hard money loans

Purchase Rentals In Phoenix, AZ With No Money Down Using Hard Money

How To Purchase Rentals With No Money Down Hard Money Loans

Real estate is often accomplished by investors through a short term loan. A short term loan is the solution to purchasing rental properties and also fix and flip homes. It is also used in purchasing homes as rental properties until a long term financing can be found.

The use of hard money will more than likely be expensive, even more than what traditional financing would be, and it is best to have some short term financing to use. However, many investors find a hard loan as a terrific option, yet, this is going to cover short term financing options as well. You can also use a conventional refinance loan for purchasing rental properties without having to have the money to put anything down.

Hard money loans, what are they?

A hard money loan is something that helps an investor to purchase rental properties for a short term, usually six months or less. They will have different terms than the traditional bank loans do. Those who lend out hard money loans are going to have a much higher interest rate, with an interest rate of twelve to sixteen percent, plus points for the money they loan you. For those who do not understand what points are, it is a percentage of the amount of the original loan and accumulates other charges and can accumulate as much as four points rather quickly.

Is there any certain reasons that an investor would use hard money to purchase property?

Investor will choose to go through an investment to purchase a rental property with a hard money loan because the lender may be willing to cover the entire amount of the loan plus what it is going to cost them for the repairs, referred to as the after repair value (ARV). These lenders are willing to loan the investor as much as sixty-five to seventy percent of the ARV, you need to remember that that is not the purchase price, it is the price the house will be worth after it has been flipped.

So, how does the lender make their money off of a hard money deal?

For instance, an investor purchases a home for $60,000 and the after repair value is $130,000, the lender is going to loan the investor up to seventy percent of the after repair value of the property. This means that the lender is going to loan the investor up to $91,000 on the property based on the after repair value. Estimates of all repairs have to have bids and receipts and the lender will cover those costs as part of the hard money loan.

The lender is going to be paying twenty-five percent of the repairs at the closing and the rest of the payments will then be in twenty-five percent increments as each repair is finished. The loan principle, interest, and points will be paid in one lump sum after the house has been sold. The lender isn’t going to charge any interest until after the house is sold, however, the lender in this case is going to charge a fifteen percent interest along with the four points, which they are willing to reduce the points paid if you do some deals with them.

When dealing with a hard money lender the cost to you can add up quickly. The interest alone for this deal is going to cost you $6m825 plus the points is already $3,640 for a six month loan. You may find a hard money lender that is will to lower the charges on interest and points, of course these are going to want you to share the profits evenly with them.

Personally, I never use a hard money loan, but the options are there for those who have no other options.

How do you locate hard money lenders?

Hard money lenders are out there, many of them will only do business in certain states, while others may do business across the nation. Begin by searching on the internet for a hard money lender in the same state you live in, using any of the search engines. Here is a few hard money lenders in case you would like to talk with more than one: Located in Phoenix, AZ is the Brad Loans, and there are the Private Money VS. Hard Money for Investment Properties.

What is Private Money VS. Hard Money for Invest properties?

Private money is when you are getting the money from someone, not from a mortgage co. Or a bank, or any other type of lender but from a person. Sometimes a regular person will loan the money needed for real estate property, especially right now, with interest rates as low as they are. Right now the average interest rate on a CD is under one percent. No one can keep up with the ongoing inflation with the interest so low. While the wealthy is now looking for higher yield investments while they are still secure others are buying up properties. By loaning out to investors could be the perfect thing for them at this time, increasing their investment returns and helping investors out, this is called Private Money Loans.

How would you go about locating Private Money investors?

The hardest issue with private money is locating someone that will loan you the money. If you go online you can find many websites that say that are private lenders and that you can borrow money for a fee. From personal experience, this is not the way to go about it as you don’t never know if they are just going to take your money and give you the name of hard money lender or what. Private money lenders are more cautious than that and they only want to do business with people they know they can trust.

The best private money loans comes from someone you know and can trust. For instance, My private money loans have been coming from my sister, she uses her profit returns towards the increase of her son’s college fund. And she will lend me the money for an eight percent rate which is reasonable, without any points added in there. She knows that I know what I am doing and that I am going to be honest with her. This is a lot cheaper than financing with hard money.

Can I purchase rental property with hard money without having any money to put down?

You can refinance a hard money loan if you used a hard money loan to also finance any repairs, using the Fannie guidelines, of course it has to be with a seasoning period. There is not cash out refinance allowed it you do not have a seasoning period. This gives the home a higher loan amount than its original cost since the repairs have also been financed. It means that you will be able to get the long term loan to take the place of a hard money loan and don’t have to wait around as you would if it was a hard money loan.

For instance, you purchase a rental property for $100,000 using a hard money loan of one-hundred percent of the purchase price with another $35,000 financed for repairs, making it a total of $135,000 in loans then you refinance after the home has been repaired using a Fannie loan making the loan amount go up to seventy-five percent of the new appraised value. The if the new value is appraised at $185,000 the amount that you could refinance would be $135,000 but according to the Fannie guidelines you cannot cash out a refinance. However, the original amount loaned to you by the hard money lender could be refinanced.

Going this route tends to be more expensive because it has a higher interest rate, then there are the added points, and the costs of the refinancing with Fannie Mae, but keeping in mind that you have just purchased a long term rent property, repaired it, and had almost no out of pocket expenses.

The use of traditional banking for financing short term loan with an investment property:

Investors can find banks that are willing to give them a short term loan, although they can be hard to locate and usually the investor will already have a good standing with the bank. Our short term loans are done through a portfolio lender to finance our short term investments. The portfolio lender will have an interest rate of about 5.25 percent, with 1.5 percent on the loan. This means we can get up to a seventy-five percent loan on the original value of the purchase price, but we can complete the loan process in a couple of weeks. There were times in the past that a bank would finance these loans at a hundred percent of the value and the funds would be ready on the same day, but, not any longer.

Lines of credit are offer by traditional banks, however, they are not referred to as short term loans. Those banks will usually want something such as real estate or other value property for collateral before giving anyone a line of credit. So, if you have a home and you have equity in it you should be able to get a line of credit. The bank I deal with charges a five percent interest rate and allow up to ninety percent towards the value of my residence, and I can get up to eighty percent on investment properties.

Give us a call today if you are interested in hard money loans for fix and flip, finishing construction, refinancing your mortgage, buying land, or need loans for other investment opportunities but have bad or no credit. Give Brad Loans a call today at (602) 999-9499.

Hard Money Lenders Phoenix

What is a Hard Money Loan?

If parting with a large sum of money upfront makes you uncomfortable, then a hard money loan may be the way to go. Phoenix, AZ hard money lenders work primarily with real estate investors and provide capital for renovating and purchasing properties. They have a well-rounded understanding of the unique needs of the investor and because of this, they work much differently than the typical mortgage lender.

What Is A Hard Money Loan?

The definition of hard money loan is: A last resort loan or short-term loan to close a bridge or gap in your finances. A hard money loan is not based on credit but it is backed by the overall value of the property.

Due to the property being used as the protection against default from the borrower, these type of loans usually have a low loan-to-value ratio also known as (LTV) typically lower than other traditional loans.

  • Hard money loans are mainly used for real estate transactions and are money from a company or an individual and not a financial institute.
  • A hard money loan, typically taken out for a brief period of time, is a way to raise money fast, but at higher costs and a lower loan to value (LTV) ratio.
  • Since hard money loans aren’t commonly executed, the funding deadline is extremely reduced.
  • The conditions of hard money loans may frequently be negotiated between the lender and the borrower. These types of loans usually use property as the collateral.
  • Repayment could lead to default but nevertheless end up in a profitable business deal for the lender.

How Does A Hard Money Loan Work In Phoenix?

A bridge loan or hard money loan is a tool for short term lending which is used by real estate investors for financing investment projects. It is quite common for bridge loans to be used by real estate developers or house flippers that have a goal of developing or renovating properties than selling them for profit. Private lenders will issue hard money loans, instead of financial institutions like banks or credit unions.

Traditional bank loans tend to focus on the creditworthiness of the borrow, while hard money loans aren’t based on solely on your credit. It is based on your ability to pay back the loan along with the merit of the real estate investment opportunity and property value to approve the loan. The lender will pay close attention to the after repair value or ARV, which is an estimate of the property value after the renovation or development has been completed.  Lenders will also take into account your plan for what needs to be done to a property, who will do it, and how it will be paid for.  The overall business plan is a larger factor in these lending situations than the credit history of the borrower.

Hard Money Loans For Phoenix Real Estate

Hard money lenders are in the business of funding real estate property investments – not the standard dream house of the homeowner. Usually, investment properties need work so they can be sold at their full value. Either through resale (the classic “Fix & Flip”) or for renovating and buying a property for rental.

If a real estate investor does not have deep pockets, a hard money loan is a viable option so they do not have to pay cash for every property they buy. Although having shorter terms and higher rates, hard money borrowing is simply a game of numbers. When everything you are investing comes together for profit, a  hard money loan can be a good choice.

If you are unsure of the higher rates and lack another source of funding you may have to walk away from a great deal, so it may well be the case a hard money loan is a good choice after all.

What Hard Money Lenders Consider When Funding A Property

Lenders will often use a decision matrix known as “The Six C’s” when they consider their options to fund a property. The goal is to minimize risk while still making money.

Lenders are looking for more than higher yields. They eat secure, safe investments that make a return on their capital and a return on investment that is solid. They need to know when they will be paid back and how. Relationship building is important to hard money lenders as they like to build repeat business with investors.

Hard Money Loan Requirements

Hard Money Loan Requirements

Here are the seven requirements to receive a loan from a hard money lender.

Step 1. Save Up A Down Payment

A down payment on a hard money loan is oftentimes larger than a down payment made on a traditional mortgage. This is simply because the loan is only backed by the property in question. The down payment on this loan is the difference between the purchase price plus the budget, and 70% of the ARV.

For instance, let’s assume an investor is purchasing a property for $200,000, with a $50,000 budget. The down payment would then by 70% ARV – purchase – budget. So, $300,000 x 70% – $210,000 – $50,000 equates to a $40,000 down payment. Bear in mind you also must cover the property insurance, fees, closing costs and other underwriting expenses.

Step 2. Set Up LLC.

Few of these projects in real estate go exactly as planned. Setting up an LLC for your investment(s) is the best way to protect your personal assets, while limiting your risks at the same time.

Most hard money lenders tend to only lend to corporations and LLCs. Hard money lenders will not issue consumer loans, so working with an LLC ensures the loan is strictly a business transaction.

Step 3. Find A Reputable Hard Money Lender

Not all hard money lenders are the same. These are privately-owned businesses and individuals, so it’s crucial to weigh these factors when searching for a lender:

  • Reputation: Does the lender have a good reputation among local builders and home flippers?
  • Speed: How fast can the lender get you the funds you need for the project?
  • Affordability: Shop around for competitive rates since hard money lenders have higher interest rates than traditional loans.
  • Location: Make sure you always work with a local lender.

Step 4. Prepare Your Proof Of Income

Getting approved for hard money loans will require much less paperwork than applying for a traditional loan. One of the few requirements is providing proof of income. Your lender needs to know that you can make the required monthly payments prior to giving you said loan.

Step 5. Set Up A Payment Strategy

These are short-term investments, with usual terms of 12-24 months. This means you will need an exit strategy from the start.

The most common strategy is selling the property within the loan period. Most hard money loans are passed out for flips or construction projects. Investors typically sell the property at a profit once the work is completed.

Step 6. Apply For The Loan

Applying for these loans is surprisingly simple. There are very few requirements, as mentioned above, and hard money lenders usually have applications available online.

Step 7. Review Paperwork With An Attorney

The last suggested step to take is reviewing the paperwork with an attorney. An attorney will check the following items:

  • Are all the fees disclosed?
  • Is the payment schedule included and clear?
  • Does the agreement clarify how much of the payment is applied to interest?

Hard Money Loans

Hard Money Loan Benefits

Clearly there are limitations to convention loans offered by banks, especially for fix and flip opportunities.  They take longer and are limited by bank conducted property appraisals. Hard money loans offer huge advantages for investors and home buyers.

Much Faster Application Process: The application process requires less documentation and is conducted much more quickly.  The borrower’s financial history will be looked at but more importantly if the borrower is able to produce a down payment and the project’s merits.  Many loan applications can be approved and funded in as little as 7-10 days!  Compared to the month or more that conventional loans you will have a much greater chance of getting the property secured for your real estate investment project, or the home of your dreams.

Greater Fix & Flip Flexibility: Hard money lenders evaluate the feasibility of project to turn a profit based on what it will generate during the renovations or upon completion of the project when it is sold.  The condition of the property is taken into consideration but hard money lenders are not as concerned with the present value of the property as they understand that an integral element of the process is to improvement of the property.   A factor that hard money lenders value is, how quickly a real estate investment will make them back their investment, plus the interest on the loan.  Read more about: Fix And Flip Loans

Funding For Bad Credit: Whether you’ve just started out and don’t have any established credit history or if you have had problems with your credit, hard money lenders have much more flexibility to who they make loans to.  This is a major advantage for a lot of consumers that have unavoidable credit challenges but still want to purchase a home, or want to get involved with real estate investing.

The Six C’s of Hard Money Lending

  • Collateral: As lenders are in the money business as opposed to the real estate business – they carefully consider the marketability, physical condition, and potential profit among others all to determine the form of equity cushion offered by the property in its loan-to-value (LTV.) They ask “What are we left with?” should the property have to be foreclosed on.
  • Conditions: In order to minimize risk, lenders look carefully into the conditions surrounding the area, what is the investment target area and the availability of resources, demands for the property, other property inventory and is the property for rental or resale?
  • Capacity: lenders need to know the borrower has the capacity and the means to carry out the terms of the loan and the proposed renovations. They will look at partnerships, experience, outcomes, existing obligations and resources of the borrower.
  • Capital: “No Money Down. is a misleading notion in the world of real estate investing. Lenders want you to have some skin in the game at the closing table.
  • Character: lenders may also look at the character of the political borrower. They look for judgments, liens, and background checks as well as derogatory public records and their criminal background.
  • Credit: Credit is not the most important thing when it comes to asset-based, hard money lending. Good credit can be a deciding factor though but it is combined with how good the other five

Private Money vs. Hard Money

Private money lenders source capital for hard money loans – but there is an important distinction. Private money lenders are individuals who work on behalf of themselves. Hard money lenders are single entities working on behalf of private lenders of money to offer their capital for a return.

When you need short term funding for real estate investments, hard money loans are often the answer. Utilized frequently by fix & flip investors. Hard money loans are quick to close and are far more flexible than mortgage loans that are traditional. hard money loans are sometimes referred to “easy money with hard terms.” In other words, they are more costly but easier to get. Real estate investors look at the cost of hard money as part of their projections for profit on fix & flip properties.

Hard Money Lenders in Phoenix, AZ

When you are searching for hard money loans near me in Phoenix, Scottsdale, Glendale, Tempe, Mesa, Chandler, or Gilbert, Arizona; Brad Loans is Arizona’s most trusted direct hard money lender!  We specialize in hard money loans for Fix and Flip, refinancing mortgages with bad credit, business loans secured by real estate, real estate purchases, short sales, and other endeavors with quick turnaround in the Phoenix Valley.

BradLoans.com is the most trusted direct hard money lender and private money lender in Arizona! We are the best hard money lender in Arizona with the ability to fund commercial & residential hard money loans many times within a couple of days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.

Refinancing With A Hard Money Loan

Refinancing With Hard Money Lenders

Hard money loans can be a solution for homeowners in foreclosure. It allows them to pay off the foreclosing lender with a hard money refinance giving the homeowners additional breathing room to fix their credit or sell their property and obtain long-term financing.

Refinancing Steps

Obtain a list of hard money lenders in your area. Typically, they restrict their lending activity by geographical area because they make lending decisions based on their familiarity with the local housing market. The Internet is one of the best ways to find local lenders, but you can also ask for a referral from a traditional lender. In some markets, you might be able to find a mortgage broker who has knowledge with private money options.

Investigate each hard money lender. Each lender will have its own loan application process, loan terms and fees. The interest rate and points offered for this type of loan will be much higher than a traditional loan, so it is in your best interest to find the lender that will give you the best terms. Hard money is a legitimate lending source, but there are unscrupulous lenders. Check the reputation of each lender with your local department of consumer affairs and Better Business Bureau before initiating any transaction.

Prepare your loan documentation. Hard money lenders rely primarily on the loan-to-value ratio of the house you are refinancing to make a financing decision. Consequently, you are more likely to obtain a loan if you have enough equity in your house. Gather proof of the value of your home, including appraisals, and the loan documentation for any outstanding loans. Typically, a lender will want to see some documentation to verify how you will make your loan payments. Some lenders might want to see additional documentation such as tax returns and credit reports.

Apply for a hard money loan. Download an application from the lender’s website or call the office directly to initiate the application process. Most hard money lenders design the application process to be short and quick, allowing you to have access to the loan money in as few as seven days.

File your loan documents with the lender. When the hard money loan is approved, use the proceeds to pay off the primary loan on your house. The new loan becomes your primary mortgage. Record the transaction with the local recorder of deeds.

Work to obtain long-term financing to replace the hard money loan or sell your home. Hard money is merely a short-term bridge loan. The interest rate will be too high for you to carry the loan for more than one or two years. During this time, you should work to fix whatever deficiencies exist in your financial profile that prevented you from obtaining traditional refinancing. Alternatively, sell the house, pay off the hard money loan and pocket your equity.

Moving Forward

The terms of a hard money loan typically include summary foreclosure or repossession rights. If you default on the hard money loan, you will likely not have the same options as with a traditional mortgage, so it is very important to have a realistic exit strategy to replace the hard money loan before you take one out.

When choosing a hard money lender, make sure you understand how the lender handles defaults or an inability to refinance the loan in a reasonable amount of time. Some lenders are more reasonable than others, and it is in your best interest to pick a lender that will work with you if problems arise.

Phoenix Hard Money Real Estate Loans

If you’re interested in getting involved with real estate investing and need the capital to purchase properties hard money is a great way to get started.  Brad Loans has extensive experience in both real estate investing and hard money lending and is proud to offer Phoenix Valley real estate investors the financing they need.  It is easy to get started applying for hard money loan and Brad Loans is able to work with clients with bad credit and no credit. We are your source for hard money when traditional banks say no.  Read more about Brad Loan’s hard money loan programs or get started fill out our hard money loan application or give us a call to ask questions at 480-948-0880.

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