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In the Rehab Process? Here’s How to Stay On Track and Under Budget!

Taking on a fix-and-flip project can be a great way to make a profit in residential real estate. With a smart investment and the right planning, you stand to make a significant profit by flipping a property and selling it. Before you get started with any rehab project, though, there are some things you need to know about staying on-track and sticking with your budget.

Plan Your Rehab Accordingly

Start by planning your fix-and-flip project during the right time of year. In general, the easiest times to sell residential real estate are during the spring and summer. With this in mind, it may make the most sense to tackle your renovations during the fall and winter months.

Set Aside a Contingency Fund

No matter how carefully you plan and budget for your rehab project, there are almost always going to be surprise repairs and other unexpected expenses that arise. The last thing you need is to end up going over your budget as a result. By setting aside a contingency fund that makes up between 15% and 20% of your total renovation budget, you can avoid running out of cash.

Account For “Hidden” Costs

There are a lot of obvious expenses you’ll undertake during any fix-and-flip project. Hiring contractors and buying building supplies are a couple of those given costs. However, there are plenty of less obvious expenses you may end up facing that you won’t want to overlook.

Specifically, be sure to budget for costs related to permits, property taxes, ongoing HOA dues, and closing costs/Realtor commissions once you sell the property. These can quickly add up and affect your bottom line if you don’t plan accordingly.

Don’t Overlook the Location

Location is one of the most important factors prospective buyers look at when buying a home. With this in mind, you’ll want to do plenty of research on the location of a potential property before you buy. While you may spend more money up-front investing in a property that’s located in the middle of a busy city, you’re also likely to get a larger return on your investment than a property in the suburbs.

Always Have a “Plan B”

Any experienced real estate investor will encourage you to have an exit plan in place for any project. While it may not be fun to think about, it’s important to plan for a “worst-case scenario.” For example, what will you do if your flipped property doesn’t sell within a few months of being on the market? Perhaps it will be necessary to rent out the property to begin bringing in income and try selling again when the market is looking more promising.

Borrow Responsibly

No matter what your plan is for fixing and flipping a property, borrowing from a reputable lender that you can trust is vital. Looking for a hard money loan for an Arizona real estate property? Hard Money Lenders AZ has you covered! Contact us today at (480) 999-6183 to find out more about our borrowing options, especially as they pertain to our excellent rehab and fix-and-flip loans.

What House Flipping Mistakes Are Costing You Money?

According to a study compiled by ATTOM DATA SOLUTIONS, the house flipping report released in 2020 showed the highest rise in the industry since the second quarter of 2006. As more and more entrepreneurial-minded investors turn to house flipping to pave their way toward financial freedom, it becomes increasingly important to avoid some of the most common house flipping mistakes.

We’ve compiled four key house flipping mistakes that fix-and-flip enthusiasts around the country are commonly falling prey to. With knowledge comes power as well as a larger Return-on-Investment!

Understand Your Budget + Renovation Requirements

First and foremost, house flippers need to approach each project with the right mindset by understanding their budget as well as the renovation requirements in front of them. A common mishap that newcomers and veterans alike will experience, underestimating your renovation budget can lead to a loss on your property and a blow to your morale.

Work with a budget-repair worksheet to properly track the necessary renovations for the flip to become successful. Consider hiring a professional home inspector to look over the property for the most accurate information.

Common Ways to Blow a Budget: A Leaky Foundation, Termite Infestation, Asbestos.

Avoid Overpaying For a Property You ‘Like’

House flipping professionals need to quickly learn to divorce their feelings from their work. Buying homes can become addictive, and it is easy to create an attachment to them. However, these attachments can hurt our bottom line by influencing our willingness to overpay for a property that we enjoy.

Aspiring house flipping professionals will learn early on to avoid letting emotions cloud their judgement. Stick to raw numbers offered by appraisers and home inspectors. There are always new opportunities on the horizon so long as we are smart with our investments.

Lackluster Property Location

So you’ve found a gorgeous home with pristine wooden floors, an extra bathroom, and a sprawling backyard. The only problem? It’s in the middle of an area that is seeing depreciating home prices. The wrong location can quickly derail a property investment. Before signing on the dotted line regarding a property purchase, make sure to take the surrounding areas into account.

Talk with a realtor or search up comparable sales in the area to see how much a property is being flipped for.  Look at how long houses sit on the market, how close the nearest grocery store is, and the proximity that a home is in relation to a school. Every little thing matters.

Avoid ‘Over Improving’ a House Flip

Finally, house flipping pros need to learn early on that they can’t over-improve every property they invest in. Over-improving properties can include adding amenities, upgrades, and materials that don’t mesh with the value of the home.

Instead of focusing on flourishes of wealth, make sure your rehab has all the necessities upgraded to compliance with modern standards. An improved AC system will sell your home faster than a granite countertop.

Budget For Success With a Loan From Hard Money Lenders, AZ

When it comes time to find the hard money loan for your next house flipping project, make sure to turn to a team that you can trust to get the job done right. Hard Money Lenders AZ is the top-rated Arizona hard money lender on Google and the #1 destination for Arizona-based fix-and-flip housing projects.

Contact Hanson Capital at your convenience on their 24/7 line to get funded, today!

image of house under renovation

Flipping Homes in Smaller Towns vs. Larger Markets

A successful home flip generally starts with finding the property with the best potential in the best location. However, a home with an excellent location doesn’t always have to be in a bustling downtown area or a major city. In fact, there can be many benefits to flipping a home in a smaller town rather than in a larger market.

By having a better understanding of these benefits and some other special considerations, you can ultimately make the smartest choice for your next flip.

Greater Affordability

When you’re shopping for fix-and-flip properties in busy markets (such as in major cities), there’s always going to be a lot of competition. This is because in general, the supply of big-city flipping properties is a lot smaller than the demand. Unfortunately, this greater competition also drives up prices. And even if you have the budget to compete with other investors, you could still end up falling short.

Flip properties in smaller towns, on the other hand, tend to be more affordably priced and have significantly less competition. As a result, you can stretch your investment budget even further.

Fewer Zoning Restrictions

Compared to properties in larger cities, homes in small towns also tend to have fewer (and less strict) zoning restrictions. This can make fixing up and renovating a property much easier on you and your contractors. You may have fewer hoops to jump through and more freedom to do what you want with the property, which may make it easier to sell.

Properties in big cities, on the other hand, are often under strict zoning and permitting restrictions that can really hinder your creativity.

Low Crime Rates

While it’s true that many buyers want to live in the city, the reality is that an increasing number of today’s home buyers actually prefer the quieter suburbs. This can be due to any number of reasons, but statistically lower crime rates in smaller towns are probably among the most compelling.

Other Considerations

If you’re thinking about buying a property to flip in a smaller community, there are some things to keep in mind. For starters, be prepared for the possibility that the home may sit on the market for a bit longer than it would in a major city (and plan accordingly for this).

To make your property as marketable as possible, shop for homes that are located near amenities such as dining, shopping, schools, and parks. These kinds of properties will generally have a greater demand than homes that are farther out in more rural areas.

Looking for a Hard Money Loan?

Once you’ve found the right property for your next flip, make sure you have a hard money lender you can trust for a seamless purchase and closing. At Hard Money Lenders Arizona, we specialize in helping investors like you fund your real estate flip projects. Contact us today to learn more about our services and what our hard-working team can do for you!

image of for rent sign

How to Get the Most Out of Rental Income

Real estate investing has rapidly grown over the years with more people choosing to buy real estate to either flip for a profit or rent out for a passive income. However, many people who are new to this type of investing may not be fully aware of how to make the most of their purchases. If you want to maximize your profits from real estate investments, the following ideas can help you think more creatively.

Allow Pets

Many landlords miss out on tenants because they’re more concerned about the damages pets can do and take the easy way out of dealing with it by not allowing pets. If you want to attract a larger pool of potential tenants, allowing pets, even with some reasonable limitations, can do that for you. Be sure to collect a pet security deposit to cover any damages that may occur. This type of deposit is often nonrefundable, but tenants are more than happy to pay if they can get a nice living environment for themselves and their fur babies. This is typically around $250. It’s also possible to charge an extra $25-50 per month for pet rent if you’re still concerned.

Rent for Shorter Terms

Not everyone is looking for a long-term rental to spend a year or more. Some people travel for work, while others may just want a place to rent for a long getaway. Offering short-term contracts can open up your tenant pool significantly. Some renters prefer shorter six-month leases, while others would rather rent month to month so they can move quickly if needed. Think about the needs of your target audience and decide whether these shorter-term rentals are a better option for your rental property.

Furnish the Property

This is especially beneficial if you are considering short-term leasing, such as for business people who may be staying for a contract period. Some businesses will even rent properties with furnishings and move various business people in and out as their contracts dictate. If your property is located close to a college, providing furnishings can make your rentals more appealing to students who may be looking for alternatives to on-campus housing. There are many reasons individuals may be looking for furnished rentals that provide most of what they need. All they need to do is bring themselves, their clothes, and personal effects. Before you furnish any apartments, though, take a look at other local furnished apartments so you can remain competitive. While furnishing your properties is costly at first, it can pay off in the long run.

Add Extra Amenities

People are always looking for things that make a rental property stand out. Consider adding some extra amenities to make your rentals more attractive than the alternatives. Alarm systems, for instance, are an excellent addition, especially in more urban properties, to not only give your tenants greater peace of mind but to show them you are putting in the extra effort to make their stay in your property more enjoyable.

When investing in rental properties, it’s crucial to find the best ways to ensure a steady flow of income. Thinking outside the box is essential to your success. When you consider these ideas and come up with a few of your own, you can make your rental property truly stand out.

image of home and money held in hands

How Hard Money Lending Can Benefit You

Gone are the days when the thought of hard money lenders evoked images of shady lenders doing deals in dark alleys. Hard money lending has evolved into a reputable financing source for many people. There’s a lot of things that hard money lenders can do for you.

The Benefits of Hard Money Lending

Fast Process

Traditional lenders engage in a slow process, even if you have a good income and a good credit score. Hard money lenders take a different approach. Hard money lenders lend based on the collateral securing the loan. With this approach, they are not concerned about how you can pay the loan back. A hard money lender will just take the collateral and sell it in order to get repaid. That being said, your collateral’s value takes precedence over your financial position. Because hard money lenders are focused on collateral, the loan can be closed much more quickly than a traditional one. Hard money lenders do linger going through your loan application with a fine-tooth comb. They don’t spend time reviewing your income or verifying your current income. As a result, the loan process moves more quickly than a traditional loan. You can close a deal quickly with a hard money lender. And that’s very important in a hot market. You’ve got to be able to move fast.

Flexibility

With a hard money lender, you get some flexibility when compared to a traditional loan. Each deal is evaluated individually, instead of utilizing a standardized underwriting process. In addition, a hard money lender is much more willing to talk with you. It may be possible for you to tweak some things, such as repayment schedules. Instead of dealing with a bank with strict policies, the policies of a hard money lender are flexible.

Approval

Since the most important criteria for a hard money lender is collateral, approval is much more likely. A hard money lender will lend only as much as the property’s worth. If you need to borrow against a different property, that’s the value of that property will be what the hard money lender is interested in. Negative items on your credit report or previous foreclosures are much less important to a hard money lender than a traditional lender. Keep in mind that many hard money lenders maintain loan-to-value ratios (LTV). Their maximum LTV ratio may be from 50 percent to 70 percent. That’s a low ratio and hard money lenders know that they can sell the property quickly to get their money back. So, you’ll need some assets to qualify for a hard money loan. The bottom line is that your approval is much greater with a hard money lender.

Keep in mind that hard money loans make good sense for short term loans. That’s why so many fix-and-flip investors use hard money loans. Investors own the property just long enough to increase the value of the property. Then, they sell the property and repay the loan. This is often done within a year. If an investor plans for a longer time, he usually refinances for a better loan.

All around, the benefits of hard money lending are good when you know what you’re doing.

 

image of couple fixing and flipping a house

4 Things to Avoid When Fixing and Flipping a Property

Diving into the real estate investment world can be very exciting—and there’s certainly a lot of money to be made. If you don’t have much experience or haven’t done your research, though, your first fix-and-flip could end up being a disaster. By being aware of some of the most common mistakes investors make with fix-and-flip properties and how to avoid them, you can come out on top.

Paying Too Much for the Property

Start with knowing how to determine a fair asking price for the property in question. Many factors need to be taken into consideration when deciding how much to pay for an investment property, including:

  • the location
  • square footage
  • number of bedrooms/bathrooms
  • overall condition

And of course, you’ll also need to consider how much you’ll be able to realistically sell the property for once you’ve made the improvements. Make sure an investment property is going to be worth your time and will actually pay off in the long-run. Otherwise, you’re setting yourself up for failure right from the beginning.

Doing Too Much (Or Too Little)

Deciding on how to spend your renovation budget on a fix-and-flip property is a very precise science. You’ll need to have a solid understanding of which improvements and repairs will ultimately yield you the best return on your investment. From there, you can make smart choices moving forward.

For example, did you know that adding a wooden deck or patio on an investment property can bring in as much as a 90% return on your investment? Other projects to consider that can really pay off include bathroom/kitchen upgrades and landscaping improvements.

Choosing the Wrong Professionals

Even if you consider yourself a DIY expert, you won’t want to take on an entire fix-and-flip yourself. Instead, your time and resources will be better spent making big-picture decisions and overseeing a team of experienced and licensed professionals.

The contractors you choose to trust with your property’s repairs and improvements can have a huge impact on the results—and on your bottom line. Take the time to screen and interview potential contractors, and always make sure they’re properly licensed, bonded, and insured.

Making Polarizing Design Choices

Ultimately, your goal with an investment property should be to appeal to as large of an audience of potential buyers as possible. This means that you’ll want to avoid making polarizing design choices and keep things neutral instead. As much as you might love the idea of installing a bright and bold backsplash tile in the kitchen, you’ll probably get better feedback from potential buyers if you stick with something neutral and in-demand, like a white subway tile backsplash.

As you can see, there’s a lot to keep in mind when it comes to taking on a fix-and-flip property. By starting with the right purchase price and choosing a team of reputable contractors to carry out your projects, you’ll be well on your way to making some money with your first real estate investment!

3 Rules for Buy and Hold Real Estate Investing in Arizona

If you’re interested in getting involved with real estate investing, you have a vast number of ways to go about it. Today, one of the biggest trends in real estate investing is purchasing cheaper properties in order to make renovations and flip them for a profit. However, one of the long-standing methods of purchasing properties with the intention of renting them out to generate a steady flow of income continues to be popular. Before you embark on this type of investment, there are several rules you need to learn so you can be successful in your real estate investment venture.

Establish an Exit Strategy

Although buy and hold real estate investing is intended to be used for longer term gains, it’s still important to have an exit strategy in mind, even before you begin buying property. By creating a plan for how or when you are likely to exit this type of investment, you can clearly get an idea of whether this type of investment is the right choice for you. It also ensures you have done your research and are fully prepared for your duties as a landlord. Be sure to consider what you will do if the housing market experiences another crash or what you intend to do if the property isn’t turning a profit as expected.

Utilize Your IRA

While most people try to get a traditional mortgage loan in order to fund their buy and hold real estate investments, this may not be your wisest choice. If you have a self-directed IRA, you are able to choose the ways your money is invested, including buying investment properties. You may be able to purchase residential or commercial property, as well as undeveloped land, as part of your investment portfolio through this type of IRA. However, it’s important to proceed carefully because you could incur tax penalties that aren’t worth the investments you’re trying to make. Keep in mind you won’t be able to live in the property if you take this path and you must have a balance in your IRA that can also cover future expenses, such as repairs and taxes. You also cannot give yourself a salary for managing the property yourself.

Evaluate the Property’s Potential

Just as you would carefully consider all factors before buying a home to live in with your family, it’s important to put the same amount of consideration into buying rental properties. After all, you don’t want to invest money into a property that is in a poor location that is unable to perform in a way that not only gets back the money you’ve spent, but also turns a profit. When you’re purchasing commercial properties to rent out, you will need to evaluate traffic patterns and ensure the right number of people have access to that property in order to attract customers. Residential properties should be located in areas in high demand and with reasonable average rent prices in order to be successful. These are all factors any lenders will also look at before they approve you for a loan.

Purchasing property as a buy and hold real estate investment can be a lucrative option, especially if you’re more focused on longer term investments. However, this isn’t a process that should be taken lightly. In fact, there are rules that should be followed and considerations to make to ensure you’re getting the best possible return on your investment.

Top 10 Tips to Selling Faster in Phoenix

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).

How Arizona Fix and Flip Loans Work

Popular shows like Flip or Flop and Fixer Upper are viewed by millions of people each day. After just a few episodes, it is evident that in the pursuit to make a profit, “flippers” do not always know what is lurking behind the walls and in the crawl spaces of the properties they buy. In order to mitigate these types of risks, it is best to devise a business plan. This plan should always ensure that enough money is being borrowed to cover the costs of any necessary renovations.

In order to invest in a fix and flip that is worth your time and money, you must first determine if it can be bought below market value. To increase the value of the property, you would then perform a rehab that consists of making improvements and repairs. Once the updates and repairs have been made, the goal would be to sell the property at a profit.

With the market full of great opportunities for fix and flip projects in Arizona, many investors look to an Arizona FIX AND FLIP LOAN. The loan does not follow customary financing and the funds received are secured by the value of the property. The loan is financed using the foreclosure of the property as collateral.

A fix and flip starts with finding the property you want to invest in. From there, you start devising a plan on how you will finance the purchase and rehab costs. This will include financing for the purchase price of the property, the holding cost, the cost needed to rehab the property, and any closing cost. Due to not meeting FHA guidelines, Fix and Flip loans do not qualify for traditional financing, and rarely do banks take part in such loans.

Unfortunately, with the level of risk involved and the speedy turn around time, you should expect to pay higher interest rates on Fix and Flip loans.

Numerous options are available to acquire an Arizona FIX AND FLIP loan, but most property investors know that the easiest and most straightforward route is to find a hard money lender. Arizona hard money lenders are individuals or private investors that know your success means translates into their success as well. With lower qualifications and a quick approval and funding process, many people have found success through a hard money lender.

The good thing about an Arizona fix and flip investment is that you don’t have to have an excellent credit score or even a down payment. With a good business plan, a carefully-planned strategy, determination, and good work ethics, you can take advantage of the great fix and flip market in Arizona. Contact Barrett Financial Group now to learn more about Fix and Flip hard loans.