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Arizona Hard Money Loans: A Step By Step Look

While most individuals go through a traditional bank loan process in order to buy a home, those who purchase homes for investment purchases often turn to other alternatives to fund their ventures. This is because banks often have stricter policies regarding the amount of money you make and how much they’re willing to lend you. When you purchase homes for the purpose of renovating and reselling them, this can make buying the properties you need difficult, if not impossible. This is why many real estate investors are turning to hard money loans in Arizona to fund their purchases. These loans are obtained from private individuals or organizations, making them somewhat easier to obtain and providing more flexible terms and faster turnaround times. Because these loans use the property as collateral, there is little risk to the lender or the investor, making them an excellent choice for real estate development investors. How does this process work?

Determine Your Goals

First and foremost, you need to determine your goals as a real estate investor. Are you looking to do this on the side for a little extra spending cash? Do you want to make this your full-time job? How many homes do you intend to purchase and resell and in what timeframe? Establishing your goals and writing them up as a business proposal are critical in getting the funding you need. The property may serve as collateral, creating less risk for the lender, but that doesn’t mean they don’t want to know what you intend to do with the money they are providing. The more detailed your goals and plans are, the more likely they will believe in your project as much as you do. It’s typically best to have a property in mind, providing the location of the property, your estimated budget for the project and how much you’re aiming to resell the home for. If you’ve done other projects in the past, before and after pictures can be useful as well. All this information is invaluable in giving the lender peace of mind.

Locate Lenders

Once you have your plan in place, you can start actively pursuing hard money lenders in your area. If you know others who are involved in these types of projects, ask them for referrals. Local real estate clubs and other similar organizations can also be valuable resources to find hard money lenders in your area. When you find lenders to consider, chances are they will want to do some research of their own before even considering your proposal. This means they may look into your background a bit, although they won’t be as concerned about your finances and credit as more traditional lenders. They will also want to research the property you’re considering, so they can get a good idea whether it’s likely to return on the investment as you hope. After all, the property is what secures the loan and ensures they get their money back as promised.

Fill Out an Application

Although the process is different from traditional bank lending, you will still need to fill out an application if you want to apply for a hard money loan. This application allows the prospective lender to look at your credit report, as well as any other necessary financial information to help them make a sound decision regarding whether to loan you the money. While these factors certainly aren’t the most important in these situations, they do still need to be taken into some consideration. In essence, you will work with your hard money lender as a partner in the project, which is what makes this type of lending so different from your traditional loans. The lender should be interested in your goals and what you plan to do. If they aren’t, they likely aren’t in this business for the right reasons and you may be better off looking elsewhere. Once they approve your application, the loan goes through the underwriting process, which is similar to that which is used for traditional loans.

The Underwriter

In simple terms, the underwriter is the individual who assesses the level of risk to help lenders decide if providing the funds is the right option for them. After all, the loan is no good to them if the individual taking it out won’t be able to repay it. They will approve the loan based on the value of the property, your credit and your capacity to pay the loan back. Property value is the most important factor in the calculation of hard money loans.

Closing

The final step in the process of obtaining a hard money loan is the closing. This is the time when you and the lender will sign all documents related to the terms, including payment terms, amount of the loan and more. An escrow agent should be used to ensure everything is in order and ready to go. Once all the paperwork is signed, you’re ready to begin renovating the property so you can turn it around as quickly as possible.

Why Commercial Loans in Arizona Can Grow Your Business

If you’re the owner of a business, chances are that you already know that growth can be difficult. After all, it’s challenging enough to start a business in Arizona much less expand it. But the good news is that you can give yourself and your business a much needed boost by getting a commercial loan. If you’re hesitant, you’re not alone. However, it is important to consider the following when deciding whether or not a commercial loan in Arizona is for you.

A Commercial Loan Is a Long-Term Solution

Whereas other types of loans are meant to be repaid quickly, commercial loans in Arizona are meant for those who have long-term, multi-stage plans for their business. Many different kinds of long-term payment plans are therefore available, allowing you to move more steadily and carefully along with your plans. This in turn allows for better results.

A Small Loan Now Can Lead to Big Time Results

Commercial loans are intended for those who have a solid business plan and are looking to see considerable growth over a period of time. And because the overhead costs of securing the loan are relatively cheap, many business owners in Arizona who use a commercial loan to invest in their business end up seeing a lot more growth than first anticipated.

Large Amounts Can Be Loaned Out at a Time

There is no “standard” amount when in comes to commercial loans, and while many people choose to start off modestly, many others are able to foresee that they’re going to need a lot more help. Need a lot of money upfront to achieve your business dreams? Hey, the truth is that most business owners do. And with a commercial loan, you can get the money you need right from the start or work out a system where you’ll have access to it over time. Because these commercial loans are meant specifically for business ventures and, again, long-term plans, you are much more likely to be approved for a large sum of money than with other types of loans.

Commercial Loans Are Lower Risk 

Overall, commercial loans in Arizona are considerably lower risk than many other types of loans often sought out by business owners or general entrepreneurs. This is largely due to the fact that many types of commercial lenders do not require any collateral upfront, though it also helps that these loans have flexible repayment plans and generally high approval rates.

Never Lose Ownership of Your Business 

Going along with the above, lot of other types of lenders require collateral like the property deed or even ownership of the business for the duration of the loan period. It’s important to realize here that even though the lender may not be acting on their ownership, they can take it over in the end should even a small error occur on your part.

Considering the Bottom Line

It’s true that not all businesses need a commercial loan to get ahead, but they are often few and far between. If anything, those that do take advantage of commercial loans in Arizona are making an important and well calculated investment in their business and their future.

7 Best Arizona Cities for Real Estate Investments

Are you ready to invest in real estate? If so, Arizona is a great place to make this investment. But, do you know which cities are best when it comes to real estate investments? If not, then you definitely need the information found here.

If you want to invest in the best markets for real estate in Arizona, you definitely are not alone. When it comes to real estate activity, Arizona’s a hot bed; however, the following seven cities are considered the best when it comes to making a real estate investment.

Each of the cities in this list have made top spots in real estate guides and are considered great locations by experts in the industry. Also, due to the fact that the areas are growing, the investment you make will only appreciate in value.

1. Laveen

Considered one of the strongest real estate investment locations, this city has a vacancy rate that’s under one percent. When you add that to the fact that the neighborhood has a rental return rate that is, on average, 11 percent, it’s pretty clear why Laveen is such a great place to look for investment real estate.

2. Scottsdale

While Scottsdale may be considered part of the valley, it’s also a pretty unique suburb that is attractive to individuals from all walks of life. Featuring a wide array of exciting nightlife, a unique western flair, amazing hotels and highly rated restaurants, it’s not surprising that so many visitors have decided to call Scottsdale home. As an extremely desirable area in the valley, there’s also a huge supply of investing opportunities found here.

3. Queen Creek

One of the factors that has made this location grow in popularity is how close it is to Mesa Airport. Another factor is the real estate prices. Vacancy rates are low and the returns on rental properties are almost as high as what’s seen in Laveen.

4. El Mirage

Affordability is the driving factor when it comes to growth in El Mirage. Right now, the median home value in this city is $110,000. This location is home to more than thirty bars, coffee shops and restaurants. If you want a great opportunity, then you should check out El Mirage.

5. South Phoenix

Another city that boasts lower than average vacancy rates and great returns on rentals is South Phoenix. It’s also close to many popular attractions, such as Tempe Town Lake, the Botanical gardens and the zoo.

6. Maricopa City

With a vacancy rate under one percent, this area has seen an increase in residents. There’s also a 10 percent return on real estate investments here, which makes this is a great place to make investments.

7. Tucson

Tucson is to the south of Phoenix and home to three natural forests. It also boasts a mild climate and great culture, making it a growing market. This city attracts both renters and buyers from the entire country.

Real Estate Investment Loans

Finding the right location and property is the first step when investing in real estate in Arizona. The next step is to get financing. You can opt for non-traditional lenders, which offer the money you need faster than a traditional bank. Hard money lenders also don’t require mountains of red tape like a traditional lender does. This makes it much easier to get the financing needed.

Arizona Business Loan Options

When exploring business loan options in Arizona, company owners are often surprised by the various types of financing they have access to. And for many company owners, it is especially surprising the benefits to be gained when going to an alternative lender. 

Securing funding is the first step that must be taken when starting a business. And while many business owners will visit a local bank in hopes of getting a business loan, this type of lending comes with certain hurdles to overcome, especially when compared to going to an alternative lender.

Understanding the Benefits of Alternative Lending

There are many benefits to alternative lending. One of the primary benefits is that these types of lenders have a higher and faster approval rate, and secondly, they allow you to obtain funding in a shorter amount of time because they are an independent entity, resulting in a higher success rate.

When choosing to go with an alternative lender, borrowers will find that the lenders are more flexible in regards to qualifications that must be met. More so, when in need of financing for inventory purposes, alternative loans tend to be far more successful. In fact, most banks will not provide any type of financing for inventory. In addition, most alternative loans will not require the business owner to use his or her personal assets as a form of collateral for the financing; this not only increases a borrower’s confidence in being able to get approved, but it also adds to the personal security that the borrower is able to sustain in knowing they don’t have to put their personal assets on the line in order to secure a loan.

Credit Is Not an Issue

Another benefit of alternative financing is that when trying to obtain a business loan, your personal credit is not a factor. Unlike most banks, alternative lenders won’t dive deep into the borrower’s personal finances. Instead, they look at the merits of the company, not the borrower.

Save Time

Lastly, if you have ever applied for a loan at a bank before, then you know that the process can be arduous and lengthy, many times taking weeks to process. In fact, the actual loan application process can take upward of three months. By the time the bank is ready to fund your business loan, you may not need the money anymore. Or even worse, your business could be collapsing by the time the funding comes through.

The Takeaway

To maximize your business opportunities, especially in relation to time-sensitive matters like landing a new client, you should carefully consider the benefits to be gained by working with an alternative lender.

3 Things to Look for in Private Money Lenders

If you have made the decision to get in the investment property game, that’s a great move. Regardless of if you are planning to flip a few single-family homes or become a landlord by investing in a multi-family property, the first step is to determine how you will finance your project. After all, if you don’t have a clear idea of where your funding is coming from, you aren’t going to be prepared to make any offers on the property to begin with.

What you need to understand is that making real estate investments usually follows a different path that buying a primary home. Most investors use private money lenders. That’s because this allows them more flexibility and they will have the chance to build a business relationship that only becomes more beneficial for both people involved over time.

The challenge is finding the right lender. If you want your deals to move quickly and easily, then you need to do your research to find the right lender.

Three things you need to look for in a quality private money lender can be found here.

1. Responsiveness 

One of the biggest benefits offered by working with private money lenders over a traditional finance company or bank is that deals are usually closed much more quickly. In fact, it can be done in just days, instead of weeks or longer. This is why the lender you choose needs to be responsive. If you have found the ideal property, you don’t want to put it in jeopardy by working with lenders that take much to long to respond.

2. Transparency 

During any transaction, you want to make sure you know what’s happening each step of the way. Reputable lenders are going to ensure you remain informed, and they will also adhere to the guidelines and the regulations that have been set by the local or state government regarding the loan origination process.

3. Competitive Points and Rates 

When you are shopping for a lender, regardless of if it is for more traditional lending or from a private lender, one of the most crucial things that you need to consider is the points and interest rates associated with the loan terms. With that in mind, you also need to know what you are looking at. The points and interest rates for any type of single-family home mortgage from a typical lender are usually going to be significantly lower than the rates provided by private mortgage lenders.

This is because a traditional mortgage is given with the thought that it is a long-term investment. Lenders know they are dealing with fix-and-flip properties and investments. You can’t try to compare the rates of a private money lender to what a large bank offers. That’s like trying to compare oranges and apples.

You also need to think about the type of funding you are going to have to have. Certain fees and down payments are considered standard in the industry, but you should not be “fooled” by a company that wants you to put down a huge “engagement fee” as well as the typical fees.

5 Things To Know Before You Flip A Phoenix Property

1. Many real estate investors in Arizona understand money is made when they purchase a house, not when they sell it. A lot of people are mistaken when it comes to flipping houses. They think they will buy the house, make any necessary repairs, give the home a little uplift, and then turn around and sell it for a major profit. What they fail to realize is there are numerous fees tied to flipping a house, like title company fees as well as potential buyer contribution fees, both of which can eat away the profit. And unfortunately, these fees are large enough that they eat away the entire profit and cause the flipper to lose money.

This is why the purchase price of a home is far more important than the intended selling price. Amateurs in the real estate business in Phoenix and Scottsdale often fail to understand the complexities involved in flipping a home. Take for example the vacant property insurance that has to be paid while the home is sitting on the market unsold. When you combine this expense with the cost of renovations and other taxes, it makes it fairly difficult to make a profit.

2. There is also the aspect of getting an Arizona home inspection performed that real estate investors need to be aware of. And even though this inspection tends to cost several hundred dollars, in the long run, it tends to be worth the investment. Having this inspection conducted will reveal any hidden major aspects of the home that need to be repaired that were not initially seen during the first walk-through of the home. Things like an improperly installed HVAC system or rotting wood under carpeted floors are both major repairs that a home inspection can uncover. It’s also important to have an inspection performed because it’s during this period of time that the house is still under contract, and if preferred, the buyer can cancel the contract and choose not to purchase the home.

3. Many investors who purchase a Phoenix home think they can perform all of the remodeling themselves, thus allowing them to save money and walk away with a higher profit once they flip the home. What they don’t realize is there are numerous remodeling jobs that need to be performed by professional contractors, especially anything relating to plumbing and electrical. Also, when investors perform all of the remodeling themselves, this extends the total amount of time it takes to remodel the home, thus increasing the amount of time the home sits on the market. The longer it sits, the lower the profit. This is why most successful home flippers agree that it is best to have professional contractors perform most of the remodeling to ensure it is completed correctly the first time and in a reasonable amount of time.

4. If you have the intention of flipping a home in Arizona, your goal should be to remodel it as quickly as possible and sell it even quicker. This is a major reason why numerous seasoned investors will price a piece of property several percentage points lower than what the competition will. In doing this, it allows them to resell the property according to a much faster timeline and decrease the amount of money they spend on holding and financial expenses. Time and time again we see that selling a home faster at a lower price will turn into a higher profit than pricing it higher and having to wait for months on end for it to sell.

5. You should hire an experienced agent. You may think that purchasing a home, remodeling it, and listing as for sale by owner is the best route to take, but it most definitely is not. And even though you may be turned off by the fact that most Arizona realtors have a six percent commission they keep for themselves when listing a property, the advantages a realtor can bring to the table are typically well worth the commission they earn. If you take the route of listing the home through sites like Craigslist, Zillow, or ForSaleByOwner, you are probably going to have to wait for an extended amount of time before you find a potential buyer. And once you do find a potential buyer, you may discover the buyer has a realtor working for them. If this is the case, you may have to be out a three percent buyer’s realtor fee anyway. When you have a realtor in your corner, you are going to receive much better exposure, meaning the home is likely to sell much more quickly than if you try to sell it yourself, and even better, since you are likely to sell it much more quickly, you can list it at a higher price.

Why Real Estate Investors Use Hard Money Loans

There are several reasons that real estate investors are choosing hard money loans. The primary reason is the ability the lender has to fund a loan quickly. In the majority of situations, hard money loans can be funded in a week or less. If you compare that to the 30 to 45 days that it can take to have a bank loan funded, it’s pretty speedy. Additionally, the application process for a hard money loan usually only takes a day or two, and in some situations, your application can be approved during the same day. You will never hear from a traditional lender about approval within the same week.

The ability that you have to obtain funding faster than a bank loan is a huge advantage for the average real estate investor. This is especially true when an investor is working to acquire a property with quite a few competing bids. Having a fast closing with a hard money loan can help to get a seller’s attention and ensure that the offer is set apart from the remainder of buyers who are using conventional financing methods.

Another reason that a real estate investor may opt for a hard money loan is if they have already applied with banks but have been rejected. Unfortunately, life isn’t always perfect, and it doesn’t always go as planned. Credit issues, foreclosures and short sales all happen. Another crucial thing that banks need access to is a person’s income history. If the borrower has recently begun a new job, then the bank may decide to deny their request for a loan because of an insufficient income history. This is the case even if a borrower has a pretty good income.

A hard money lender can look past all these issues. They will make a decision based on whether or not the loan will actually be repaid and whether or not the borrower has plenty of equity invested in the property in question.

Points and Interest Rates Paid for a Hard Money Loan

The points and interest rates charged by a hard money lender are going to vary from one to another. They can also vary from one region to another.

Because these lenders are taking on more risk compared to traditional financing methods, the interest rates are typically higher. Additionally, the points usually range from two to four percent of the total amount of the loan. Be sure to keep this in mind when considering this type of loan for your real estate investment.

Loan to Value Ratios

The loan amount that the hard money lender lends is usually determined by the value of the property divided into the loan amount. In most cases, a borrower will be able to access 65 to 75 percent of the property’s current value. While this is a riskier loan, it’s still beneficial to anyone who is borrowing the money in order to have access to faster funds.

When it comes to taking out a hard money loan for a real estate investment, there are many things you have to keep in mind. It’s best to be informed to get the best possible results. To find out more, contact Barrett Financial Group today at 480-999-6183.

How to Build Trust with Private Money Lenders

Trust – It is the foundation of the private money world. Private money lenders are trying to find ways to reduce their risk and trust goes a long way when trying to reduce the perceived risk present. While you can create contracts, deeds and notes, all these documents are no good if you aren’t honest and trustworthy.

The question you have to answer is how to build trust with lenders. The good news is, there are several ways you can do this. Learn some of the methods here.

Be Trustworthy

This is simple, but extremely effective. Just do what you say you are going to do and live up to your commitments. Show up to appointments on time, pay your bill and follow through on promises. All this is going to affect the way other people view you, and your trustworthiness. Private lenders are likely going to ask about your character, so make sure you are trustworthy.

Document Your Trustworthiness

If you’re trustworthy you can prove it with documentation. Create a “Banker’s Book” showing your trustworthiness. Also, acquire a copy of your credit report and show how other real estate projects you have taken on were successful. Include a list of references in your book.

Explain Things with Simple and Clear Language

Don’t try to spout all types of real estate and technical terms. Most people won’t understand and may become confused or turned off from the deal. It’s better to keep things simple and explain what you are doing in clear terms. In most cases, lenders only want to know how and when they will get repaid.

Listen to Find Out What Your Lender Wants

Much of what makes a successful real estate investor is listening. Stop to listen to what your potential private lenders have to say. Don’t just focus on your needs. Find out what their goals and needs are to ensure they get something out of the deal, too.

If you want to work with private lenders, be sure to be trustworthy and find out what your lender wants. In the long run, this will help you be more successful.

Mistakes To Avoid As A First Time Investment Property Owner

So you’ve decided to start thinking about the future and finally take the leap into property investment. Congratulations! Being a property owner can be incredibly rewarding both personally and financially, but only if you make the right moves. Fortunately, many people have been where you are now, and you can learn from their mistakes to ensure you get the most out of your investment property endeavor. So with that in mind, here are the top mistakes made by first time investment property owners that you should do your best to avoid:

1. Not Treating it As a Business

Make no mistake; investing in property ownership is a business. You therefore need to keep emotions out of your decisions and make smart, analytical moves. This should go without saying throughout the process, from deciding which property to purchase in the first place to filling it with tenants and maintaining it. On that note, it is also a good idea to consider enlisting the help of an experienced property management company.

2. Relying on Appreciation Alone

A lot of people tend to buy property with the expectation that, with time, the property value will go up and they’ll get a big payoff in the end. While property values do tend to increase with time, the truth is that the monetary difference is often not nearly as much as people expect. Additionally, outside, uncontrollable factors like the fluctuating economy and occurrences in the surrounding local community play a huge role in property value. So when you purchase property, you need to not only make sure that there are unique aspects about it contributing to its value but that you are also willing to put in additional work to make sure that happens.

3. Not Doing Enough Research

Many first time investment property owners also unfortunately do not perform adequate research before making the decision to purchase. But just because a place looks good on the surface does not mean it’s automatically a smart investment. It’s important that you do your research into things like the building history and any structural damage / repairs, the surrounding community and any potential crime / economical issues, etc. Doing so will also help prevent you from overpaying on a property.

4. Not Properly Assessing Your Financial Situation

It may seem like a no-brainer, but a lot of people still underestimate the importance of making sure all their finances are in order prior to investment. You need to make sure you at least have enough money for a down payment, much less be able to continue making payments. Even if you can afford the property outright, you need to make sure you have the funds for things like property taxes, repairs and renovations.