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Understanding Hard Money Lending in Arizona

Most people are well familiar with the traditional types of bank lending many individuals use to finance purchases like homes and vehicles. However, when you’re interested in real estate investing, there are other options you should explore. In Arizona, hard money lending is a viable option to help you more easily purchase the properties you want to use as either rental properties or to renovate and flip for a profit. Regardless of what type of real estate investing you’re interested in getting involved in, it’s essential to have a firm understanding of what hard money lending is and how it can benefit you.

What Is Hard Money Lending?

Traditional loans often require extensive credit checks and income verifications in order to be approved for the loan. This is where hard money loans are different. These loans are typically asset based and simply require you to have a valid property to put down as collateral. Hard money loans are most often obtained from individual investors or companies that specialize in this type of lending, rather than more traditional banking institutions. This means they aren’t likely to complete any of the income verifications and credit checks typically used to determine loan eligibility. Instead, they will look at the property you are interested in buying and put money up to fund the project as an investment. You are able to get the funds more quickly than traditional bank loans, but it’s essential to remember hard money loans are used for a shorter time, making them ideal for those who purchase properties, fix them up and sell them for a profit. In most situations, they are used to increase the value of the property.

How Do They Work?

When you’re ready to take on one of these real estate projects, you’ll need to put together a proposal that includes current details about the property, such as the purchase price and what type of property it is. This information must be presented to a prospective lender in order to let them see what they are investing in. However, it’s not just about the current state of the property. They will also want to know what types of improvements will be made, how much those will cost and a projection of the increase in value. This can help them decide whether your project is worth the investment. Rather than being concerned about your financial ability to pay back the loan through credit checks and income verification, they are far more interested in the value of the property and what kind of turnaround it will see. Because of the way these hard money loans are set up, if you fail to pay back the loan in the agreed upon timeframe, they are able to seize the property and sell it themselves to regain the money they’ve lost. This is why a collateral-based hard money loan can be beneficial to all involved without worrying about credit and income guidelines usually used to determine loan eligibility.

It’s important to note hard money loans typically only last between a few months and three years, giving you enough time to improve a property and sell it for a profit. Because the timeframe is so short, you can also expect higher interest rates, ranging between 10 and 18 percent. While this may seem like a disadvantage, the potential in this real estate investment opportunity far outweighs the interest rates.

Top 10 Tips to Sell 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).

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).

The Growing Popularity of Hard Money Loans

The past several years have seen significant growth in a certain lending trend– hard money loans. Though it has technically been around since the 1950s, this form of lending has grown in popularity for a variety of reasons. People are drawn to them because they tend to have faster documentation and approval processes, are mutually beneficial to the borrower and lender and are generally free of frivolous costs and fees, not to mention the fact that they are also not based on credit scores. But before deciding to jump on the bandwagon, both investors and potential borrowers should learn as much as possible about this arrangement.

Where Does ‘Hard Money’ Come From?

Rather than banks, hard money generally comes from private lenders. Instead of credit scores, it is based on assets and the value of the project or property the money will be funneled toward. This means fewer obstacles and, usually, less time between the loan application and the release of funds.

What Are Hard Money Loans Intended For?

Hard money loans are meant for projects like construction and remodeling, house flipping, property purchases and real estate transactions in general. They can be used for both long-term and short-term projects, but most financial experts recommend going for short-term because there is a lot more uncertainty with long-term situations. For example, project values can change, and borrowers may find that they still don’t have enough funds, or investors may see their returns not turn out as expected.

The Mutual Benefits

Again, the borrower often has faster access to the money they need in addition to having less red tape to cut through. Instead of having to go to a bank with a proposal or address a committee, the borrower deals directly with an individual or small group of lenders, and the approval process generally just consists of whether or not the lender will say “yes”. The lender meanwhile benefits by getting a higher return on their investment– in this setup interest is either a fixed amount or at a higher percentage than private banks. And just as the borrower gets the invested funds faster, the lender also has less paperwork and legal matters to wade through in order to get their return.

Know the Law

Generally speaking, there are actually not too many laws governing hard money loans (part of the reason the lending process is easier is because it’s largely unregulated). That said, certain states (like Tennessee and Arkansas) have restrictions placed on interest rates that can ultimately affect hard money arrangements. Both lenders and borrowers should thoroughly educate themselves on their local state laws before moving forward with a hard money deal.

The Bottom Line

Hard money loans will most likely continue to grow in most areas, especially in places where real estate and construction are booming. Interested borrowers should talk with local private lenders about this opportunity.

Tips to Avoid Paying Too Much for an Investment Property

There is no question that purchasing investment property is becoming something that is growing in popularity. After all, land and property is the one thing that there will never be more of. However, for those who are new to purchasing investment property, there are several things that must be known. Some tips to ensure you don’t overpay for this investment can be found here.

Determine the Median Price in the Selected Suburb

If you have plans to invest in property, you should first find out what the median price for the suburb was and which prices fell or rose in the previous year. Also look into the prices for the past five and 10 years. In most cases, this information can be gathered with an online search.

Utilize the Services of a Buyer’s Agent

It may be smart to engage the services of a buyer’s agent who is an expert in the area and able to provide reasonable guesses regarding the value. The buyer’s agent will also be beneficial if the market is going to auction and make bid’s calmly without any emotion. These services are invaluable when attempting to purchase investment property.

Track the Property Sales

It is a good idea to track the property sales in your selected suburb and learn what properties will go to auction on a weekend. Pay attention to similar properties that are sold, as well. This will ensure you get a great deal on the investment property you are considering.

Be Ready to Take Action

Be sure that you know what you can spend before looking into any investment properties. There is no reason to negotiate a great price and not be able to go through with the deal. It may be wise to seek a loan for the investment property prior to searching. This will let you know for sure what type of investment you can afford to make.

Time is of the Essence

If you are planning to make an investment in property, you have to remember that time is of the essence. After all, if you wait, then it may result in someone else looking to make an investment in a low-priced property coming in and purchasing the property instead.

If you are new to purchasing investment property, you have to take the time to know what to do and how to handle the process. If you aren’t careful, you may wind up spending too much for the property that you are interested in. Being informed and even seeking the help of someone who has invested in property before may be beneficial and help you along the way.