Month: September 2019

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

ALL ABOUT HARD MONEY SMALL BUSINESS LOANS

When it comes to small business loans there are a variety of different individuals and organizations that are willing to lend–one of those options is hard money.

It’s not that difficult to get a small business loan–if you have the qualifications and the credit. Into the picture steps hard money. Business owners with poor credit or a small amount of time in business have an opportunity for financing through hard money. These hard money loans are practical for business owners who don’t meet the strict qualifications of a traditional lender. What exactly is a hard money loan and how does it work?

Hard money small business loans are backed by the business’s commercial real estate as collateral. It is common for start up businesses to look towards hard money loans due to the ease of approval. Hard money loans are not specific to business loans; in fact business loans are only a small percentage of the loans financed. Hard money loans are made against the value of a collateralized asset. This helps business owners with poor credit. These loans are not based on a borrower’s income and credit worthiness. Hard money lenders will base loan amount using a loan-to-value ratio (LTV). The LTV is a percentage of the property’s value. Typically, hard money lenders lend around 70% of the value of the property that is used as collateral.

There are a multitude of benefits of hard money business loans. They are easier to qualify for and the application process is simple. Most business owners are approved within a day and have funds within a couple of weeks. However, keep in mind you have to show that there is sufficient collateral value to offer the lender– that is key. Conventional business loans are a huge pain to deal with. The application process itself is torture and most borrowers don’t hear for weeks about approval. Because hard money lenders aren’t banks they are able to be flexible when it comes to repayment schedules. Hard money loans are interest only loans; meaning the monthly payment will be interest only and there will be a balloon payment at the end of the loan. It is critical the business owners pay attention to the payment schedule and understand the process.

Hard money loans are short-term loans. These loans generally run from one to three years. However, there can be shorter or longer terms. Again, because of the flexibility allowed to lenders they can work with the borrower to arrange a loan that will work for them.

Hard money small business loans are a wonderful alternative for business owners who have found themselves unable to qualify for a conventional loan.

Generally, hard money lenders will lend about 70% of the value of the property. What that looks like is that a property is appraised at $250,000. The project the business owner needs to take a loan out for costs $125,000. Seventy percent of $250,000 is $175,000; more than enough for the owner to complete their project. Borrowers many have to go through a few hard money lenders to find the one that works best for their situation.

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

GETTING A COMMERCIAL MORTGAGE WITH POOR CREDIT

You have a dream, you have a vision, but you have poor credit. How can a small business owner get a commercial mortgage with poor credit?

Many small business owners give up expanding their business because of their credit–it seems that it is too much of a long shot. In fact, one business owners receive dings in their credit many don’t even bother looking around let alone applying for finance due to that three-digit number looming over their head. Instead, they just try and keep their nose above water.

Can you get a commercial mortgage with poor credit? Yes. There is commercial financing for borrowers with bad credit. However, there are lenders out there that won’t focus on your credit. Seem to good to be true? It’s not. Although hard money lenders will look at your credit and finances, they are not solely focused on just those particulars. Hard money lenders use the property that you are purchasing as your collateral. Traditional lenders use your credit score and finances to feel confident about your capability of paying back a loan. Hard money lenders use the property as 100% collateral.

Many small business owners have run into financial problems in the last decade. Because of this many have been stuck and felt unable to upgrade and make improvements or expand their business. Improving and expanding take finances–and finance is hard to obtain with poor credit.

Small business owners with poor credit face limited options when it comes to commercial real estate financing; it would be wise for small business owners to consider hard money lenders. In commercial real estate financing, hard money lenders are known for worrying less about a borrower’s credit score and more about the value of the proposed property obtaining financing. While the terms on a hard money loan may have a higher interest rate than that of conventional commercial mortgage, borrowers generally won’t be turned away if they don’t have a stellar credit score, as long as the property has value.

There are even more benefits for small business owners when it comes to hard money loans.

Generally, hard money loans close much faster than conventional loans. Borrowers are typically approved within 48 hours and have their funds within a week to ten days. In times where an investor needs quick money to purchase a property a hard money loan should be considered. Terms are much more flexible and are shorter than conventional loan terms. Unlike traditional lenders who have a team of numerous people working on a borrower’s application, hard money lenders are able to work on more personally with the borrower. Because these are private investors a borrower can have a real relationship with their lender. These lenders base terms on an individual basis; meaning not all loan terms are alike.

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

EVERYTHING YOU NEED TO KNOW ABOUT HARD MONEY LOANS

There’s a lot to know when you are considering taking out a hard money loan.

Hard money lending rates, which are also known as private money loans, are set by each individual lender. These rates can range from around 7% to upwards of 15%. Hard money loan rates are not set by the prime rate—instead they are influenced by the equity in a property and the risk involved for the lender. Hard money loans also have flexibility which gives the lender the ability to set their own rates. This flexibility also gives them the power to fund loans that traditional lenders would deny. Just as the rates are set by individual lenders so are the minimum and maximum loan amounts. Loan amounts are not set by the FHA—they are determined by the lender when looking at risk assessment, the LTV (loan to value) and the ARV (after repair value). Certain lenders in certain situation will loan up to 90% of the ARV and, or the LTV.

The LTV is the biggest determining factor when it comes to the lender’s risk. The risk becomes less as more of the borrower’s own money is invested. In fact, it should be noted that first time borrowers should be prepared to come with at least 20% down. Lenders want to see investors that have skin in the game. The more experience the borrower has, the more comfortable the lender will be when determining loan rates and terms.

Hard money loans typically fund two types of properties—fix and flips and and investment properties that investors may rent. However, these are not the only loans that hard money lenders will fund. They will fund small business loans and primary homes, as well. In the case of a primary home they are typically funded to borrower’s with poor credit that are planning on transitioning into a conventional mortgage at the end of the loan.

Hard money loans give investors an opportunity to compete with cash buyers. The approval process is very quick on hard money loans. The application process is simple and typically take less than 10 minutes to complete and generally are approved after a short conversation with the lender. Most loans are funded within 2 weeks. A seller wants a quick closing date and that will happen with a hard money loan. Conventional loans typically take an average of 45 days to close and at that point the borrower can easily lose the property.

Hard money lenders can help investors, businesses and borrowers with poor credit.

This article gives the reader a general idea how hard money lenders approve borrowers and what type of properties they typically fund. For more information on hard money loans please contact us at level4funding.com.

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

5 REASONS YOU SHOULD USE HARD MONEY

In the past hard money lenders got a bad rap. Images of loan sharks arose in people’s minds, but that couldn’t be further from the truth.

Hard money financing is a tool that not only investors should keep in mind—but, people from all walks of life. The main benefits of using hard money are the speed and flexibility but there are many other reasons you should use hard money.

1. Hard Money Lenders Will Approve Lenders With Poor Credit— Income history and high credit scores are required when a bank approves a loan. And it is not only your credit and income that the bank must approve—it is a plethora of other criteria. Hard money lenders, on the other hand, primarily focus on the value of the property that serves as the collateral for the loan. If the lender is comfortable with the value of the property then they can be more lenient with the borrower’s income and credit. This can benefit investors, business owners and people needing a second chance when it comes to their credit.

2. You Can Negotiate a Lower Purchase Price With A Quick Close

Investors biggest competition is all cash buyers. Why? A seller wants to sell their property as fast as possible and with the least amount of hang-ups as possible. Unless an investor has cash saved, they need quick cash. Hard money loans typically close within two weeks which allows real estate investors to negotiate a lower purchase price with the promise of a short escrow and speedy closing of the loan. Sellers are more willing negotiate with a promise of a quick close.

3. Fast Approval and Funding

Hard money loans are simple and straightforward. Borrowers fill out a standard loan application that typically takes five to ten minutes. In most cases, the application will be approved within five minutes. When applying with a traditional lender you will fill out countless pages that take hours upon hours to fill out. It is not unusual to wait weeks to hear if you are even approved. Once, the approval happens you will go through a painful amount of additional forms and information the bank will need to fund your loan. Even after approval you will wait anywhere from 30 to 90 days to close on a conventional loan. During that time it is highly likely the property you wanted is long gone.

4. Flexibility

Because hard money lenders are individuals they make their own rules. Underwriting is the main reason conventional loans take so long to close. However, hard money loans have a very simple underwriting process; hence, you will receive your loan quickly. Hard money lenders are people—people that know their borrowers. Because these lenders are not mandated to be as strict with their underwriting process, they are able to work with the borrower to negotiate terms and repayment schedules.

5. A Borrower Can Obtain Financing for Additional Loans

Banks and credit unions cap the amount of loans an individual can take out at four. This can be difficult for an investor trying to get a head of the game. Hard money lenders do not enforce these caps. Their concern is the equity in the property. Most hard money lenders prefer working

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

THE 411 ON HARD MONEY INVESTMENT LOANS

There are several reason to contemplate getting a hard money investment loan instead of a conventional loan.

There are pros and cons when it comes to absolutely every decision in the world you will make—and when it comes to your money it is crucial to reflect on both the pros and cons. Investment loans are an amount of money lent to finance a particular project. Investors have choices when it comes to the type of lender they want to work with—generally, they will work with either a traditional lender or a hard money lender.

Hard money investment loans have a lot of benefits for investors. Convenience for one—because of the new regulations on mortgage lending implemented as part of the Dodd-Frank Act, applying for a conventional mortgage is terribly time consuming. On average it takes about 45 days to close on a loan with a conventional mortgage. And that is “average.” It can take up to 90 days if there are any type of hang ups—which there almost always will be. This excessive wait time puts investors at risk of losing their deals. A hard money investment loan can typically be funded within two weeks.

Because hard money investment loans are available through private lenders there is more wiggle room when it comes to loan terms. Hard money lenders don’t use a traditional underwriting process which allows more flexibility. Investors may even be able to tailor the repayment schedule to their needs—and may be able to get certain fees waived depending on the lender.

In a hard money investment loan the property typically serves as the collateral. That can be a pro or a con depending on the unique situation of the investor. However, because hard money lenders are able to be more flexible they may allow investors to secure their loan using their own personal assets such as their personal residence. Hard one lenders look at each project individually and work with investors to make the repayment and terms work for both of them.

It is always important to pay attention to the rates and terms in any financial dealings. With a hard money lender, investors have an opportunity to mold their loan to their goals, which can be helpful.

Hard money investment loans are a great fit for investors who need funding quickly with flexible terms and repayment schedules.

Conventional loans come with a whole lot of red tape that investors generally don’t have time to deal with. The bottom line— investors can know their lender, work with their lender and form a real relationship with their lender and that can be priceless.

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

ALL ABOUT PRIVATE MONEY LENDERS

Private money lenders issue short-term loans for investment properties. These lenders are non-institutional lenders that are sometimes referred to as “hard money lenders.”

Private money lenders typically work with real estate investors looking to purchase and renovate a property; this is also known as a fix and flip. However, private money lenders can help in other situations, as well—such as log-term buy-and-hold investors. Private money lenders can come from a variety of circles— they can be family members, colleagues and acquaintances and, the largest branch—investors and hard money lenders. Basically, a private money lender can be anyone, other than a traditional lender, that is willing to loan money on a property. Because friends and family members can arrange any type of term under the sky with a borrower—in this article we will focus on hard money lenders.

Investors work with private money lenders for two main reasons: short-terms and quick cash. Competing with an all cash buyer is difficult if you don’t have cash yourself. Typically, private lenders will have funds available to the borrower within 10 days. Sellers are aware of how hard money operates and so they are armed. With the knowledge that rarely are there any setbacks when entering into a deal with a private money lender. Bottom line—they know they will get their money and get it quickly.

Investors tend to work with private money versus banks and credit unions because of the short terms. An investor wants to buy a property and sell that property. They don’t want to keep it for years—typically, just a few months. These loans have terms between 6 months and 3 years and interest rates range between 7% to 15%. Generally, private loans don’t carry an early payment penalty, which is great for an investor that sells earlier than expected.

However, there are other reasons borrowers choose to work with a private money lender. Long-term investors that are unable to qualify for a conventional mortgage, but plan to work on their credit and will refinance once those qualifications are met will benefit from the less rigid qualifications of a private money lender. Buy-and-hold investors who are looking to rehab a property before refinancing with a conventional loan can benefit from the flexible terms these loans offer.

Interest on a private money loan is generally assessed as interest only payments. What that means is the borrower will only pay interest throughout the life of the loan and pay a balloon payment at the end of the loan. It is not uncommon to see that, although the interest rates on private money loans are higher than a conventional mortgage, the monthly payments will actually be less. This would be helpful in a situation such as a buyer that is waiting for their house to sell and can’t afford to pay two mortgages.

Family members, colleagues and acquaintances can all work as private money lenders.

It’s not always a good idea to mix money with friends and family—especially if this is a first time investment or you’re in a pinch financially. Many times it is best to work with someone where it is strictly business and in that case a hard money private lender is the best bet.

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

BEING SUCCESSFUL WITH HARD MONEY

Using hard money is a great way to get ahead in the world of real estate investments. Here are some tips to help you along the way.

Not all hard money lenders will require the same amount of money down—and some may not require any at all. However, it is always a good idea to have saved some money first. Even if lender doesn’t require a large amount down, you’ll save money in the long run if you are able to invest your own money in the project. Hard money lenders like to see that their clients have money in the bank. Most lenders can fund the majority of the cost that includes both the sale price and the renovation cost. Generally, lenders will finance about 70% of the total purchase price.

Be prepared for higher interest rates than a conventional loan. For each investment deal, hard money lenders evaluate their risks. You should walk into the deal knowing you will be looking at anywhere form 7.99% to upwards of 16% depending on your lender. Typically, hard money loans fall into about 10% interest rates. Points can range from 3 to 6.

Understand exactly how much you will need. Make sure you walk in a lender’s office with a budget, appraisals and a business plan. A legit lender will not want to do business with someone off the street that has an “idea” and thinks it will cost “about this much.” They want solid numbers and to be confident that you know what you are doing.

Make sure that you are working with a transparent lender. Your hard money lender should provide detailed documentation that outlines the entire process you will be going through. Most lenders will give you a free consultation before you apply to make sure that you are confident in them. Be aware that there are many so-called lenders that aren’t truly lenders—they are brokers trying to party another’s investment. It is beneficial to do a little research on your lender before signing anything. Make sure they are established and you are able to see some of their success stories. There are also lenders out there that prey on the vulnerable with bad credit. Many people with poor credit will get themselves involved with anyone saying they will approve a loan for them. If a hard money lender tells you they will finance you at 6% and 2 points with your 510 credit score—they are not legit. And, even if they are, make sure you read the fine print. Because, if it is too good to be true—then, it most likely is not true.

Before signing your name of the dotted line make sure all your t’s are crossed and your i’s are dotted.

An honest lender will not pressure you. In fact, they will take the time to make sure what is at stake and that you have all the necessary information. Working with a hard money lender can aid in your success, but it is imperative that you find one you trust.

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

5 THINGS TO KNOW ABOUT NEW CONSTRUCTION LOANS

Construction loans have changed in the past few years. Years ago most of these loans came from traditional lenders. It is common that traditional lenders decision on construction loans waver with the market. So where do you go for a new construction loan?

In today’s market new construction loans may be harder to get. Generally, banks and credit unions tend to shy away from these loans, hard money lenders are still willing to work with these projects if they fit their qualifications. New construction hard money loans are short-term loans used to finance the construction of a property.

There are certain things investors should know when searching for hard money loans:

1. There may be a down payment: Find out how much of a down payment will be required. For example, on a construction-to-permanent loan the borrower can most likely work with the hard money lender for the construction of the property. Typically, the lender will require a 20% non-refundable deposit. This deposit can be rolled into the takeout loan.

2. Rates and Fees: In the past investors were hesitant to work with a traditional lender who wanted 10% to 12% interest and 3 to 4 points. Because traditional lenders don’t regularly work with construction loans, builders and investors alike will have to get used to the idea of higher interest rates. You will pay a higher interest rate using hard money. Hard money lenders are taking huge risks with new construction loans. Builders need to be prepared for interest rates ranging from 10% to 15% and 2 to 4 points on the loan. There is no getting around that.

3. Location: Location is key when it comes to new construction loan approval. A hard money lender absolutely must feel comfortable with the geographic location of the project. They will only underwrite a loan if they are confident of the location of the project.

4. Lot: The lot can be included in the construction loan. Find out if the lender is comfortable including the lot cost. In a perfect situation, the lot would be free and clear. However, many times that is not the case. Some lenders will loan as much as 60%-70% LTV of the appraised value and potentially allow the lot cost to roll into the loan.

5. Be Prepared: Investors and builders alike need to be prepared to have all necessary information for the lender. Lenders want an experienced builder with a minimum credit score of 600. They will also want a budget and all supported financials.

Understandably, hard money lenders are cautious with new construction loans, but they are willing to fund builders if they are able to meet the set requirements.

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177

111 Congress Ave | Austin | Texas | 78701

WHY USE HARD MONEY?

Why would anyone need a hard money loan and what is the difference between a hard money loan and a traditional loan?

Hard money lenders take a different approach than traditional lenders. While traditional lenders base approval upon a borrower’s credit score and income—a hard money lender basis their approval upon the value of the proposed property. The hard money lender’s collateral is in the property. In any case of non-repayment the hard money lender will simply repossess the property and sell it to gain their return. There is risk involved for these lenders. Not only will they work with bad credit; they are also working on deals that could easily flop. Take for example a fix and flip loan: an investor finds a property that he wants to rehab. He finds a great property that he believes he can make a 150% profit. He has a great business plan and the house is in a very sought after neighborhood. The hard money lender approves his loan. All is good until an unforeseen event occurs and the investor doesn’t complete the renovations. Now, the loan terms have run out and his balloon payment is due—he disappears.

Because of the larger risk that hard money lenders are taking and because of the shorter terms of the loans (we will get into that in a minute) they charge a higher interest rate than a conventional mortgage. Hard money loans tend to run anywhere from 7.5% to 16%, depending on the lender.

What is beneficial about hard money loans? A lot. We have already discussed bad credit. Flexibility. Hard money agreements are much more flexible than traditional loan agreements. Hard money lenders do not use a standard underwriting process. Not using this standard they are able to look at loans on an individual basis versus just looking at numbers as large corporation do. Depending on the situation, it may be easy to change repayment plans. Need money quick? Another benefit to hard money. Unlike conventional loans that can take up to 90 days—30 if you are lucky—borrowers can be approved within minutes and fully funded within ten days. This is helpful to investors that are competing with cash buyers. A seller will always take a cash deal over waiting up to 90 days for their money. In fact, sellers enjoy working with hard money because they know the deal is going to go through—there aren’t going to be any hang-ups that can delay closing.

Is a hard money loan right for you?

That’s simple. Are you looking for a home to live in for years to come? Do you have good credit and a solid income? If the answer is yes then a hard money loan isn’t right for you. Are you in need of rebuilding your credit, but want to purchase a home? Are you an investor in need of financing to fix and flip a property? Are you a business owner that has a few dings on your credit, but want to expand your business? If you answered yes to any of these—then, the answer is, a hard money loan is for you.

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Arizona Tel: (623) 582-4444

Texas Tel: (512) 516-1177