Money Loan Approved

Acquiring a hard money loan doesn’t have to be the toughest task you’ve tackled this year. In fact, working with the right lender can make the process as simple as can be. Before meeting with your potential lender, there are a few ways that you can maximize your chances of approval.

Understand Your Collateral

One of the easiest ways to make your hard money lending experience a simple process is by having collateral available. Collateral is simply property that you own which can be held against the finances that you are pursuing. Hard money lenders tend to work in a host of different spaces within the real estate field.  Lenders may offer to finance an industrial, commercial, or retail property. Hard money lending with collateral is also a common prospect for people looking to fix and flip homes.

Typically, the toughest hard money loans to acquire approval for are to finance the purchase of land. Land intrinsically does not produce income until it has been modified. Borrowers looking to finance a land purchase will require strong credit, provable cash flow, and a rock-solid exit strategy — with a 50% deposit.

Loan to Value Ratio

Otherwise referred to as ‘LTV Ratio’, your loan to value ratio is one of the most dominating factors that a hard money lender will consider during a request. Borrowers looking for a hard money loan typically struggle with credit or minimal cash flow, making it hard to get a loan without collateral as payment.

A lender that focuses on your loan to value ratio will instead prioritize the loan amount against the value of your property/purchase. A house that costs $100,000 with a loan of $50,000 would have an LTV of 50%. Keeping this number under a certain percentage point will make acquiring your loan more possible. Most lenders tend to cap their percentage position at 70% LTV.

Create a Repayment Plan

While hard money lenders won’t focus as much on your income as a conventional private money loan, they will still want to know how you plan to repay the provided finances. This may include asking about sale dates, ideas for improvements to a property, or what you plan on putting in the active listing agreement.

Take some time to craft your plans for the hard money loan that you are pursuing. Do you plan on repaying your loan through specific home improvement upgrades that result in a higher ROI? These are things that have to be discussed prior to sitting down with your hard money lender.

Call On Your Friends at Hard Money Lenders AZ

Dealing with loans can be tough in even the best of circumstances. For entrepreneurs and investors looking to acquire a hard money loan, contact the team at Hard Money Lenders AZ to discuss your goals and desires!

How to Protect Your Rental Income During (And in the Aftermath Of) the Pandemic

It’s no secret that COVID-19 has affected the bottom line of many hard-working Americans. If you own residential rental properties, you have probably experienced this first-hand if your tenants have struggled to pay rent or if you’ve had a hard time filling vacant units. Fortunately, there are some steps you can take to protect your rental income not just during the pandemic, but as the world begins to slowly return to some semblance of normal.

Offer Payment Plans to Tenants

Many tenants are having a difficult time paying rent, especially if they have been furloughed from their jobs as a result of the pandemic or have had hours cut. If this is the case with any of your tenants, you may be understandably worried about how you will collect your rental income.

This is where it can be wise to begin offering payment plans to tenants who are struggling financially. In doing so, you can ease some of the financial burden on your tenants while ensuring that you receive at least some of the funds to which you are entitled.

Screen New Tenants Thoroughly

One of the biggest mistakes landlords are making right now is rushing to fill vacancies in their rental properties without properly screening their prospective tenants. The problem with this is that you could end up with tenants who don’t have sufficient income or even a reliable job to pay rent. This means that not only will you lose out on rental income, but you may even end up having to go through the drawn-out (and expensive) eviction process. Even though you may be eager to fill vacancies in your rental units during this time, proper screening is actually more important than ever.

Direct Tenants to Resources

With so many Americans struggling financially as a direct result of the pandemic, the government has made many assistance programs available. Some of these even include rental assistance. Take some time to research these options for your tenants and point them in the direction of these resources when appropriate. From the Housing Choice Voucher Program to unemployment assistance, there are plenty of resources available to those struggling.

Fill Vacant Units Remotely

Even though more people are getting vaccinated, many people are still hesitant to go out in public. This may make it difficult to fill vacancies in your rental units unless you’re offering virtual tours, digital lease signing, and other means of finding and approving new tenants remotely. Make sure you’re posting detailed listings of your vacant units online and accepting lease applications digitally as well. When tenants are approved, you can even collect rent and security deposits online to make things more convenient for everybody.

By taking the right measures, you can protect your rental income even in the midst of the COVID-19 pandemic. For more financial assistance as a real estate investor, reach out to our team of Arizona hard money lenders today by calling (480) 576-5788. We offer a number of loan programs and other options to help fund your next real estate investment quickly, easily, and remotely!