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Sunday, May 27, 2018

Understanding Loan to Value Ratio for Hard Money Loans Arizona

Understanding the loan to value ratio for hard money loans Arizona is critical to knowing how much money you can request. Without knowing the LTV you have no idea what lenders would be willing to fund.

Because hard money loans are secured with real estate, it is critical to understand how lenders determine the dollar amount that they are willing to lend. This determination process uses the loan to value ratio which is the loan amount divided by the property value. In most cases a hard money lender will fund up to 65% to 75% of the current property value. What this means for anyone who wants to use funding from hard money loans Arizona to make a purchase is that they must have cash or other financing for the remaining 25% to 35% of the purchase price.

It is important to understand what the loan to value ratio is on the property that you are purchasing so that you can be prepared to pay the remaining balance to complete the purchase. Some borrowers will seek a partner to contribute the remaining funds or others will use other properties as collateral to borrow the remaining funds.

On some rare occasions lenders will use an alternative ratio called the after repair value. This is basing the value of the property on its potential value after the buyer makes the repairs. It works in the borrowers favor as he or she is able to get a larger amount for the hard money loan. The down side is that this type of loan poses a greater risk to the lender who is likely to demand that the borrower pay a higher interest rate as compensation.

Hard Money is Always Secured

Understanding that hard money loans Arizona are all based predominantly on the value of the property being purchased is Important. It is also important to know that the lender will only offer a percentage of that property value as a way to ensure that the property is always worth more than the balance of the loan. This is so that in the event of a default on the loan, the lender can sell the collateral property and recover the full loan amount.

More Risk=More Cost

Hard money lenders are in business to make money just as real estate investors are buying properties to make money. All lenders calculate the amount of hard money loans Arizona in the same way. The only reason that some are willing to offer a higher percentage is because they are willing to assume a greater risk. And in return for that greater risk, the lender is going to require that the borrower pay a higher interest rate on the loan. But if you have no other way to secure the funds needed to close the deal, then paying a higher interest rate is better than losing the deal all together. You will always have the opportunity to refinance the loan in a more traditional manner at a later point in time to improve the interest rate.

Monday, May 7, 2018

Try These Tactics if You Want to Get Your Hard Money Business Loans to Close Quickly

There is nothing like the painstaking process of waiting to see if your loan application has been approved by a conventional lender. Instead of playing the waiting game, Level 4 Funding offers ways to get your hard money business loans to close and fast!

Traditional loan applications are known for being super-complicated to complete, and then the process for the bank or lender to approve can be an even longer, more complicated process! When you’re in need of a loan, time of often of the essence, which is why hard money business loans are the way to go if you need cash in hand and you need it… like yesterday! There are some things you can do to ensure the process goes even quick and more smoothly, even with a short-term loan application which are known to be less cumbersome than conventional loan applications.

For example, being prepared can help get the process off on the right foot. Be prepared to put up some collateral. That is typically one of the most important things you can do to ensure your hard money business loans get approved, and fast! If you are prepared to show that you have the value of the loan (or more) in personal assets (such as a home or car) or you can use the property or business that you are intending to use the loan for as the collateral, that is usually a sure-fire way to ensure a quick process, too. While you likely won’t need to have you credit report, score or a lot of financial statements, it’s a good idea to have those items in order, just in case that documentation becomes needed for the application process.

Working together with your lender to get your hard money business loans approved is another way to ensure a quick turnaround. Remember that although the process can seem daunting, unfamiliar or even a little intimidating, your lender is on your side and there to help you get the loan you need. So work together to get all you ducks in a row or provide the proper documentation he asks for to move the process along. If you are helpful and make the process easy for him, he’ll want to make the process as easy and successful for you, too.

Find a reputable lender

It’s also a good idea to take some time to research some lenders to ensure that you are starting the process of right – with the right lender. You would hate to get down the line with an untrustworthy lender only to have to scratch the process before the loan is approved and start fresh with another lender. Work smarter, not harder! Find the right lender, and the right loan will follow.

Finally, call Level 4 Funding!

Level 4 Funding offers the professional, experienced lenders that will help make the loan process quick and easy. We know that time is crucial when waiting for a loan approval and we do our best to ensure a smooth and simple process!

Sunday, April 29, 2018

Tactics to negotiate a better hard money deal

You may be seeking a hard money loan and looking for the lowest possible interest rate, but there may be additional costs you could be unaware of beyond the interest rate. You will be at a disadvantage if you aren't aware of these expenses and don't try to negotiate with your lender.

Some private lenders may earn their profits by charging fees rather than collecting interest payments. In the worst case scenario, an unscrupulous lender could lure in borrowers by advertising a low-interest rate, all the while charging them exorbitant fees. Even if a lender is reputable, borrowers should be aware of any additional expenses when it comes to their loan.

Private asset based lenders are business savvy and approach each loan as a business deal. There is always room to negotiate the terms of any business deal, and the same holds true for your loan.

The most apparent expense on an asset based loan is the point fee, which is a percentage of the loan amount which is paid by the borrower up front. You should do your best to negotiate the point fee because depending on the size of your loan this cost can be considerable.

You as a borrower need to be aware of the cost of your loan in points and any other fees that may apply.

Which fees can you negotiate when it comes to hard money loans?

In the first place, there's the underwriting fee, which is the cost of a lender's due diligence. The cost of underwriting can range from 750 to 2,500 dollars depending on an individual deals complexity. In addition depending on your circumstances the cost of servicing your loan could also be a factor. Loan service fees cover the cost of recording payments and generating reports, and this price can be considerable. A lender may charge a fixed monthly payment or charge a given percentage of the loan amount annually.

In addition, be aware of any late fees, or any potential change in your interest rate if you miss a payment. You will want to keep these fees as low as possible because if you miss a payment due to financial difficulties, higher interest rates and late fees will make it harder to catch up.

The main advantage of asset based lenders over traditional banks is that they are flexible and that their is always room to negotiate the terms of your loan. If you don't try to negotiate these additional fees you may be taking on an unnecessary expense.

Take advantage of the flexibility offered by hard money lenders

Some of the fees mentioned before may or may not apply in your case. But you should try to take advantage of the flexibility offered by private lenders. If you are a borrower with considerable experience and strong collateral on hand, in most cases your private lender will work with you to negotiate any fees.

In short don't look at an attractive interest rate when shopping for a loan. If you want to get the best deal possible, know the fees that are being charged and to do your best to negotiate.

Thursday, April 19, 2018

Why you might consider a Hard Money Business Loan

If you are having trouble qualifying for traditional financing, a hard money business loan can be a great alternative to a conventional bank loan. With this loan you borrow against assets owned by your business, allowing you to qualify even if you have poor credit.

When it comes to businesses that apply for this type financing the value of their commercial property acts as collateral for the loan. The value of this underlying property is a more critical factor for this type of lender than a borrowers credit score. Those with low credit but with a lot in the way of collateral may find an asset-based loan a good financing strategy.

However, a Business owner will need to consider whether the expense of a loan matches their need for financing. Any type of alternative loan will almost always be more expensive than a traditional business loan.

Before applying for a hard money business loan, consider your need for financing and whether your need is proportional to any assets you might pledge as collateral.

With asset-based loans consider whether your need for financing matches the risk of losing any property you might pledge to back the loan. With this type of business loan there is the potential that the lender could seize your business or other personal property should you default.

However also consider the main advantages of asset-based loans. Because credit is a non-factor, they are easier to qualify for, less documentation is needed and these loans can close within a matter of days. These advantages may outweigh risks depending on your circumstances.

Why should you consider a hard money business loan over other types of alternative financing?

The interest charged on a typical asset based loan is usually 10-15 percent. The higher interest rate on this type of loan is due to the risk assumed by the lender by forgoing the usual credit checks. However, asset-based loans are still less expensive than other types of alternative financing.

You may have considered other alternative financing options which could be far more expensive than an asset-based loan. One example of alternative financing are merchant cash advances, which are loans backed by a percentage of your businesses future sales. Cash advances can consistently eat away at revenue stream, and APR can reach into the triple digits. Some methods of alternative financing may be less expensive, but could take much longer to close. For example, peer-to-peer platforms are one such type of alternative financing. While these loans may be less expensive than an asset based loan there is no guarantee that your loan will ever be fully funded. Asset based loans are less expensive than cash advances and are fully capitalized once your application is approved.

Always perform your due diligence to ensure any potential asset lender is trustworthy. Read online reviews of any potential lender to gauge the lender's honesty and the experience of their borrowers.

Asset based loans can be cheaper and can close faster than other types of alternative loans, making them a great option are you struggling to qualify for traditional financing or if your business needs cash quickly.

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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Monday, March 26, 2018

How to Qualify for a Commercial Real Estate Loan

With all the varying requirements, it can be confusing understanding what one needs to do and expect when trying to qualify for a commercial real estate loan. Here’s a few of the basic documents and experience you need when applying for a loan.

No matter which type of lender you are working with, most will prefer that the borrower focus on a property when assessing a loan. This information should include the address and location, purchase price, intended use of structure, amount and scope of work, timeline for rehab, contractor bids and projected after-repair-value (ARV). The more information you can bring to the table, the better, such as drawings and environmental analysis.

The financial information regarding the project includes the rent roll or schedule of leases which basically amounts to the amount of income that can be expected from the property. If the property is under construction, a lender will want to see the general health of the particular market including the area’s vacancy rates and your plan for obtaining tenants. Having pre-leasing in place can be a big checkmark on the “yes” side when trying to obtain a commercial real estate loan.

They will also want to know what type of experience you have and any past investment projects in this specific segment of real estate. Some lenders will check the borrower’s qualifications such as credit history and bank statements. They will want to know your financial situation. Do you have other projects currently in the pipeline? If so, just how much debt are you currently faced with? If you have partners, the lender will want information on them as well. This will be their go-to in case of default.

Pro Forma

Other lenders require a pro forma for a commercial real estate loan. This includes the net operating income (NOI). Also known as EBIT or Earnings Before Interest and Taxes, it is, just that, and helps lenders understand what kind of cash flow you’ll be expecting. It equals all revenue from the property minus all operating expenses. The debt-service-coverage ratio (DSCR) is also part of this documentation and is calculated by dividing the Net Operating Income by the Annual Debt Obligation. The internal rate of return and cap rate are the final pieces of the pro forma puzzle. The internal rate of return is the rate of growth a project is expected to generate while the cap rate is the ratio of Net Operating Income to property asset value.

Conventional commercial real estate loans from banks and credit unions must adhere to strict rules and guidelines when it comes to financing an investment. For this reason, they are often more difficult to obtain loans from than one provided by a private hard money lender.

Traditional lenders will need to check your credit score as well as your creditworthiness. Hard money lenders, on the other hand, do not require income verification or credit references. These short-term loans usually fall into the one to three-year mark, though some will issue loans up to 5 years and allow extensions. Some lenders assess a prepayment penalty, usually 1 to 3 percent, while others do not—Important considerations when funding your project. It is much easier to qualify and faster to obtain funding for hard money real estate loans making them the loan of choice for many investors.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Leasing vs. Flipping: Two tactics to use your commercial loan

Learn which strategy is right for you when it comes to using commercial loan proceeds.

Leasing and flipping are two of the most common ways to invest in a piece of commercial real estate. Every investor wants to make money, but an investor who leases commercial real estate intends to earn a steady stream of income.

The investor needs to purchase the property, so both approaches have the same upfront costs. Leasing allows investors to maximize the long-term potential of property with minimal risk. If one tenant leaves, another one should be not hard to find in most cases.Renting out commercial real estate is an ideal strategy in areas where the supply of commercial property is low, and demand is high.When it comes to leasing, additional returns can be earned as property values in the area improve, and rents appreciate.

However before committing to leasing as a strategy consider the commitment of time that is involved. Leases can include complex negotiations, require regular property maintenance and resolution of issues among individual tenants. Professional property management companies can alleviate some of these problems, but the added cost can stifle potential returns.

In contrast, flipping commercial property offers a quick profit and a minimal commitment of time

You can use a commercial loan to flip your investment property, but you should throughly understand the market

Flipping is the opposite of leasing commercial property and involves quickly selling a property for maximum profit. With this strategy purchase a commercial property that is substantially undervalued. The lower a properties initial purchase price, the higher the potential for profit.

But commercial real estate valuations are far more nuanced than residential valuations. Savvy investors should know how renovations on commercial property could impact its value. The wrong type of improvements on a property can restrict potential buyers and detract it’s marketability. For example, by converting a storefront into a restaurant space, buyers will be limited only to those who want to open up a restaurant. But the right type of renovations can significantly improve a properties ability to generate income and therefore substantially increase it’s value.

A thorough understanding of the local commercial real estate market, the types of businesses that are opening nearby and other types of due diligence are needed to flip commercial real estate successfully.

There are obvious risks involved in using a commercial loan to flip commercial property, consider these risks before closing an investment strategy

When it comes to commercial real estate leasing is usually a safer investment strategy. Tenants should not be hard to find if the property is in decent shape and in an ideal location. Depending on the terms of the lease tenants can take on the expense of improving the property themselves.

Flipping commercial real estate entails that an investor takes on the cost of the renovations themselves and any improvements can be costly and could restrict potential buyers. Additionally commercial properties are subject to a longer sales cycle. There is a chance that any renovated property could sit on the market for many months, or in the worst case years.

But as with any investment strategy, the higher risks involved with flipping commercial real estate can also offer greater rewards. Consider the market, understand commercial real estate valuations and perform the necessary due diligence when choosing whether to lease or flip a commercial property.

In summary, leasing is a good bet when property values are steadily increasing, while flipping is best in cases where a low-cost renovation can immediately raise a properties value.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tuesday, March 20, 2018

Process for Obtaining Commercial Loans

There is really no shortcut when you are seeking commercial loans. But following a tried and true process can help to expedite the response to your application.

Most borrowers fail to understand that a great deal of the success or failure of their commercial loan application rests on their amount of effort in preparation. There is a huge amount of research and due diligence that a borrower must invest in the process in order to be successful when applying for commercial loans. Understanding the loan application process, the desires of specific lenders and their loan approval criteria are all very important and should be researched long before you begin to search for a commercial property to purchase.

Many borrowers are in awe of commercial lenders and fail to see them as a business partner or vendor. They get too caught up in the “bank” aspect and feel as if they are being judged. The lender is making a judgement but only from the perspective that they want to verify that you can afford the loan. They are just making smart business decisions. In that vein, you should also be making smart decisions about who you are interested in borrowing from. There are many options for commercial loans which you should explore including large national banks, medium sized regional banks, a small local bank, a private lender or a mortgage company just to name a few. If you are not familiar with any major lenders or to gain information about your options, begin with a meeting at your current bank to learn about their commercial loan products.

Each lender is going to have a slightly different set of criteria for approving a loan. Learning these requirements can help you to determine which lenders you will actually apply to. Set up a few appointments to speak to loan officers to learn about the lenders and what they have to offer you. Be prepared to discuss your business, the reason you are requesting a loan and how you plan to meet the financial responsibility of repaying the loan. These conversations can glean some very helpful free advice for you from seasoned lending professionals.

Select Lenders Who Best Meet Your Needs

Not all lenders are going to be a great fit for you or even a fit at all. If you are looking for a small loan then a national bank might not be interested in your application. Likewise, if you are seeking a very large loan, then a small local bank might not be your best choice. Try to determine which lenders specialize in the type of commercial loans that you are seeking and then apply only to those lenders. There are costs involved in commercial loan applications as well as a commitment of time. Don’t waste either by applying to a lender who will not be interested in your business.

Make a Great First Impression

Other than a brief introductory meeting, your loan application will be your first contact with many lenders. This is your only opportunity to create a positive and professional first impression. Invest all of the time that you need to research your options and the criteria that each lender uses to evaluate loan applications. Only then should you begin to compile your documentation and complete the loan application. This dedication to completing a high quality loan application and documentation packet will pay great dividends when you learn that you have multiple loan offers at very competitive rates.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Monday, March 19, 2018

How Short Term Commercial Loans Can Help Your Business Dreams Come True

Can you really take your business to the next level? You can with the help of commercial loans to help you finance the next phase of your company, and Level 4 Funding explains how.

If you need cash fast to put a down payment on a property for a new location, for example, short-term commercial loans are the perfect option. Unlike conventional bank loans that typically have five- to ten-year terms, short-terms are defined by shorter repayment schedules that are designed to be paid off in between three months to three years. Usually these loans have higher approval rates than long-term loans, and can be paid in smaller daily or weekly payments versus a monthly lump sum. Ensure you can manage the daily or weekly payments prior to agreeing on the terms of this loan.

Short-term commercial loans are great for businesses because they are typically approved a lot quicker, which means you get cash in hand quicker in comparison to a conventional lender application and approval process. New businesses can get approved for these loans, which can actually make it easier for them to get approval for long-term or more traditional loans in the future. Prior loans — and proof of paying them off — give lenders peace of mind that you can pay off a loan.

Short-terms are also easier for new businesses to get approval or for companies that haven’t yet established a business credit history. Once credit history is established with a short-term loan that is another way to help future loan approvals from traditional banks. Usually lenders specializing in shot-term loans do not require a minimum on credit score as conventional lenders typically do, especially for long-term loans.

One of the best benefits of short-term commercial loans is that their approval time is fast – which means you can get your funding fast.

With these loans, businesses can receive their cash advance in just 24 hours, give or take. This is important for many reasons as a company is looking to expand, but it can also be just the thing a business needs if they are cash-tight and need to handle payroll or pay their vendors. Fast cash is one of the reasons short terms are so desirable for new and expanding businesses that are having growing pains or “tight” times.

It’s important to know that while there are many benefits to short terms, there are some disadvantages to be aware of, too.

While these short terms are very helpful to businesses, there are some drawbacks. For example, the annual percentage rate tends to be much higher with loans like this than the APR of conventional loans because the amount of time the loanee has to pay back the loan amount is much shorter. While there are very short reschedule periods of three to six months, it might be more reasonable to negotiate a (relatively) longer payment schedule up to three years. There are also lender fees and other costs that may be associated with short terms so it’s important to know what those are before you proceed.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

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Sunday, May 27, 2018

Understanding the loan to value ratio for hard money loans Arizona is critical to knowing how much money you can request. Without knowing the LTV you have no idea what lenders would be willing to fund.

Hard Money is Always Secured

More Risk=More Cost

Monday, May 7, 2018

Sunday, April 29, 2018

You may be seeking a hard money loan and looking for the lowest possible interest rate, but there may be additional costs you could be unaware of beyond the interest rate. You will be at a disadvantage if you aren't aware of these expenses and don't try to negotiate with your lender.

Thursday, April 19, 2018

If you are having trouble qualifying for traditional financing, a hard money business loan can be a great alternative to a conventional bank loan. With this loan you borrow against assets owned by your business, allowing you to qualify even if you have poor credit.

Monday, March 26, 2018

With all the varying requirements, it can be confusing understanding what one needs to do and expect when trying to qualify for a commercial real estate loan. Here’s a few of the basic documents and experience you need when applying for a loan.

Learn which strategy is right for you when it comes to using commercial loan proceeds.

Tuesday, March 20, 2018

There is really no shortcut when you are seeking commercial loans. But following a tried and true process can help to expedite the response to your application.

Select Lenders Who Best Meet Your Needs

Make a Great First Impression

Monday, March 19, 2018

Can you really take your business to the next level? You can with the help of commercial loans to help you finance the next phase of your company, and Level 4 Funding explains how.