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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.

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3 Reasons to Make Sure You Have Sufficient Funds For Your Real Estate Project!

At the time of this writing, flipping houses is on the rise throughout the United States of America. In fact, studies show that the first quarter of 2020 featured more flipped homes than at any point since 2006, a jump of at least 2 percentage points. With real estate flipping on the rise, it stands to reason that more than a few newcomers are finding their way to the industry.

While there are plenty of opportunities available for individuals to build capital through real estate, leaping into a renovation project should not happen until sufficient funds have been accrued. Like many other entrepreneurs in life, we understand the desire to leap first and look later however, today’s conversation will clarify why you should avoid this technique.

Three Reasons to Wait for Sufficient Funding in Real Estate Development

Right now the house flipping market is booming out west. From Texas to Arizona, savvy property investors are accumulating funding to purchase, rehab, and flip their housing investments for profit. With that being said, there is one issue that individuals are struggling to overcome: starting work with sufficient funding.

While you may feel driven to start a rehabilitation project without proper funding, there are a couple of reasons why you should hesitate to embark upon that path. Let’s take a look at three key reasons that you must have sufficient funding in place before breaking ground on your rehab project.

1. The Second Loan Is Harder Than The First Loan

Acquiring a financial loan to complete a house rehabilitation seems pretty simple. Just meet up with your bank, decide on how much you can afford to take out, and let the rest take care of itself… right?

Well, not exactly.

For first-time flippers, it is always better to take out more debt than you might need. If you take out a loan from a financial institution only to see it fall short of your needs, you’ll likely have trouble working with a second lender. Many private money and hard money lenders will not think twice about rejecting a second loan request. 

2. Chances of Failure Dramatically Increase

Whether we are remodeling our home or flipping an investment property, the true extent of hidden costs will not be known until we break ground on our project. Purchasing and flipping a home will require digging deep into the structure of the property, leading to potential costly issues at a later date.

Some common issues that real estate renovation professionals run into are electricity and code issuesimproper building techniquesdeep rot and pest damage, and finally hidden dangers such as asbestos. If you aren’t equipped with the funding necessary to overcome each and every one of these hurdles, you could be stuck with a dead project.

3. Complications Related to Title Insurance

Very few things are as frustrating or necessary as paperwork. Included in the paperwork we’ll have to navigate is our title insurance. Once your home has begun its renovation, it can be hard for a new lender to obtain title insurance due to the fact that construction is likely already underway.

To make life easy during your next renovation or house flipping project, consider working with one of the top hard money lenders in Arizona. Fast and convenient funding helps get your project going!

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.

 

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As Arizona Begins To Re-Open, What Should We Expect From the Commercial Real Estate Industry?

The ongoing coronavirus pandemic has fundamentally changed the world as we know it. As countries around the planet began to shut down, states within the U.S.A.. followed suit. While each state followed its own set of guidelines, the country as a whole experienced a cumulative economic downturn. Now, months later, the state of Arizona is beginning to re-open as life returns to some semblance of normalcy. Unfortunately, life will be anything but normal for the commercial real estate market in the weeks, months, and potentially even years following COVID-19.

Understanding the Impact of COVID-19

While much has been made regarding the discussion of COVID-19s true impact on the country, it is hard to ignore the economic fallout that has taken hold in Arizona’s commercial real estate market. According to a vacancy report detailing post-COVID office vacancies, Arizona’s business sector is sporting Great Recession-levels of vacancy rates within traditional office buildings. A report compiled by the team at Costar projected that vacancy rates in commercial offices will remain between 11% and 15%. Seeing these numbers and understanding their impact are two different things. While only a sliver of the picture, this vacancy number gives us plenty to digest.

Let us briefly chart a few primary ways that the commercial real estate industry in Arizona will shift for the foreseeable future. As the state of Arizona continues to re-open, these expectations should be held for the commercial real estate industry:

  1. Space Requirement Changes – Living in a post-COVID world means acclimating to the new normal. Social distancing, sanitation, and large open spaces will dominate commercial property in the coming months and years. As OSHA and HR reps around the state adjust to these new regulations, expect businesses to need larger spaces for the same amount of work.
  2. Equalizing Rental Rates – As individuals struggle to make ends meet, there is an expectation that rental rates will reach an equalization factor. Landlords who are not beholden to debt or lenders that are offering amenable rates will do what is possible to keep their buildings fully staffed. As landlords compete to retain the best tenants, there is an expectation that flexibility in lending and renting can be met.
  3. Changing Operational Expectations – Industries that rely on call centers will also experience rather large changes in the way that they perform in the post-COVID world. Call centers will be expected to split shifts to reduce the footprint of their employees. Buildings will be reorganized and adjusted for CDC and OSHA regulations which could include the installation of filter systems, sneeze shields, and other sanitary safety measures.

While there is no telling exactly where Arizona will be on the other side of the COVID-19 re-opening, it does appear that the state is primed for a healthy launch. Arizona sports a warm and dry heat thanks to its geographical location. With plenty of room for potential land development and a healthy infrastructure for commercial construction, Arizona is in a primed position to succeed.

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.