How to Make a Profit with a Fix and Flip Loan in Arizona

Flipping homes has rapidly increased in popularity over the past decade or so. Today, it seems like just about everyone has built an interest in buying undesirable homes and making repairs and other renovations that will significantly impact the value of the home, making it easier to sell it at a profit. While these changes often require an additional investment, these costs can sometimes be built into the initial loan and are likely to be more than recovered when the home is ultimately sold.

How to Qualify

First and foremost, it’s important to learn how you can qualify for a fix and flip loan in Arizona. For many people, qualifying for a traditional mortgage is a lengthy and often difficult process. However, it can actually be easier to qualify for a fix and flip loan than it can be for other options. For starters, most people who choose this type of real estate investment don’t go through traditional channels when it comes to getting a loan. In fact, hard money lending is often the most commonly used method of funding these ventures. In these situations, the private money lender is looking more at the potential for the property rather than the financial background of the borrower. This means you could potentially get the money you need to flip a  home without having good credit or even any credit at all. However, it’s important to remember these types of loans are designed to be offered over the short term. You will need to make any fixes and renovations to the home as quickly as you can and sell the home. If the home goes into foreclosure, the lender will gain control of the home.

Finding the Right Lenders

Unless you have a strong credit history and a solid foundation in the field, you are unlikely to find a traditional lender that will provide you with the funds you need to flip the home. For starters, you may need to borrow more than the value of the home in order to finance the renovations you would like to complete in order to increase the value of the home. Hard money lenders are often private investors who want to get into the real estate market without being as hands on. This means they are happy to work with investors who want to do the work but don’t have the funds necessary to do it. If you search for hard money lenders, you will be able to get the financing you need to make all the changes you want to make the highest profit from the sale of these homes.

Few people want to purchase a home that is run down and outdated. This means you can often purchase these homes for less, allowing you to make renovations to the home, in turn selling it for profit.

Tips for Investing in Hard Money Loans in Arizona

Borrowing money from a private lender rather than a lending institution can be a lucrative experience, but it’s important to understand the process before you get started. Even though many find hard money lending to be less strict than obtaining a loan through a traditional method, you will need to work harder to make sure you don’t enter into an agreement that damages your chances of a successful investment. The following tips will help you learn how to make the most of hard money lending.

Choose an Experienced Lender

You don’t want to trust just anyone in this type of agreement. Instead, it’s important to seek out an experienced hard money lender who has already established positive relationships with other investors. A good private money lender will be focused on developing long-term relationships with investors that are mutually beneficial.

Do Your Research

It’s important to put some time and effort into researching before you enter into a funding agreement with anyone. Before you agree to purchase a property with the help of a hard money lender, perform your own appraisal and view the prospective property for yourself. You need to feel confident you will be able to make money on the property before you enter the deal. It can also be useful to compare the property with similar properties in the area so you can get an idea of how well others have done in a comparable situation.

Get Outside Advice

There’s nothing wrong with hiring an attorney to look out for your best interests. A qualified real estate investment attorney will be able to go over all of the paperwork and let you know whether you should request other terms. They will also be able to tell you if the investment has the opportunity to produce the results you’re looking for.

Request a Guarantee

While there’s no way to guarantee a specific return on your investment, you need to be sure the lender will give you the appropriate amount out of the sale or rental of the property. To ensure this happens, request a guarantee from the lender. This personal guarantee will protect you and ensure you can recover any investment you make in the event the property is foreclosed upon.


It can be tempting to invest in only one type of property so you become more familiar with one area of real estate investments. However, just like any other type of investment, it’s important to diversify to protect your investments. This will increase the chances you can make money in one area if another is slow or failing.

Hard money lending can be a great way to make the most of your investments without dealing with the hassle of traditional lending. With the help of these tips, you will increase your chances of a successful outcome.

5 House-Flipping Mistakes to Avoid

Thinking about embarking on a house-flipping project? Before you dive in, there are a few common mistakes you’ll want to be sure to avoid.

Lack of Funds

Many new house-flippers fail to realize just how much capital needs to be available not only to purchase the fixer-upper, but to actually do the fixing-up. When possible, homes should be bought with cash so as to avoid accruing interest on a loan. Regardless of the method used to purchase a home, additional costs must be factored in on top of renovations. These include taxes, utilities, and even capital gains taxes when the home sells.

Not Knowing the Market

A successful house flip always begins with a solid understanding of the local market. You need to know, for example, what homes in the area tend to sell for before you buy. You can’t expect to purchase a fixer-upper for $75,000 and sell it for $150,000 when most homes in the area sell for a max of $100,000.

Hiring a Pro for Everything

Sweat equity is key when flipping a house, so this is a job best suited for people who already have at least a little bit of DIY experience when it comes to home renovations. Otherwise, you’ll need to hire a professional for the majority of the work, which quickly eats away at your profits. While you’ll probably need to hire pros for at least some of the work (especially electrical and other potentially dangerous projects), the more you can do yourself, the better off you’ll be.

Being Impatient

The entire process takes time, yet so many people go into their first house flip anticipating that they’ll go in, get the work done in a week or so, and sell right away for a huge profit. In reality, house-flipping projects very rarely work out this way. More than likely, you will encounter hiccups and hang-ups along the way, so patience is a virtue when it comes to a successful house flip.

Underestimating the Time Investment

Flipping a house can easily become a full-time job, so don’t expect it to be a small “side project” that you can work on in your free time. There is a good chance the project will consume all of your free time and then some, so one of the worst mistakes you can make is embarking on a house flip without realizing the time commitment required.

When you have a solid understanding of what to expect and what will be expected of you before flipping a home, you’ll be in much better shape. Be sure to avoid these common mistakes as you prepare for your first house flip and you’ll have a much easier time!

What is a Hard Money Loan and Who Is It Right For?

A hard money loan is a short-term financing option used to fund the purchase of an investment property. Hard money loans are commonly used by real estate investors for fix-and-flip projects, renovations of rental properties, or simply to facilitate the speedy purchase and transfer of real estate.

Who is a Hard Money Loan Right For?

Hard money loans are right for both short-term investors and long-term investors. Specifically, hard money loans are used by:
Fix-and-Flippers – Short-term investors who will purchase, renovate, and sell a property within 12 months.
Buy-and-Hold Investors – Long-term investors who will purchase a house in poor condition, renovate it, and then rent it out to tenants.
Portfolio Investors – Long-term investors who would like to grow their portfolio of rental properties (typically 4+).
Let’s take a look at the different ways short-term investors and long-term investors use hard money loans.

Fix-and-Flip Investors

Fix-and-flip investors are short-term real estate investors who look to purchase, renovate, and sell a property within 12 months. Hard money loans are good for short-term investors because they can finance both the purchase and renovation of a home in a single loan, have a short loan term, and offer interest-only payments.

For example, many short-term investors look for houses in poor condition, that if renovated, could sell for more than their current fair market value (FMV). These houses are typically found at short-sales, foreclosure auctions, as well as with lender-owned REO properties.
Using a hard money loan, fix-and-flip investors finance the initial purchase of the house as well as the necessary renovations. Fix-and-flippers typically obtain hard money loans equal to a percentage property’s after-rehab-value (ARV), which is the expected FMV after all renovations have been made.

Once a property is purchased with the initial funds from the lender, investors start their renovations, receiving renovation financing from hard money lenders in stipends or “draws.” This means that fix-and-flippers typically have to float rehab costs until they receive funds from the lender.
During renovations, fix-and-flippers pay a hard money lender interest-only payments. At the end of the hard money loan, fix-and-flippers repay the loan through the sale of the house for a profit. If you want to dig deeper into this, read our detailed example of how rehab loans work.

Buy-and-Hold Investors

Buy-and-hold investors are real estate investors who purchase and renovate rental properties. Buy-and-hold investors typically use hard money loans when an investment property isn’t in good enough condition for a traditional mortgage.
This is because traditional lenders won’t issue conventional mortgages for houses in poor condition. However, dilapidated houses provide as much upside for long-term investors as they do for short-term investors.
To circumvent this funding problem, long-term investors use hard money rehab loans to finance the initial purchase and renovations of the asset. Once renovations are made, long-term investors rent out the property, refinance the improved home with a conventional mortgage, and use the money to pay off the hard money loan.

Sometimes a buy-and-hold investor who may qualify for permanent financing will need access to the financing right away, like when they’re competing with all-cash buyers at real estate auctions. In these cases, long-term investors rely on hard money loans for a quick approval process and a fast funding time.

Portfolio Investors

Portfolio investors are long-term investors who invest in multiple properties at the same time. While these long-term investors prefer conventional mortgages, many banks and lending institutions only loan out between 4 – 10 conventional mortgages to a single person.
So, if a portfolio investor meets his or her conventional mortgage limit, the only financing options available are to either purchase a house all-cash, obtain a blanket mortgage, or use a hard money loan. Since most portfolio investors are highly levered to begin with, they typically rely on a hard money loan to make the additional property purchases.
This means that a portfolio investor might use a hard money loan to purchase houses in both good and bad condition. If the condition is poor, hard money lenders issue loans as a percentage of the house’s after-rehab-value (ARV). If the condition is good, hard money lenders issue loans as a percentage of a house’s loan-to-value (LTV) ratio, which is similar to the loan limits set by conventional mortgages.

Similar to buy-and-hold investors, portfolio investors sometimes use hard money loans specifically because they need the speed to compete with all-cash buyers. Finally, some portfolio investors might not meet other conventional mortgage qualifications – such as the minimum credit score – and therefore need to rely on hard money loans before meeting qualifications and refinancing at a later date.

Hard money loans have many differences when compared to a conventional mortgage. For example, conventional mortgages are issued by banks, have strict loan requirements, a longer time to approval, a longer loan term, low interest rates and fees, and fund single-family homes, apartments, condos and multi-family units in good condition. Conversely, hard money loans are issued by private money lenders have fewer loan requirements, a short approval time and loan term, comparatively higher interest rates and fees, as well as fund single-family homes, apartments, condos, and multi-family units in most conditions.

What is a Rehab Loan?

If you love watching those flip or flop shows that take dilapidated or outdated properties and turn them into gems that make a profit on the real estate market, then you might be wondering how to get the money to do something like this in your own home town.  Rehab loans are a niche type of loan offered by Arizona rehab lenders, also known as hard money lenders.  Typically there is a lot more for borrowers to understand with these types of loans than with traditional loans you get from a local bank. Read more

Personal Guarantees and Hard Money Loans

When it comes to hard money loans in Arizona, what are the personal guarantees that lenders expect?  Before going into that, you need to know the difference between a full recourse loan and a guarantee.  Your hard money loan is either a full recourse loan, meaning the lender can lawfully pursue the borrower’s other assets to pay the debt if the borrower’s collateral is not enough to cover the loan, or a non-recourse loan, meaning the borrower’s assets are protected as being separate entities and can not risk being liquidated. Read more

How Long Does it Take to Close a Hard Money Loan in Arizona?

If you’ve ever closed a traditional loan, you know how long it can take. However, expect a hard money loan to take even longer and to have a lot more involved in the closing process.  You can expect your hard money lender to help you through this process and give you a checklist of required documents and items required to close the hard money loan.

Hard money loans have a lot of people involved in closing a hard money loan and we will take a closer look at each one and the job they need to do. Read more

How Do I Pay Off a Hard Money Loan?

When it comes time to pay off a hard money loan in Arizona, the process isn’t as simple as paying off a traditional mortgage or car loan, for example.  In fact, a hard money loan, also known as a private mortgage, is typically a complicated process, even when it comes to attempts to secure a payoff statement.  For this reason, you should know what to expect before you borrow from a private mortgage lender.  Seek transparency when it comes to how to pay off a hard money loan and consider the following scenarios: Read more

Tips For Investing in Trust Deeds in Arizona

There are many options when it comes to investing. While most people think of things like investing in stocks and bonds on the stock market or buying and selling real estate as an investment, there are other lesser known options that can be just as lucrative. In fact, investing in trust deeds in Arizona can yield excellent returns and is actually relatively easy to do and understand, making it a great addition to your investment portfolio. Here are a few tips you should follow if you’ve been thinking about adding trust deeds to your investment portfolio. Read more

Common Mistakes New Real Estate Investors Make

Real estate investing has quickly grown in popularity. While it sounds like a great way to make money fast, individuals who are new to the real estate market can make some serious mistakes that end up costing them money instead. Investing in real estate gives you the freedom of a flexible schedule with the power to make as much or as little as you want. However, it’s important to avoid making these common rookie mistakes so you can make the most from your investments. Read more