Investment Property Loans

Hard Money Loans For New Construction

Hard Money Loans For New Construction

Hard Money Loans For New Construction

As the real estate market grows and then fluctuates, the one constant is investors in real estate still need money so they can fund their projects. But the everchanging nature of lending has made it tougher for developers to secure the money required through traditional means.

And it is here where private lending hard money loans can be of great help. They are an important option for developers wanting to get their project underway but may not be suited to a traditional leader loan.

Hard Money vs. Traditional Lender Construction Loans

While conventional loans are issued traditionally by banks, hard money loans are provided by investors or investment groups. Hard money construction loans are secured by the real estate being purchased. They often charge higher interest rates than loans from a bank, but can close in just a few days. When considering hard money vs. traditional construction loans, you should consider the following questions:

When Do You Need The Money?

Time is often vital when it comes to teh success of the project. Funding a loan quickly can often be the difference when you need to secure a great deal. Though timelines vary when it comes to obtaining a construction loan, hard money loans tend to be quicker. While most hard money construction loans can be funded within a week, traditional lenders often take a great deal longer.

How Should Your Loan Be Structured?

Traditional lenders take a one-size-fits-all approach to construction loans. Their terms are straightforward, but there is little room for negotiation when it comes to your specific loan requests. On the other hand, hard money lenders often provide more flexible terms. This means hard money lenders can structure the loan terms in ways that benefiting everyone. In addition, they can also provide repayment schedules that are structured to meet the borrower’s individual requirements.

What Type of Loan Is Available To You?

Approval is one the most important when it comes to construction loans. Even with a good financial history, the bank may still see something in your application that indicates you aren’t a good fit for a conventional loan, such as incomplete records or self-employed work. Hard money lenders are able to take more than just the borrower or company’s financial history into account.. A hard money lender looks at your ability to repay the loan as well as how much equity you have invested in the property.

Which Loan Type Is Best For You?

If you hwere turned down for a conventional loan, then a hard money loan may be just the solution to helping you get your project funded. Similarly, if the less flexible loan structures offered by traditional lenders don’t work for you, then you may want to explore your hard money loan options. In this business, being able to quickly take advantage of deals and secure land or properties is important. While conventional loans are slower when it comes to approval and funding, hard money loans can be completed and funded quickly, allowing builders to jump on excellent opportunities.  Finally, consider which loan will give you the flexibility and terms you need to get your project off the ground.

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.

House Flipping Tips

Using Hard Money Loans in Real Estate Investment in Phoenix, AZ

House Flipping Tips

When flipping a house you need everything to go as smoothly as possible. Here are some top tips to help you through the flipping process.

  • You need a good exit strategy and work out what you are going to pay for it and what you are going to do with the house once you have renovated it. A good plan is to purchase the house, have a contractor fix what needs repairing or renovating and then sell it.
  • You have to source the money for the property purchase. www.bradloans.com can help!
  • Work out the cost of your investment and for how long you will have to borrow money. If a house in your area on average takes 6 months to sell, go for 9 months.
  • It is best to find a house in an area where the property is selling rapidly. A good rule of thumb is to go for a house slightly below the current median home price. Remember, people are not always willing to buy in areas where there are a lot of renters.
  • Discover as early as you can how much repairing and updating the house will cost. A contractor can help here. Take notes on everything they say regarding costs.
  • Get ready to start as soon as the house has closed so time is not wasted
  • Develop a good relationship and contract with your contractor! Put everything in writing and be very detail oriented so everyone has the same expectations, milestones, and targets. Oh, and do not forget the penalty for not finishing on time!
  • Do not go over the top of making improvements to the house. It is an investment and you are not going to be residing there.
  • It is very important to finish the house on time and under your designated budget. Part of that is keeping people on their toes and making sure they are aware of the consequences (penalties) of not doing so.
  • Make sure the house is well staged and clean before display.
  • If the house is not selling at the price you want, most likely it is priced too high. People lose money all the time because they are not willing to lower their price.
  • Be open to negotiation. Sometimes it is best to barter on something relatively insignificant to secure the deal giving the buyer the feeling they got a deal.
  • Understand your holding costs. Every day the house does not sell is another day eating away at your profit.
  • Be prepared to make concessions to close the deal, especially if it is costing you money or being dragged out.
  • Follow up the title company to make sure everything is progressing in a timely manner.
  • Remember to cancel the utilities!
  • Once the process is over sit down and work out what went well and what needs improvement next time you flip a house.

 

 

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.

Hard Money Loans For Real Estate Investors in Phoenix

Using Hard Money Loans in Real Estate Investment in Phoenix, AZ

Using Hard Money Loans in Real Estate Investment in Phoenix, AZ

If you’re searching for hard money loans for real estate investors to get involved with real estate investments in Phoenix, Brad Loans can help!  When it comes to creating wealth, real estate investments are a good option for many investors, as well as being effective for adding diversity to your portfolio. While real estate crowdfunding or REITs (real estate investment trusts) let you to invest more passively, there are a lot of investors that prefer to own the property directly. If parting with a large sum of money upfront makes you uncomfortable, then a hard money loan may be the way to go. Although these types of loans give you advantages over regular financing, there are some potential drawbacks that you should be aware of.

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.

How Does A Hard Money Loan Work?

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.

Why Use Hard Money For Real Estate Investing?

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.

The Top Three Reasons to Borrow Hard Money for Investment Properties

  • Timing: Investment real estate is understood very well by hard money lenders. They move rapidly to get applications approved and fund the renovation and property project.
  • Approval Criteria: When other people will not finance certain properties, hard money lenders will.
  • Flexibility: If something goes wrong accidentally, hard money lenders are there to help and are considerably more nimble and agile than a big institution.

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.

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.

The Pros

There are plenty of reasons to think about a hard money loan or bridge loan over a conventional loan from a bank. Below are a few advantages that it provides investors:

Convenience: It takes time to apply for a mortgage, even more now with new regulations placed on lending by the Dodd-Frank Act. This means it can take months to get a loan, which means that you could be missing out on a property. But, it is possible to get funding in a few weeks with a hard money loan. Time is quite important when you are investing, especially for a large development projects if deviations can’t happen between the timeline and finishing the project.

Flexible terms: Since private lenders will offer hard money loans, it is quite possible for an investor to find a bit of wiggle room for negations on the loan terms. It is even possible to create a repayment schedule to fit what you need, or to get fees such as an origination fee eliminated or removed during underwriting.

Collateral: With a hard money loan, the investment property is the collateral for the loan. Even though, some lenders may offer you a bit of leeway on it. For instance, there may be lenders who will allow a loan to be secured by personal assets like retirement accounts or residential property owned by the investor.

The Cons

When it comes to financing, a hard money loan isn’t always a perfect solution with some downsides to think about:

Expense: Although a hard money loan is convenient, it can cause an investor to pay a higher interest rate and fees with this option. The rate can be as high as 10% greater than your average loan. Loan origination fees, servicing fees, and closing costs are much higher.

Less time for repayment: The purpose for a hard money loan is to let the investor get the property, remodel it, prepare it, and get it back on the market quickly. The result is that loans have a shorter repayment time when compared to a regular loan. If you decide to go with a hard money loan, it is important to calculate how you’re going to get the property ready and the loan paid back on time.  Ensure you’ve got funding for not only the purchase but repairs, tools, or skilled labor you’ll need to get the house ready to be sold at a profit.

Overall

When it comes to getting a hard money loan, they are good for established investors that need to be quickly funded for an investment property and don’t want to wait for traditional funding channels. It removes the red tape that comes with regular bank financing. When you look into hard money lenders look at the fees, interest rates, and loan terms. In the end, if you pay too much for the loan or the repayment terms are way too short, it could diminish the profits for your investment property.

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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