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.
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.
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.
If you’ve been thinking about earning money flipping houses and investing in real estate, it will be important to find a lender who will be able to help you get the money you need to purchase these properties and make the necessary renovations to turn a profit. Hard money lenders are one of the best ways to ensure you have the financial backing you need to successfully flip homes. Unlike the traditional mortgages most people get, these types of loans don’t look at your credit, but are instead based on the value of the property itself. This means they are typically easier to qualify for.
A Higher Risk
One of the few downfalls of using hard money lenders is the higher interest rates they charge. This is because this type of loan is generally a higher risk for the lender. They often put in a high amount of capital and the borrower invests little of their own money. However, the property itself is the protection against defaulting on the loan, which typically means a much lower loan to value ratio, In many ways, the benefits of using this type of loan far outweigh the risks, such as the higher interest rates.
A Faster Turnaround
When it comes to obtaining a loan for flipping homes, a fast turnaround is essential. Waiting to be approved for a traditional loan can take weeks or even longer in some situations. However, when you find a hard money lender, you will be able to get the money much faster and get to work. In addition, low-cost homes that are typically sought-after by this type of real estate investor often close quickly on the market. Having to wait for a traditional loan can lose an investor the sale and cost them a valuable investment.
A Short-Term Solution
Traditional mortgages are designed to be paid back over a much longer period of time. If you’re buying a home to flip it, chances are you only plan to hold onto the home for a few months while you make some necessary renovations. Hard money lenders often focus on providing loans that are meant to be paid back in less than a year. In addition, they are much easier to qualify for, allowing you to get the money you need to flip a home and get the most from your investment.
If you’re interested in investing in real estate, such as flipping homes, you will need to be able to get the capital you need to turn these investments around quickly. For many people, hard money loans are the best option to achieve this goal and help you get the most money for your investment and hard work.
The concept of the “fix and flip” property loan is one that has grown substantially in the past few years. This is because more and more people are looking to invest in real estate and take advantage of the additional income opportunities this provides. However, these loans are different than the ones given when a property is bought with the intention of selling it one day.
Understanding Fix and Flip Loans
A fix and flip loan mean that the property that is being bought is typically distressed or run down. The investor is purchasing it with the intention of renovating it and then selling the property for a profit. The lenders providing these loans are at somewhat of a higher risk, since there’s no guarantee the property will sell for a profit, but there are more and more lenders coming into this space due to the demand that is now there.
Finding a Fix and Flip Loan
It can be extremely challenging to get funding for a fix and flip property the traditional way. Also, paying for this type of property out of your own pocket is also pretty risky. The majority of banks aren’t going to provide any type of long-term financing option for fix and flips, nor will they provide short term loans because the returns aren’t very good. The majority of fix and flip properties are sold within 12 months or so of being sold. As a result, a hard money lender may be the best option for obtaining the funding needed to purchase the property in question.
Why Use a Hard Money Lender for a Fix and Flip Loan?
The fact is, hard money loans offer competitive rates. Even better, there aren’t any requirements regarding bank statements, tax returns or a person’s credit score. AS a result, the company is able to help the investor with their fix and flip project.
Finding a Hard Money Lender
In some cases, the real challenge is finding the right hard money lender. Not all of these service providers are created equal and it is necessary for you to take your time to find a reputable company to work with. This is the only way that you can feel confident you are protecting the investment you have made.
If you are thinking about seeking out a fix and flip loan, then don’t rule out the possibility of working with a hard money lender. The fact is, these companies make it easy for you to make the investment and then earn a profit. Just make sure to chose the right company to work with before moving forward with the project at hand.
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.
Flipping homes has rapidly increased in popularity over the past decade or so. Today, it seems like just about everyone has built an interest in buying undesirable homes and making repairs and other renovations that will significantly impact the value of the home, making it easier to sell it at a profit. While these changes often require an additional investment, these costs can sometimes be built into the initial loan and are likely to be more than recovered when the home is ultimately sold.
How to Qualify
First and foremost, it’s important to learn how you can qualify for a fix and flip loan in Arizona. For many people, qualifying for a traditional mortgage is a lengthy and often difficult process. However, it can actually be easier to qualify for a fix and flip loan than it can be for other options. For starters, most people who choose this type of real estate investment don’t go through traditional channels when it comes to getting a loan. In fact, hard money lending is often the most commonly used method of funding these ventures. In these situations, the private money lender is looking more at the potential for the property rather than the financial background of the borrower. This means you could potentially get the money you need to flip a home without having good credit or even any credit at all. However, it’s important to remember these types of loans are designed to be offered over the short term. You will need to make any fixes and renovations to the home as quickly as you can and sell the home. If the home goes into foreclosure, the lender will gain control of the home.
Finding the Right Lenders
Unless you have a strong credit history and a solid foundation in the field, you are unlikely to find a traditional lender that will provide you with the funds you need to flip the home. For starters, you may need to borrow more than the value of the home in order to finance the renovations you would like to complete in order to increase the value of the home. Hard money lenders are often private investors who want to get into the real estate market without being as hands on. This means they are happy to work with investors who want to do the work but don’t have the funds necessary to do it. If you search for hard money lenders, you will be able to get the financing you need to make all the changes you want to make the highest profit from the sale of these homes.
Few people want to purchase a home that is run down and outdated. This means you can often purchase these homes for less, allowing you to make renovations to the home, in turn selling it for profit.
Borrowing money from a private lender rather than a lending institution can be a lucrative experience, but it’s important to understand the process before you get started. Even though many find hard money lending to be less strict than obtaining a loan through a traditional method, you will need to work harder to make sure you don’t enter into an agreement that damages your chances of a successful investment. The following tips will help you learn how to make the most of hard money lending.
Choose an Experienced Lender
You don’t want to trust just anyone in this type of agreement. Instead, it’s important to seek out an experienced hard money lender who has already established positive relationships with other investors. A good private money lender will be focused on developing long-term relationships with investors that are mutually beneficial.
Do Your Research
It’s important to put some time and effort into researching before you enter into a funding agreement with anyone. Before you agree to purchase a property with the help of a hard money lender, perform your own appraisal and view the prospective property for yourself. You need to feel confident you will be able to make money on the property before you enter the deal. It can also be useful to compare the property with similar properties in the area so you can get an idea of how well others have done in a comparable situation.
Get Outside Advice
There’s nothing wrong with hiring an attorney to look out for your best interests. A qualified real estate investment attorney will be able to go over all of the paperwork and let you know whether you should request other terms. They will also be able to tell you if the investment has the opportunity to produce the results you’re looking for.
Request a Guarantee
While there’s no way to guarantee a specific return on your investment, you need to be sure the lender will give you the appropriate amount out of the sale or rental of the property. To ensure this happens, request a guarantee from the lender. This personal guarantee will protect you and ensure you can recover any investment you make in the event the property is foreclosed upon.
It can be tempting to invest in only one type of property so you become more familiar with one area of real estate investments. However, just like any other type of investment, it’s important to diversify to protect your investments. This will increase the chances you can make money in one area if another is slow or failing.
Hard money lending can be a great way to make the most of your investments without dealing with the hassle of traditional lending. With the help of these tips, you will increase your chances of a successful outcome.
Mortgage Loan Originator
NMLS ID: 370470
AZ MLO License: 0923102
NMLS ID: 181106
AZ MB License: BK – 0904774
2 N Central Ave #1800
Phoenix, AZ 85004
NMLS ID: 181106
AZ MB License: BK – 0904774