My credit was decent, a glitch here and there in the early years I had been in the business of buying and selling apartment buildings. No nine-to-five income popped into my bank account every other Friday, but I had no huge debts either, just the usual for renovation on my latest building. It had not sold yet, but was being looked over by two different buyers out of town.
Still the way the mortgage lenders acted, one of whom I had successfully worked with before when I partnered up with someone, you would have thought I had holes in my credit you could jump though, no real income and my house (completely paid for) a month away from foreclosure. The bankers were much more polite, but they weren’t much help either.
Now here was Tom wanting me to get mixed up with people whom I had always heard were a bad taste in the real estate industry’s mouth. “I know of them,” I replied. “But I’ve always been told to steer clear of them, too.”
Tom grinned. “Well, let me tell you what happened with my latest deal.” He then proceeded to describe how no traditional lender would touch him on account of a large project that had gone south when his partner had had legal issues. “I checked around and the Arizona Hard Money Lenders have come a long way since the days when you just went without rather than go through them. How do you think I got my funding for the construction I’m working on right now? McCandliss & McCullough did it—they have an office by Riverside Bank and up from BestView Realty. Not only do they all get along well, but BestView referred me to M&M. The hard money folks aren’t bound by all the rules the everyday lenders have.”
I was hooked, at least as far as finding out more anyway. “What do they want someone to do when they apply for a loan through them?”
Over coffee in Tom’s kitchen, I found that these lenders basically work through private investors or independently-owned businesses and the would-be borrower acquires their funding via security connected to real property value. I would have to provide a very well-defined business plan for my project as well as show plainly how I intended to pay back any money they lent me. My payments, Tom noted, would probably be mostly interest and a bit of principle monthly, with the remaining total due at the end of the pay period. “And this is good, too,” he pointed out with another grin. “That repayment period can be a year–or five years. Do some digging and find out what you could gain using one of these lenders—maybe not M&M, but someone who could help with your type of situation.”
Hard Money Loans: a different approach to funding.
(Everywhere you look there are ads inviting you to borrow funds through traditional lenders—banks, mortgage companies and the like—but is the standard way the best choice? Find out if a non-traditional loan might be better.)
Financing is the biggest problem a would-be investor has when starting unless he/she has a considerable amount of personal funds to invest and most of us don’t fall into that part of the population. Let’s say you have tried to invest before and while it went smoothly for awhile, life changed things and they all requiredmoney. Plenty of it.
The next thing you knew you had declared bankruptcy in your business and downsized it and a block of land you had purchased was foreclosed upon by the bank. This all happened in the last five years and despite your landing pretty much on your feet, the business coming back and most of the bills paid, those two items burnt holes in your credit report and knocked a considerable number of points off your score.
The conventional lenders you have seen about a loan to purchase two apartment buildings were very nice—one was a bank and the other a mortgage company—but neither of them could do anything to help you.
As you went out the door of the mortgage company, the lender you had been talking to motioned you aside and said quietly, “Try the hard money lenders—those people aren’t tied up with all the restrictions we have, although they do cost more.”
What is a hard money loan? And is one right for you?
These loans are set up differently than conventional ones and are designed to aid the potential investor who has credit issues, low cash reserves, is self-employed, etc. The one thing that is needed here is collateral to back your getting the loan—the lender is much more interested in what you have to literally fall back on than your having a perfect credit score and a straight-line job that pays every two weeks. A lien will be placed upon the collateral by the lender to cover their interests in the event you cannot repay your loan.
A second positive point with hard money loans is the time it takes for one to be processed and closed—itcan be done in an average of two weeks’ time as opposed to a bank which can take six months easy. This is an especially good thing when you could end up taking all the time needed and getting required documentation for a bank, only to be told, “We’re sorry—we just can’t approve your application.”
Third, payment times and schedules can often be tweaked to favor your calendar rather than the lenders’. If you need five years to pay the loan back instead of two, a hard money lender can generally work with you on that.
A different loan may be helping hand you need. Get out there and look for the one made just for you.
Do what the mortgage lender advised—research the hard money people in your area, find several that are offering loans which appeal to you and set up times to talk with them. You’ll meet new people, learn things that could help you in the long and perhaps walk out the door with possible funding for your future project.
After a good night’s sleep, I began to do the research Tom suggested and it was just like he told me– Arizona hard money lenders concentrate on the people whose lives don’t fit the standard 9-5 structured employment lines and have some difficulty obtaining loans through traditional lenders.
I put together a plan and six weeks later, I got my funding. These loans aren’t for everyone, but take a look like I did. Maybe this type loan can work for you, too.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: 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.