Tactics to secure a larger hard money loan: estimate the ARV

A hard money loan (i.e.,an asset-based loan) is any loan secured by the value of an underlying asset. Most of these lenders will only give loans of up to 65 percent of an assets market value.

But what if you intend to renovate a distressed property which is significantly undervalued at the time purchase? To secure more in the way of financing you need to understand what your property worth is after you’ve repaired it (the after repair value, or ARV).

Asset-based lenders could offer more financing if you can demonstrate the potential of a project. However, to explain a project’s potential you need to understand property valuations. Relying solely on appraisals will limit your understanding and wont serve you in the long run as a real-estate investor. Professional assessments are also expensive and time-consuming.

Your best bet is to develop your sense of what a property is worth by comparing your estimates with that of a licensed appraiser. Educating yourself this way will develop your understanding of property valuations. An excellent way to start training yourself when it comes to property values is to use the comparable sales method.

You can begin to estimate the ARV yourself by utilizing the comparable sales method, which could help you qualify for a larger hard money loan.

The first step is to assess your subject property, look at its location, what is the neighborhood like and what impact does this have on the properties value? Figure out the lot size and determine the condition of the exterior. Find out essential details about the property, its size in square feet and its amenities (i.e., Number of bedrooms and bathrooms).

Find 5 to 10 properties similar to your subject through local listings. Only consider properties that have sold within the last 3-6 months, are in the same location and have a similar size and similar amenities. It is crucial that you don’t look at distressed properties. Remember you are trying to determine your properties potential after you have made renovations.

After you have enough comparable properties, consider the ones that are the most similar and find the properties with the highest and lowest selling price to estimate a range of value for your subject property. These numbers will give you a sense of what the property will sell for after you make your repairs. With this understanding, you can thoughtfully discuss the potential of your renovation project with a lender and qualify for the best loan.

You can secure a larger hard money loan if you can explain the potential of your project

Even the most informed estimate of a properties value is only an educated guess. If you rely solely on appraisals, you aren’t building your knowledge of property valuations. Using a simple comparable sales method is an easy way to increase your understanding of property valuations and the after repair value of your property. Having this understanding builds your lenders confidence in your project and increases your eligibility for a larger loan.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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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

Obtaining a Business Loan in Arizona

In Arizona, every year thousands of people seek out loans to help smooth the transition into entrepreneurship. These business loans in Arizona can be provided by banks, private lenders and even governmental grant programs provided by the state.

There are almost 400,000 small business in Arizona with almost 300,000 with no employees or staff. Each year, 8 out of 10 businesses that have been in business for a year or less will fail. Lenders tend to avoid lending to businesses because of this high-risk factor. You may, however, need a business loan in Arizona for heavy expansion. Do not be surprised if you are not able to secure a business loan for the first two years.

Taking out a business loan in Arizona differs from a personal loan because you will need to provide proof of consistent revenues. The institution that you are applying to wants to verify that you are bringing in consistent income. You may be disqualified from obtaining a conventional business loan if the banks see your organization as high-risk. The high-risk assessment is determined by the bank calculating the number of sales, clients and contracts you obtained within the past year. If your company is not viewed as a growth company, a stream of increasing sales, then you will be denied a loan. Additionally. if you have a poor credit score you will also be denied a business loan.

The term and interest rate are dependent on the term of the agreement you sign. A business loan in Arizona can be made for five to ten years with interest rates of 10% to 20%. The loan may be renewable if you are struggling to repay the loan. The loan from a conventional lending institution most likely will want you to provide a personal guarantee as well as collateral of 2:1 to 3:1 to approve the loan. Understand that if your business fails then you will need to continue paying the loan or lose your capital.

Getting the Help you Need to Succeed

You will need the advice of a good attorney for the establishment of the business as well as a good CPA for financial setup which includes pricing of your product and a proper accounting system. You may consider, if you have employees, utilizing an outside payroll service so you are assured that the taxes are paid properly and you minimize your exposure.

If you are still determined to open your business and the avenue of securing a conventional loan is not a viable option, then you may want to seek non-conventional financing.

If you are starting a new business, seek out an equipment lender that will do a lease back of the equipment to you. You will also want to consider angel investors, credit cards, and friends and family. If you are purchasing an existing business then you will want to seek out hard money/asset-based lenders, A/R financing, and invoice funding. These avenues all have high interest rates attached to them and you will need to know that the business can cash flow the debt obligations. If you are seeking to secure a loan, contact Level 4 Funding for guidance and structure of the right loan or loans to make your dreams come through.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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Hard Money Business Loans

Are you thinking about obtaining a hard money business loan? You might be surprised at the cost of the money.

Have you been turned down for a conventional business loan? Many people shy away from a hard money business loan because of higher interest rates and other fees that are locked into the loan. For short-term loans, however, they can be the saving grace in circumstances such as seasonal lows or when needed inventory is hard to come by. Many lenders also offer no prepayment penalties which can reduce the cost of the loan significantly. If you are a business that needs inventory or equipment or funds to hold you over until peak season, this could be the type of loan to consider.

If you are flush with hard assets, hard money business loans may not look at credit scores because these types of loans are often based on the collateral rather than credit ratings or other financial requirements. For lenders, there are fewer regulations but greater risks, which explains the increased interest rates. Almost anyone who has extra cash can offer hard money loans, so you should always research who you plan on doing business with.

You will need to offer up your assets to the lender. The lender will not loan one hundred percent of the value of the assets, rather up to 75%. If you have assets of $100,000, they may lend you $75,000. Interest rates vary widely so you might want to search out other lenders and compare interest rates before you agree to a loan. Almost totally determined by the collateral, usually commercial real estate, the loan-to-value is determined by the hard asset. In the case of a business, this could be equipment or receivables. Some business owners choose to use their home as collateral in order to obtain a hard money business loan.

Quick to Funding

Often quicker and easier, hard money loans give business owners a solution in a financial pinch when they cannot wait for the approval of a conventional loan process. If you have a poor credit score and lack the time to rebuild before launching your business, then you might want to consider these types of loans. You will need to weight the costs and benefits of this type of loan. Some of the advantages of this type of loan are, easy to apply for, easy to qualify for, and fast access to cash. Some of the disadvantages are the increase costs and risks you assume when financing a business.

Interest rates for these types of loans are slightly higher than traditional loans. For the lender, these types of loans are much riskier than traditional loans.

Since these loans are riskier than traditional loans, the interest rates you will pay could start at 12% and go all the way up to 29%. One drawback on these types of loans are that they are short term in nature and usually carry a balloon payment after 1 – 6 years. You will need to consider all your financing options before proceeding with the Hard Money Loan. Make sure you do your research before placing your signature of the line. Make sure the lender is honest and trustworthy. See if there are any complaints at the Better Business Bureau and read all reviews from past borrowers before you proceed. Make sure you help your business, not hurt it! At Level 4 Funding, we have worked with hundreds of businesses and offer rates as low as 7.99 percent with 90 percent LTV. Call us for a no-obligation quote.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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How to Use Spec Construction Loans for Investing in Real Estate

Are you thinking about purchasing an existing property or rehabbing a property in need of repair? If you are, you’ll want to investigate builder or spec construction loans. These loans are used to finance single property, multi-unit residential properties or commercial buildings to sell for a profit.

A number of projects with high Return on Investments (ROI) are passed up because the builder/speculator cannot secure a conventional construction loan from a bank. Hard Money spec construction loans can be used for new builds, rehabilitated older property to be sold for a profit, a group of homes, a multi-family dwelling or a commercial property. If the project makes sense, and you can cash flow the higher interest rates for the loan, then a hard money loan is right for you. They are easier and quicker to secure with little concern about credit or income details, so long as the project makes sense and the builder/developer has sufficient experience. A concern will focus on the profitability of the project.

Hard money loans are short term in nature. These loans can be used for the purchase of a new property or refinance an existing project. These loans usually do not cover the carry cost during construction but you can fold into the loan cost of construction/renovation plus a short period for selling or renting the property. At closing these loans (spec construction or rehab) will have an escrow established and disbursements (draw) for each stage as the project is completed, pay for the property or refinance of an existing one. Payments on the interest are often due fro the first month. Borrowers will need enough cash reserves or cash flow to pay the holding costs, including but not limited to the payment on the loan, taxes and insurance.

The construction loans are draw loans, in other words, as the stage of construction is completed and the city/county and loan company’s inspector signs off, the lender will pay (issue a draw) for that stage of the project. You need to have enough funds to float these expenses until these funds are released.

Some of the Different Types of Loans

Fix and Flip: Do not miss an opportunity. Hard Money loans offer you the opportunity to purchase the property, rehab and sell for a handsome profit. You will need to demonstrate that you have the experience and expertise to buy, rehab and sell for a profit. Purchase and Rehab: If you have a property that is old and rundown, you will need to demolish it and rebuild to the expectations of today’s buyers or renters. Spec Construction Loan or Purchase and Build: If you have a lot and want to build a home or multifamily project, then this loan is your vehicle to begin the project. No owner occupied and only for resale or rental income.

In order to qualify, consider the following: Underwriting based on asset, no proof of funds or seasoning required, no 4506’s, foreign nationals are welcome as well as most credit scores. Having experience in building/marketing real estate is also an important consideration.

You’ll find terms up to 20 months interest-only payments, minimum loans that vary, but can start at about $350,000, and 4 to 7 points with interest rates that are typically around 10 percent. If you are considering proceeding with a purchase or rehab of a property, contact Level 4 Funding to team up with you and guide you to the loans that best fit your needs.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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Alternative Business Loans Arizona Entrepreneurs Best Option

Exploring alternative business loans, Arizona start up and small business owners could be surprised by their options. There are many reasons that an alternative loan could be your best choice.

Traditionally, when a business owner needs money to fund a startup or to grow a fledgling business, the first stop is their local bank. But there can be many hurdles to overcome when seeking a loan from a traditional lender. Alternative lenders provide business loans Arizona small business owners actually have a chance of securing and that is just one of the many benefits that they offer.

There are two main benefits to working with an alternative lender. The first is that the approval rates are much higher than a traditional lenders and the second is the fast approval and funding time frame. As an independent entity, there is not the mile of red tape to slog through with most alternative resources so borrowers enjoy a much better customer service experience for the most part and a higher success rate.

When alternative lenders offer business loans, Arizona borrowers will discover that the lenders tend to be more flexible on terms as well as qualifications for the loans. Alternative loans are therefore a good option for a business looking to finance inventory or for working capital which is not something that banks will approve. In addition, the alternative lender is not as likely to require that the business owner use personal assets as collateral for the loan. Which offers the borrowers more confidence in the lender and personal security as well.

Personal Credit is Not an Issue

Poor personal credit is often a factor that will derail business loans Arizona business owners are seeking. Banks are not willing to process a business loan without a deep dive into the personal financial status of the company owners and even some of the other major officers of the company. That is not an issue for alternative lenders as they are primarily interested in the merits of the business and not the owner’s personal finances.

Time is On Your Side

Anyone who has applied for any type of loan from a bank knows that the process can be long and arduous. A personal mortgage loan can take weeks to process. But a business loan application can actually drag out for more than three months. By the time a bank is willing to fund a business loan, the need for the money could be gone, the opportunity could be lost and the business could even be floundering. Business deals are often time sensitive, but traditional lenders tend to overlook that fact. Great opportunities to grow a business don’t appear every day, so business owners need to be prepared to act when the opportunity arises. Securing a loan from an alternative lender is a great way for an Arizona business owner to maximize an opportunity to expand, diversify or land a huge client that might otherwise have gotten away.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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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

Tips for Success When Using Hard Money Lenders

Borrowers can tend to be in a hurry when they are seeking hard money loans. Sadly that can lead to making a poor choice as a result of not checking out options for hard money lenders.

Finding the perfect property can be very exciting. The potential for making a great profit can make many new real estate investors rush through the process of selecting a lender. But using hard money lenders is no different than using a bank or a mortgage lender. And borrowers should always follow the same process when selecting their lender.

As with any business deal, you will want to complete some research on all potential lenders. This will tell you how long they have been in business, who they typically loan to and the types of loans that they normally offer. You might also be able to read customer reviews online or testimonials. All of this will let you know what other borrowers experiences have been with each of the hard money lenders that you are considering.

Talking to each lender will also give you a good feel for their level of interest in their clients. If the lender asks about your plans for the property, how you are financing the repair expenses and about comps in the area then he or she is interested in not only getting his or her money back but also in your success. Working with a lender who has a genuine interest in seeing you succeed will make the process much less stressful. Hard money lenders who are interested in creating long term relationships will express interest in each project. In addition, they will be more willing to work with you on creative or different terms than they normally offer.

What to Watch Out For

Bait and switch is a sure sign of an unethical lender. In these events, the lender offers great terms that the borrowers can’t refuse. Then as soon as the borrower verbally commits to the lender, the lender supplies a loan offer with drastically different terms. In most cases the interest rate is much higher and there are other hidden fees added to the final cost of the loan. A catch and release situation is where the lender charges several fees upfront that the borrower must pay before getting the actual loan offer. Once the borrower pays the fees then the lender ignores the borrower and never provides a loan offer. The lender gets to keep the fees and the borrower is faced to find a different lender. Both of these cases are certain signs of dishonest lenders.

Just Another Service Provider

When you are seeking any type of loan, don’t be intimidated by the lenders. Think of them as you would any other service provider and complete your due diligence to be sure that you are doing business with a reputable lender. An honest lender will not be offended by questions about their standard terms or loan practices.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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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

What is Hard Money?

Many people have heard the term hard money but they do not have a good understanding of what it is or how to use it. Having this understanding can open up many opportunities for borrowers.

Hard money is a type of loan which is offered to a borrower based on the value of the collateral and not the personal financial position and history of the borrower. This type of loan is sometimes referred to as asset-based loan financing. The collateral is normally real property as opposed to personal funds in a retirement account or other material goods.

Because of the unique nature of a hard money loan, the lender is not the traditional bank or credit union that most borrowers are familiar with. These types of loans are offered by private investors or private investment companies. Being that the loan is from a private entity, the terms, conditions and processing time of the loans is quite different from the traditional bank loan application and process. Lenders are free to tailor each loan as they see fit and to meet the needs of the borrower. This is because the lenders are not regulated by state or federal law as traditional banks and lenders are. But these private lenders are still in business to make money so there are best practices which most hard money lenders follow.

As mentioned before, the loans are secured with collateral which is real property. To assure that the investment is protected, lenders use what is called loan to value when evaluating a loan request. The amount of the loan is determined by the value of the collateral property. Most lenders are willing to loan 65% to 75% of the value of the collateral. This insures that the collateral will always be more valuable than any outstanding balance on the loan.

There are Pro’s and Con’s

Asset based lending offers a borrower opportunities based on criteria other than personal credit and financial standing which can be very helpful. In addition, the terms can be very flexible to meet the borrower’s needs. But the lender is also seeing some benefit from funding the loan. The interest rate on these private loans is normally higher than that of a traditional bank loan. In most cases these private loans offer interest rates above 8% and they can range up to as much as 25%. But borrowers are willing to pay the higher rate to secure the loan that they need.

Shop Around

Just as when applying for a traditional loan from a bank or mortgage lander, it is always a good idea to shop around for the best rate and terms available. There are more private lenders out there than most people are aware of. With the higher interest rates of private loans it is even more important than ever to secure the best rate possible. Investing a little time to find an appealing interest rate on a private loan can save you a great deal of money over the life of the loan.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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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

Important Considerations when Choosing a Hard Money Lender

Hard money lenders are many real estate investors choice for funding, yet many just getting into the field know little to nothing about this lending option. Let’s take a look at what this type of lender can bring to the table.

Hard money lenders are not held by the same regulations that banks and credit unions must operate under. Because of this, they can offer loans to individuals and businesses with less than stellar credit. Many are private individuals who specialize in several types of real estate investment strategies from multifamily to office to the fix-and-flip model. These types of loans are asset based, meaning that the lender will look at your collateral as the prominent element of the loan. These types of loans are good for investors just getting in to the real estate investment model.

Another positive to those that operate under less regulation is that they are much quicker to funding. This becomes important when an investor is looking to get into a property, do some quick renovations, raise the property value, and get it on the market or obtain a loan from a traditional lender that is based on the property’s new value. If you end up developing a long-term relation with a hard money lender, you will find that you can often receive the funds you need for that next investment property in as little as a few days, compared to a month or more from other types of lenders.

Be sure to check the small print. Are you working with a hard money lender that offers a no-penalty clause for early payments? A pre-payment penalty states if you pay your loan back in full before the actual due date, a penalty will be assessed. The fee is percentage-based or the amount in interest that you would have paid for a set number of months. This can lead to tens of thousands of dollars. If you have an existing loan with a pre-payment penalty, be sure to assess fees before paying off the loan in full to determine if this is the right strategy for you.

Know Your Exit Strategy

While your property may be acting as collateral, hard money lenders do not want to be in a position of laying claim and having to foreclose on a property due to unpaid debt. For this reason, they will want to know your exit strategy. An exit strategy is how you plan on paying off the debt. Most of these loans are short-term, anywhere from 3 months to five years, making this component an important consideration for both the lender and the borrower. A few options are to refinance with a commercial mortgage, renovate and sell, or pay the debt off with business capital.

Know your exit strategy before considering a hard money lender. Going in with strong collateral and a good exit strategy are keys when considering going after a hard money loan.

At Level 4 Funding, we work with hundreds of private hard money lenders. Our rates start as low as 7.99 percent with terms that run anywhere from 3 months to 5 years. Call us to see if we are the right brokers for your next real estate investment deal.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008

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

How to Obtain a Commercial Loan Despite Bad Credit

While commercial lending rates are up, there are still many individuals and businesses that are finding it difficult to obtain the commercial loan they need. Fortunately, there are lenders that offer greater flexibility.

In 2017, small banks approved 49 percent of funding requests—quite a jump from 2008 when about 80 percent of small business owners received a rejection. That still leaves over 50 percent that are not getting approved and you may have found yourself one of these. Don’t give up on your dreams. There are other lenders that you can turn to when banks say no.

Hard money lenders are one of these options. They are usually private lenders that base their loan qualification standards on the collateral or assets of the property or business. While most banks require credit scores in the 700 range, private hard money lenders do not have these strict qualifications. They will want to know what your plan is for the business or property and what your exit strategy is. After all, this is how they will receive their capital as most offer interest-only payments for a set amount of time. These lenders offer short-term loans with terms that usually extend from 3 months to 3 years. Because they approve loans that have been declined by traditional lenders, there is usually an increase in risk and, therefore, a higher percentage rate often applies to the commercial loan.

These types of loans are helpful for young or new entrepreneurs who may not have the credit score required by traditional lenders. If you have a high-risk, high-return business strategy, a hard money lender may very well have the capital you seek. Many of these types of lenders are not risk adverse. In fact, if you can get them excited about your proposed business plan, have the necessary collateral, and some experience in your chosen segment, chances are good that you will leave with a loan. This doesn’t necessarily mean that all the required assets must come from the proposed business. Many individuals start their own business by using the collateral that has been established in their home or other investment properties.

What are Possible Exit Strategies in a Hard Money Commercial Loan?

Your exit strategy is an important part of obtaining this type of loan and one that you will want to consider before interviewing potential lenders. Here are a few of the strategies that businesses use: they sell the property or refinance with a more traditional lender after a property has been renovated or a business is showing a profit. Self-amortizing can also be considered, though it is a little risky. While most hard money lenders allow you to pay interest-only payments while you are developing your business or property, you may want to consider paying both principal and interest during the full duration of your loan so that it is paid off upon maturity. You will need to determine just how you will create this cash flow in order to be able to make the scheduled payments.

At Level 4 Funding, we offer hard money commercial loans that are quick to funding and require little paper work.

We offer three simple steps to obtaining your loan: a loan application, purchase contract and written approval, all of which can be accomplished in as little as 24 hours. Call us today to see if we may just be the lender that can make your dreams come true.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
clip_image002clip_image004clip_image006clip_image008

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

How to Develop an Exit Strategy When Obtaining a Hard Money Loan

An exit strategy is, in essence, your plan for paying off your hard money loan. It is a plan that you will want to develop before you sit down with a lender.

Exit strategies are crucial for obtaining a hard money loan. Many of these lenders offer interest-only payments as you develop or renovate your project. They obtain the big payoff upon completion when you have succeeded in your “exit strategy” and can repay them in full. For those of you in the fix & flip model, your exit strategy is fairly easy to define. You rehab and then sell the property.

Selling the property, then, is your exit strategy. Because timelines can change in the world of construction and rehab as well as finding qualified buyers, it will be important that you look for a hard money lender that does not charge a prepayment penalty. You’ll also want to come to the table with improvement plans that include costs and potential market value as well as comps and average time on the market.

If your real estate segment falls into the buy-and-hold model, selling will, obviously, not be an appropriate exit strategy. A strategy that does work is refinancing. Many traditional lenders that offer lower interest rates with longer terms will not loan on properties in poor conditions. Once you have the property renovated and a suitable tenant, your chances of obtaining a traditional loan are greatly elevated. It could be that you needed a loan quickly to jump on a property that just hit the market. Many investors obtain funding from their hard money lender in order to accomplish a quick buy and then refinance at a later date.

The Sale of Assets

The sale of other assets such as real estate or accessing additional funds such as money from IRAs, the stock market, or business interests is another exit strategy. You may wonder why, in this case, the borrower wouldn’t just dip into their additional assets and bypass the loan process all together. For many investors, time is a crucial component in their investment strategies and waiting while other assets sell may cause them to miss a prime property or opportunity. In essence, you are obtaining a bridge hard money loan. These types of short-term loans simply “buy some time” and act as a “bridge” from either one loan to the next or one property to the next.

Don’t feel like you have to stick with one exit strategy. Blended strategies can often be the best solution depending on the situation.

And just what is a blended strategy? This type of exit strategy utilizes a combination of all of the above to create a strategy that works the best for your particular situation. For instance, if you cannot obtain the full loan amount upon completion of the project, you can sell an asset and reduce the LTV so that a traditional lender will consider financing. Whatever your exit strategy, be sure to check with Level 4 Funding before obtaining your hard money loan. We have years of experience and can help you develop an exit strategy that works well for your project.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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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.

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