Monthly Archives: October 2019

Construction Loans: The Dangers of Going Off-Budget

Construction loans present a risk to both borrowers and lenders. As a borrower, you don’t have any assurance that your project will go according to plan and your lender has nothing to fall back on besides a hole in the ground and the sky above it if you default. For these reasons, construction financing is distributed piecemeal in the form of draws as construction proceeds.

The draw process has all sorts of exciting risk factors to building projects, the main one being that you have to have a plan and stick to it.

Because construction financing is given out in stages, you as a borrower need to do everything in your power not to divert from your initial budget. Any diversion on your part and you might not have enough money to finish your project. If you don’t stick to your budget, disaster might be around the corner, as the following purely hypothetical scenario will clearly illustrate.

What not to do when it comes to construction loans

Our borrower is in the middle of building his dream home: a glass box perched over a beach. He’s had a clear budget thus far, but he feels the initial 5 x 5, floor-to-ceiling windows won’t adequately capture the view, so he orders, new 20 x 5 windows which have to be shipped from Italy and cost $20,000 apiece. No matter; he ignores the pleas of his grumbling architect who now has to reframe that whole section of the house to accommodate the new windows. “There’s enough in the budget this month,” the borrower says, and he is right about that, to a point.

Construction proceeds over the next few months as only a bit of minor work is needed, but then, sure enough when it comes time to install the drywall, our poor builder can’t afford the cost of installation.

He asks his lender to increase his loan balance because he just needed to have those new windows, but it’s safe to say the lender rejects his request for more money. Work ceases on his glass villa. Until he can get another loan, the house will remain empty and unfinished. Worse yet, he’s still on the hook to pay the loan for his unfinished dream home.

The best way to risk less when it comes to construction loans is to stick to your budget.

The above story may seem far-fetched, but such situations are not uncommon. If you change your mind on a whim in the middle of construction, you can run out of money and your lender might not agree to give you more.

Do yourself a favor and have a plan and stick to it, unlike our hypothetical builder. Cost overruns are inevitable in any construction project. Most reasonable lenders are willing to work out some contingency if an unforeseen expense comes up, but few lenders are going to give you more money just because changed your mind on a whim. Staying as close to budget as possible is the best possible way to ensure you will have the funds needed to complete your construction project.

                                                                           Dennis Dahlber Broker Ri CEO Level 4 Funding LLC

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Hard Money Lender

Hard Money Loans

Hard Money Loan

Arizona Tel:  (623) 582-4444

Texas Tel:      (512) 516-1177

Dennis@level4funding.com

Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378

22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027

111 Congress Ave | Austin | Texas | 78701

About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions

Types of Loans To Flip Houses in Arizona

It is important to know that there are different types of loans available. And some Loans To Flip Houses in Arizona offer more benefits than others.

There are dozens of television shows which have popularized the concept of buying a house, making some repairs and renovations and then quickly reselling the home. The process is known in the real estate industry as flipping. And this process is making a lot of money for a lot of people. But there is more to this business than just buying low and selling high. It is critical that investors understand all of the nuances of using Loans To Flip Houses in Arizona.

There are four common Loans To Flip Houses in Arizona for the average investor. And in this case, average means an investor who is going to need to secure financing and does not have a pile of cash under the mattress. The first method is what almost everyone uses to finance a home, the traditional lenders. These are the mortgage companies and banks that everyone is familiar with. The biggest issue when using a traditional lender is the time involved. Just as the name implies, flipping is a fast process which relies on speed and efficiency to make the process profitable. And anyone who has ever applied for a traditional mortgage knows that the process is anything but fast.

The second method is to use personal credit such as the equity in your own home through a refinance or a home equity line of credit. The personal refi has the same issue as the traditional loan in that the time required does not fit the fast process of a flip. The home equity line is a better fit because you have instant and constant access to the fund. But you are essentially placing your own home at risk by using a HELCO.

Arizona Hard Money Loans To Flip Houses in Arizona

Hard money is a loan that is funded from a private lender rather than a bank or mortgage company. These loans are fast and relatively easy to secure as compared to a traditional loan. This makes Arizona Hard Money Loans the best choice for most real estate flip deals. The drawback on hard money is that the cost is higher than a traditional loan. But when time is critical, hard money is the way to go. Hard money is an asset-based loan so the application process is not as time-consuming or stressful as a traditional credit-based loan approval.

Evaluate Your Options

Even though Arizona Hard Money Loans are more costly than traditional loans, the fast turnaround time is often worth paying for. You could find a property, make an offer, get hard money and complete the refi and flip before a mortgage company would even get you an answer on your application. And the fact that Arizona Hard Money Loans are short term is also a benefit as you are not financing out for a number of years and paying interest for the entire time. There is also the option to use the equity in your home or a line of credit but beware of risking your home on the flip of another property.

                                                           Dennis Dahlber Broker Ri CEO Level 4 Funding LLC

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Hard Money Lender

Hard Money Loans

Hard Money Loan

Arizona Tel:  (623) 582-4444

Texas Tel:      (512) 516-1177

Dennis@level4funding.com

Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378

22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027

111 Congress Ave | Austin | Texas | 78701

About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions

Home Equity Loans to Flip Houses in Arizona

Flipping houses can be a very profitable business once you have the means to finance the purchase. Using home equity Loans To Flip Houses in Arizona is one solution.

Flipping houses is a fast-paced business and having instant access to funds when you find a great property is critical to your success and longevity in the business. Traditional lenders just can’t meet the timetable to be a useful and reliable resource for most house flip purchases. But if you own a home outright or you have a great deal of equity in your home, then you can put that to use rather than searching for other types of Loans To Flip Houses in Arizona.

Many homeowners are offered preapproved home equity loans or a home equity line of credit when the amount they owe on their home is far less than the value of the property. These funds can be used for anything that the homeowner chooses and the loan is basically a second mortgage on their house. This fast access is great for flippers who want to buy a place fast, add some value and then sell it quickly. The money from the home equity line is only used for a short time and the homeowner does not pay a huge amount in interest or in fees and closing costs.

Another benefit of using home equity Loans To Flip Houses in Arizona is that the interest rates are much lower than those of a short-term hard money loan or a personal loan. Most banks offer very competitive rates for a HELOC or a home equity loan to entice homeowners into using the money. Most traditional lenders are offering rates anywhere from 5% to 9% while hard money lenders could ask in the neighborhood of 15% or even 20% for a short-term loan. That will greatly reduce your potential to turn a good profit.

The Down Side

There is a definite downside to using home equity Loans To Flip Houses in Arizona. Not only are you risking the house that you are flipping if you can’t make the payments but you are also risking your own home if you run into trouble and the flip loses money or you are unable to sell it quickly. It is always important to consider what you are risking and how you will carry all of the payments in a worst-case scenario.

Evaluate Your Choices

As a brand new flipper, risking your personal home on a new business venture might not be the best choice. You are already in a position of a great stress as you learn the new business and having your house on the line will only add to that stress. But as you become more experienced and understand the process, the stress and the level of risk will decrease. At that point, using the equity in your home will open up new opportunities for you as the funding is instantly available. In addition, the lower interest rate will help to increase your profit margin and allow you to grow your house flipping business even faster.

                                         Dennis Dahlber Broker Ri CEO Level 4 Funding LLC

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Hard Money Lender

Hard Money Loans

Hard Money Loan

Arizona Tel:  (623) 582-4444

Texas Tel:      (512) 516-1177

Dennis@level4funding.com

Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378

22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027

111 Congress Ave | Austin | Texas | 78701

About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions

3 Things to Know Before Approaching Residential Hard Money Lenders

If you’re a newcomer to fix-and-flips, residential Arizona Hard Money Lenders can be your best ally. Learn a bit about what they’re expecting before you apply to ensure you get approved.

1. Credit doesn’t matter, but experience does. One of the reasons why working with residential Arizona Hard Money Lenders is awesome is that your personal credit score doesn’t usually matter. You can have rotten credit and still get a loan to finance your flip. Newcomers can get financing as well, but the terms you’re offered are likely to improve as you gain more experience. If you’re cash poor but idea rich, plan to start off on smaller projects first, then build up to bigger and more expensive ones after you’ve demonstrated you’ve got what it takes to be successful.

2. You’re going to have to have some of your own cash. A great broker can work miracles and find alternate ways to get you financed, but you’re likely going to have to have some of your own cash in the deal, even if it’s just to cover the cost of getting financing set up. If you’re struggling to scrape up your own cash, focus on finding one really good deal; a home that’s being sold for far less than it’s worth. Sellers can become especially motivated to slash prices during divorces or when they’ve gotten in over their heads with projects. These situations may be your best bet if you’re trying to break in with minimal cash.

3. You need to be 110% certain you won’t run out of cash. Always leave room in your budget for unexpected expenses. Sometimes newcomers are eager to get going and work with a tight budget or, worse yet, assume they’ll be able to get additional funding after the project gets underway. In reality, it’s really difficult to get extra funding partway through and most projects that run out of cash simply stop.

Your Team Wants You to Be Successful

Generally speaking, residential Arizona Hard Money Lenders are people just like you, but they’ve grown their wealth enough that they can begin investing in projects like yours. Their approach to lending is different than most. What they care about more than anything else is that you’ve done your diligence and have the ability to carry out a successful project. When you work with a seasoned broker, he will also be part of your team, helping make sure you’ve got everything in order and that what you’re bringing to the table is presented to investors in a way that gets them excited about what you’re doing.

If you know how to evaluate a good deal and need some cash to get going, HMLs can lend a helping hand.

While you don’t need to have good credit or a ton of cash to get started with fix-and-flips, you do need to have the right mindset and do your homework before jumping in. If you’re set on those, talk to an established broker who will help you get the best terms possible from residential Arizona Hard Money Lenders and get you started on the path to wealth.

                                Dennis Dahlber Broker Ri CEO Level 4 Funding LLC

Dennis Dahlberg

Broker/RI/CEO/MLO

Level 4 Funding LLC

Hard Money Lender

Hard Money Loans

Hard Money Loan

Arizona Tel:  (623) 582-4444

Texas Tel:      (512) 516-1177

Dennis@level4funding.com

Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378

22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027

111 Congress Ave | Austin | Texas | 78701

About:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

© 2019 Level 4 Funding LLC. All Rights Reserved.

Copyright | Privacy Policy | *Terms & Conditions