If you’re like most people with a construction project (either in mind or already underway), there’s a good chance you need to secure a loan in order to get it all done. But just when you think you’ve gotten it all figured out, you notice that your loan options are anything but straightforward. In fact, most of them are downright confusing!
What’s makes the average construction loan so complicated? Well to start, a single construction loan is often not singular at all, but rather multiple loans (with different purposes) all tangled up. This is because the first portion of a construction loan typically only is used to cover the cost of the project itself (construction tools and equipment, labor, etc.), but other costs (like refinancing) are put into a separate loan later on that acts more like a conventional mortgage. Because the refinancing terms often fluctuate upon the project being completed, interest rates can fluctuate wildly.
The risk here is that borrowers often end up paying multiple closing costs and fees on these different loans. Likewise, the terms may be stricter for construction projects that don’t go exactly according to plan, and borrowers may have to take out additional loans as a result (or even face penalties). And let’s face it, most construction projects definitely come with unforeseen circumstances and the occasional surprise! In many cases, it means developers having to charge higher costs to new tenants upon the project’s completion, and they may not be able to refinance with the initial lender due to the initial terms being “broken”.
So, what’s the alternative?
Though you’d be hard-pressed to find a lot of information out there on short to permanent financing options (many lenders will push hard on traditional loan options because it’s how they make the most revenue), the truth is that this is the ideal form of construction project financing for many.
What is a Short to Permanent Loan?
Like other construction loans, a short to permanent loan is essentially two loans. However, they are put neatly into a single package that allows the terms to be more clear (or at least way more clear than the average construction financing plan). The first loan or “short” loan is used to pay for the construction, while the second or “permanent” loan is used as the mortgage for refinancing. The loan package all comes from the same lender, allowing for there to be less confusion.
In a nutshell, short to permanent or simply, “short to perm” loans have refinancing already built in, so there are no questions later on. This is crucial, as many other types of construction lenders change the refinancing terms during the project or they will not approach refinancing until the project is already been complete.
Benefits of Short to Permanent Loans
One of the biggest benefits with this kind of loan is that the risk is far less great when refinancing is already built into the loan package. That said, here are the key benefits that come with short to permanent loans:
- Refinancing rates already set, so they will not risk going up should other circumstances change
- Flexible terms that accommodate for construction projects that take longer than planned or go in a slightly different direction than initially planned
- Usually a single closing cost for the loan package as a whole (rather than having them spread out through various loans)
- Often lower fees (as a result of the single closing cost and neat loan package)
- Protects you from financial ruin should the project not go according to plan, as refinancing terms are already set
For all of these reasons, we anticipate that an increasing amount of developers and construction companies will be turning to this lending option in the future. Interested in learning more about your short to permanent loan or other construction financing options? Contact the lending experts at Barret Financial Group today!
Flipping homes has become a popular and lucrative investment for individuals across the country. While many people purchase cheaper homes to flip and sell, flipping luxury homes has been growing in popularity. In order to be successful in this branch of real estate investment, it’s critical to consider the following obstacles that are unique to flipping luxury homes. Read more
The Phoenix metro area is currently one of the healthiest real estate markets in the country. It’s particularly a great time to invest in a residential property with multiple units (apartment building) right now, especially if you plan on flipping that property for a profit or holding it and renting the units out to tenants. Here are a few tips worth following to make sure you’ll always stay at the top of the market when it comes to Arizona apartments:
Take the Current Climate into Consideration
Though our real estate economy is strong right now, the current climate is very much a “sellers market”. This means there is a lot of demand to purchase apartments, and so as a seller you are able to price your property higher and get more gross profit in return. If you are fixing up a property and plan on selling it, make sure you do so relatively quickly because things will not always stay this way. Depending on your current financial situation, you may want to consider doing a 1031 exchange to delay your tax liability.
Likewise, if you are planning to buy, you should be prepared to shell out a bit more than you might have originally intended because you’re buying in a sellers market. You also need to do your research to make sure you’re still paying an appropriate amount and will meet your ROI (return on investment) goals if your intention is to buy and sell or rent out. That said, while it may seem like a good idea to wait to purchase until prices go down, the truth is that there’s no telling exactly when that will happen. Besides, wait too long, and there’s the very real risk of losing the property to another buyer.
Know That It’s All About Location
Even though Phoenix is a strong real estate market overall, not every piece of property here is a worthwhile investment. The “hottest” areas to sell in are those that already have been established as a longtme desirable location or those that are “up and coming” or “transitioning” neighborhoods. Renters and buyers will always be most drawn to areas they can see a future in.
If you currently have a property you are interested in selling or renting out, take a look at the surrounding area and recent real estate sales history. This will give you a more realistic look at what you can sell the property for. In many cases, it may be higher than you initially thought! In situations where the estimates are lower, you may be able to save yourself from doing some expensive renovations that are otherwise unnecessary.
Make Sure You Have the Right Financial Backing
Whether you’re buying apartments, looking to fix up and sell apartments or are simply looking to increase the value of your current property, it’s important to make sure you have the funds to do so. After all, the last thing you want is to get caught in the middle of a project without the financial means to finish it! Waiting too long to finish can even mean missing out on the current sellers climate. Getting a bank loan is one way to remedy the problem, but it takes a lot of time to apply and get approved. Even upon approval, there may be stringent rules of the loan that you have to follow.
It’s therefore worth considering far more flexible and fast-approval options, like a hard money loan. Contact the Barrett Group today to learn more about your hard money loan options and how we can help you achieve your real estate goals.
The Greater Phoenix area has come a long way from its humble roots when it was created as a farm town back in 1881. If you aren’t from the area, it’s difficult to believe that Phoenix actually ranks number five on the list of the biggest cities in the United States.
The state of Arizona is considered one of the fastest growing economies in the entire country, with Phoenix at the top of the list. According to information from a recent U.S. Bureau of Economic Analysis State Data, the state is among the top five when it comes to fast growth, having an increase of 4.3 percent in total gross domestic product. Considered the most populous city in the state, the area of greater Phoenix is still a huge part of this growth and there is no sign it’s going to slow down any time soon.
The greater Phoenix area’s job market is also seeing significant growth. Recent statistics make it clear that the state of Arizona, as a whole, is going to outpace the country regarding job growth, with most of the opportunities being available in the capital of the state. Excluding the area of Phoenix, Maricopa County, there may be an increase in 2.1 percent in overall employment growth each year, with the greater Phoenix area experiencing an increase of 1.5 percent. What may be surprising to many people is that the job market has grown in some less than expected areas. Before the recession, the majority of the job opportunities were derived from construction, retail sales, and real estate. Now, however, business and financial services, along with manufacturing and healthcare, are meeting if not outpacing the industries that have been previously mentioned. Also, Phoenix has been dubbed as the “Wall Street West,” and it is ranked as number three on the list of different cities that have the highest number of workers in the financial sector.
The specific statistics surrounding job growth are further supported by the increase in overall demand for total office real estate, which actually outpaced the supply in 2018 according to information provided in the Phoenix Market Outlook Report that was conducted and then published by CBRE Research. The report also read that the net absorption has been outpaced by the supply since 2011 and is further pushing down the total office space vacancy from the recessionary peak that was 26.2 percent to 15.2 percent in quarter four of 2018.
Office space has not been the only portion of the real estate market in Phoenix that’s in high demand according to the above-mentioned report. There’s been a higher demand for multifamily housing which has outpaced the new supply for eight years in a row and has pushed down the increase from the recessionary peak which was 11.6 percent to under 4.5 percent during 2018. Approximately 8.300 new units, primarily employment centers and submarkets were added into the market, which is now up from the 6,300 new units created in the previous year.
With a beautiful and sunny state and a growing economy this state offers a vibrant community. The greater Phoenix continues to provide countless opportunities for both visitors and residents to enjoy virtually all hobbies imaginable.
What’s the point of a fix and flip house project if you’re not going to get back everything you invested in it and more? After all, flipping a house the right involves not just the initial hard money loan financial investment but your own time, physical effort and even various other expenditures along the way. Fortunately, there are various measures you can take to make sure that none of this ends up being a waste of time.
Here are some fairly simple tips you can follow during the selling process to make sure that you are maximizing your return on investment:
Seize the Advantages a Hard Money Loan Has to Offer
By utilizing a hard money loan in lieu of a traditional mortgage or other bank investment, you actually have multiple advantages that other financial avenues may not offer. For example, hard money loans offer both conveniently fast approvals and flexible terms. This means you can get started on your fix and flip project much faster and can use the time that you need to make sure the project gets done right. And because the collateral for the loan is usually the property itself, you have the convenience of not having to make constant payments to a bank or having to come up with other assets.
Take Some Great Photos or Hire a Professional Photographer
Think about how you’re going to draw in prospective buyers. These days, people often browse through dozens– if not hundreds– of real estate listings online before they finally narrow down a list of houses they would like to see in person. It is therefore important to not just write up a great listing that can be posted on various high-traffic real estate sites, but also to post some appealing photos.
If you have a high quality camera and have an eye for great lighting and space, you may be able to take professional-looking photos yourself. If not, you may want to consider hiring a professional photographer to come do the job for you. After all, the photos are arguably the most important part of any real estate listing, and a great one can be the difference between prospective buyers clicking to see more and scrolling on past.
Stage the House for Showings
Selling the house is the very last stage of a fix and flip project. So why stop putting in effort now? Stage the house to make it look like a home, not just a project. You don’t need to go filling it up with furniture and hanging pictures, but putting in at least some home items will help. After all, people are better able to envision themselves living in a place if they see some furnishings already in place.
To keep costs low, consider picking up some nice-but-cheap furniture from Goodwill (always make sure it is clean before putting it inside the house). If you won’t miss it during the showing process, you can also borrow some furniture from your own home.
That said, you might also want to consider enlisting the help of a professional staging company if you really want to go the extra mile. Often used by realtors, these companies require minimal effort on your part and will stage the house for you to make it look like a real attractive home. When a house is staged right, you are more likely to get a higher selling price.
Consider Hiring a Professional Real Estate Agent
Let’s be real– you’ve already put in a lot of effort on your own by this point, and if you’re like many people you probably want to see your fix and flip project right on through to the very end. While it is certainly possible to sell the property all on your own, the truth is that you are far more likely to attract buyers (more specifically, high-spending buyers) if you enlist the help of a professional real estate agent. They can get your listing on high-traffic websites more easily and can use their industry connections to get the word out to local realtors working directing with buyers.
While you will have to pay a fee to a realtor, the truth is that using one is the best way to bring in as much revenue as possible.
Fixing up and flipping a house is a great opportunity to make a substantial profit, but only when it’s done right. A lot of people get into this business thinking that a few coats of paint and maybe some new fixtures is all it takes to flip a house for a fast profit, only to find themselves either stuck with a property they can’t sell or construction and repairs they can’t finish. And in booming real estate markets like Phoenix AZ, it can be a simple matter of ignoring the local weather conditions the property is in and not making repairs accordingly.
If you have no prior experience in fixing up houses, you may want to consult with an experienced contractor. That said, it is possible to take things into your own hands if you’re willing to put in the time and effort required. In Phoenix (and other parts of Arizona), you’ll also need to take into account the hot and arid climate before making any repairs or modifications.
Here are some tips you can follow to make sure your fix and flip job is done right:
Install Drought-Friendly Appliances
As anyone who’s lived in Arizona for a while can tell you that droughts are common. You’re probably already planning to put in some new appliances to up the property value, so why not boost your house’s appeal more by installing some water-saving appliances?
The good news is that there are more water-saving appliances available these days than ever before. The main ones you’ll likely want to look into are low-flow faucets and shower heads, as well as double flush toilets (toilets with different flushing power available).
Consider Alternatives to Water-dependent Plants and Lawns
We all want great curbside appeal, and the front yard is a huge part of that. In some cases, it can be more of a selling point than the house itself. But here in the Phoenix region, it just doesn’t make sense to invest in a lush green lawn with grasses that require heavy watering, nor is it worthwhile to have a lot of other foliage that requires a lot of water to survive. So, stick to plants that thrive in desert climates like cacti, California lilacs, yucca plants, etc. Some examples of drought-resistant glasses include Bermuda grass, Buffalo grass and Bahia grass, but there are actually a surprising amount of low-water varieties out there.
You may also want to user stones as decoration or even tasteful, contemporary ornaments for extra pops of color. If you really want to boost the home’s value, look into building in tiered plant or rock beds (adding dimension can add just as much value or even more than a traditional open lawn).
Make Ventilation and Interior Shade a Priority
Especially in hot, desert regions like Arizona, the home should serve as an oasis against the bracing heat and dry air. Buyers will flock to your house if air flows freely through it and they can escape the dangerous temperatures outside.
With these things in mind, you may want to install new windows or a sliding door that allow for plenty of air flow. Take a look at the existing ventilation system too, as it may be due for some updates.
Putting in some nice thick doors will also help keep the house insulated and cool. They will also instantly add much-desired value to the property, especially since this is an area where a lot of people tend to skimp on.
To make sure the house is kept as comfortably cool as possible, make sure that the walls are properly insulated as well. A lot of buyers will also appreciate it if the windows already come with some good quality shades or blinds that block out bright sun and heat.
Make Sure You Have the Finances You Need to Complete Your Project
One of the biggest things you can do to ensure a successful fix and flip project is to secure the financing you need ahead of time. Hard Money Lenders Arizona makes it easy, with fast approval rates and a simple application.
Have more questions about how you can make your fix and flip house ideal for the Phoenix market? Or just want to get started already with your investment? Contact us at Hard Money Lenders Arizona today. We’re here to help make your house flipping dreams become a reality!
Whether you’ve recently purchased land you want to build on or are currently considering it, you’ll most likely be in need of a construction loan. Here’s everything you need to know about getting a construction loan in Arizona so you can get quickly on your way to building your dream home!
What is a Construction Loan?
A construction loan is a specific sum of money that you will use to fund your building project. Like most other types of loans, a construction loan is paid back gradually in installments, according to pre-set rules laid down by the lender. Construction loans are often paid out by the lender in installments as well, usually as the project goes along and hits specified milestones.
Why You Shouldn’t Just Get a Regular Loan
You may be wondering why you shouldn’t just apply for a regular (lump sum) money loan that can be used for general purposes in order to fund your construction project. However, there are some great reasons to apply for a specific Construction Loan as opposed to a regular loan.
Because the loan is focused entirely around a construction project, the funds are released in stages as the project moves along. This helps you keep on track and stay within your budget, and it also means you will actively be using the money instead of getting approved for it and then just letting it sit (which happens all too often with regular loans). Furthermore, construction loans often come with more flexible terms than regular loans, allowing you to pay it back after the project is completed rather than expecting payments before you are done.
Consider a Hard Money Loan Instead of a Bank Loan
When it comes to home construction, a hard money loan is often the way to go instead of going through a bank. A hard money lender has less stringent rules on how the money can be used and when it needs to be paid off, giving you more time and flexibility with your project. While a hard money loan can sometimes cost you more in the long run than a bank loan, you are also more likely to get approved for one. This is because hard money lenders look more at the project’s potential and its likelihood of being completed rather than at personal credit scores and financial history.
Bank construction loans meanwhile have more stringent standards and can be difficult to get approved without either making significant changes to the construction plans or having a really solid credit and financial history. These types of loans are often “one size fits all”, and if you do not fit into their specific box of requirements, you will not get approved (and even if you do, the pay-back requirements can be very strict). Hard money construction loans are meanwhile more lenient, and they focus on the project as a whole rather than the specific person.
How to Apply for a Construction Loan
Banks require a ton of paperwork and documentation of financial history prior to approving you for a loan, but hard money lenders usually only require their application to be completed and do not need as much paperwork. That said, you will still need to outline your project and be able to show how you plan to achieve your construction goals. Bank approval can take days if not weeks, but approval from a hard money lender can come within 24 hours. Following approval, your property and project will still need to be appraised to ensure you are getting the money you need and that everything is in order.
Construction Loans Can Be Used for Land As Well
It’s worth noting that construction loans can also be used for purchasing land to build on (although they may sometimes have an add-on termed “land loan”). This can be very helpful if you are still in the initial stages of your project but have a clear idea of what you want to achieve. Once approved for your loan, you can buy the property of your dreams and start making your construction goals come to life!
Have more questions? Talk with a lender today about your options!
It’s only natural to want to sell a property as quickly as possible. Whether you’re flipping a house or are selling the place you’ve lived in for years, finding and securing a buyer quickly allows you to move on faster and not have to wait for a big payoff.
Visit any bookstore or do a quick Google search, and there’s tons of literature on the art of selling property. However, a lot of it is full of vague information and tedious steps that don’t help you sell quickly. While you don’t want to cut out necessary steps, there are measures you can take to sell quickly and smoothly.
Follow these top 10 tips to selling faster in Phoenix, and you’ll be signing over your property in no time!
1. Make Sure All Maintenance & Improvements Are Complete
A lot of people make the grave mistake of listing the property prior to all renovations, maintenance projects and landscaping being completed. While it can seem like a time saver to list the property when it’s almost completed, doing so often boils down to some wishful thinking and a misunderstanding of how long these projects can actually take. Showing the property before it’s finished (and this also means being thoroughly cleaned inside and out) can also lead to lower bids being offered.
2. Take Quality Photos
Having great photos of your property is among one of the most important things when it comes to selling, because these are what actually draw potential buyers to the property. While you don’t necessarily need to hire a professional for this, all of the photos should be high resolution and well lit. Make sure there are no mop buckets or cleaning products left around, and if there is furniture, it should be clean and well staged.
3. Make Sure the Price is Right
It’s a good idea to discuss what the price should be with an experienced real estate agent, or if you’re selling on your own (not necessarily the fastest way to sell, but still doable), do your research on what similar properties in the area have sold for. You don’t want to be overpriced, but you don’t want to undersell either. Buyers will be quickly attracted to a property that is reasonably priced and fits what they expect to pay in the area.
4. List on MLS
Your local Multiple Listing Service or MLS is your best bet to sell the property quickly. This will give the property more exposure, and it can easily be done through a broker or real estate agent who works in the area.
5. Read the Market
Once your property listing is up and running, it is important to pay attention to how it performs early on. If you’re not getting as much interest as you’d like, it could be because of something you can easily fix (like getting better photos or supplying more information). Talk to your agent about how things are going on the buying side of things, and see if there are any comments coming through that you can use to your advantage.
6. Be Smart About Lowering the Price
Going along with the above, sometimes one of the adjustments you’ll have to make is lowering the price. However, a dramatic drop in price can look bad, and too many price reductions can also turn buyers away. If you’re going to lower the price, it should only be done to meet market standards and should be done as sparingly as possible. You can discuss what the best strategy is here with your real estate agent.
7. Only Accept Offers with Lender Approval
When you do start getting offers, you should only look at ones that come with an approval letter from the buyer’s lender. The last thing you want to do is accept a bid quickly only to find that the buyer doesn’t actually have the funds to back it up, as this can end up costing you time and money.
8. Go with the Best Offer
Contrary to popular belief, the best offer is not necessarily the one that offers the most money. Instead, it is the one with a responsible buyer who will close on time and is financially qualified. They already have lender approval, and they are prepared with all the documentation they need. Oftentimes, the first offer you receive is the best one, but it is still important to review these qualities in each offer you are considering.
9. Be Prepared for the Inspection
Most buyers won’t close without an inspection being completed, and in many cases they will have specific details they want looked at (like the foundation, water heater, electric outlets, etc.) to make sure the property is up to code and safe as well as valuable. Be prepared for this ahead of time so you aren’t caught off guard.
10. Complete the Appraisal
The final step is letting your property be appraised. This process can go faster if you have gotten a previous appraisal report that you can provide a copy of, as it will help the current appraiser do their job more efficiently (and better understand your pricing).
Mortgage Loan Originator
NMLS ID: 1115218
AZ MLO License: 0925472
7621 E. Gray Road, Suite B2
Scottsdale, AZ 85260
NMLS ID: 1115218
AZ MB License: BK – 0925472
40 N. Central Avenue, Suite 1400
Phoenix, AZ 85004
NMLS ID: 1115218
AZ MB License: BK – 0925472