With house flipping at its highest level since 2007, dues to rising home prices and more availability in financing, it’s a terrific time to get involved in real estate investments.
Buying and selling houses is the new fad. You will see it on television and read about it on the internet. But, why? Well, if you are an investor, it is one of the quickest ways to make a profit. And while buying, fixing and reselling property can be fruitful— it takes time, effort and money. You need money to buy the property and you also need money to rehab the property. Ahhhh… and let us not forget you need the money to cover property taxes and insurance until the property sells. So, the big question is, “where do I get all that money from?”
Back in 2005 anyone with a pulse could qualify for a mortgage through a traditional ban—however, this is 2019 and that just isn’t the case anymore. If you don’t have money saved up then house flipping will take some planning. If you are approved for a conventional mortgage you will still end up paying more than you did on your primary residence. Banks are not comfortable lending on a flip house. The bank’s main concern is they are repaid the loan. Knowing that this is an investment property that could potentially fail, leaving the borrower possibly walking away, makes the banks uneasy. Banks do not work with risky deals. However, there are lenders that want to work with risky deals because it’s how they make their money.
Arizona Hard Money Lenders are not banks. They are individuals that lend money out to investors at a slightly higher interest rate than a traditional bank. The interest rate is higher for two reasons: they are borrowing the money from investors themselves and have to pay an interest rate and they are lending on riskier deals than banks will. Arizona Hard Money Loans have different terms than banks. Their interest rates are typically between 7.99%-15.99% plus two to five points. A point is equal to 1% of the loan amount. With a conventional mortgage a borrower will pay points at closing; with an Arizona Hard Money Loan a borrower does not have to pay the points until the Arizona fix and flip property sells.
Arizona Hard Money Lenders typically base the amount you can borrow on the property’s after-renovation-value (ARV). This means that the lender will finance the property based on what it will sell for after the repairs and renovation have been done. To give you an idea of what this looks like imagine finding a property selling for $75,000. Once it has been determined what repairs need done and a value has been assessed on the price you will sell it for, the lender will finance you for 70% of that price. So, this $75,000 home will sell for $120,000 after rehab-the Arizona Hard Money Lender will loan you $84,000. That leaves the borrower with $9,000 to use towards the rehabilitation of the property. That is $9,000 that you, the borrower, do not have to spend out of pocket. Yes, you may have to spend a small amount of money. However, it is highly likely that you may not have to spend your own money at all.
Another benefit of an Arizona Hard Money Loan is the terms are flexible. Because these are individual lenders they are not required to follow any federal requirements—they make their own. Which means all terms can be negotiated—from the interest rate to the life of the loan.
Not only will a good Arizona Hard Money Lender work with you on terms, they also are not focused on your credit or income. Arizona Hard Money Loans are based on hard assets which will be the property the borrower wants to finance. Yes, these loans have higher interest rates than a conventional mortgage. However, these are typically interest only loans with a balloon payment due on the last payment.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
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 and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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