Traditional lenders are designed to serve companies with good credit. There is a requirement that the company has strong monthly cash flow. In addition, the lender will require the principal to sign a personal guarantee. The personal guarantee is in lieu of putting the asset up as collateral. Arizona Hard Money Lenders, on the other hand, require that the asset (target property) be used as collateral. Less emphasis is placed on the borrower’s credit and cash flow. The hard money loan loosely represents a traditional mortgage.
Arizona Hard Money Lenders are not counting on you repaying your loan back; this is why your credit is not a big consideration. The value of your collateral is the primary consideration for your loan. Arizona Hard Money Lenders are similar to other short to medium term loans with high interest rates. The terms of the loans are from less than one year to five years. The underwriting process will vary between lenders; however, you can expect interest rates to be between 9% to 21%.
The property that you are seeking to acquire will determine the amount of the loan you will qualify for. The more valuable the property, the larger the loan. This is non-negotiable. Each Hard money lender will have their niche market that they lend such as commercial or residential, so you will need to do a lot of leg work to find the right lender for your project. You will need to develop a business plan for the property showing the cash you have available and how the loan is going to be repaid. In the business plan, you will need to reference your experience in real estate. If you are new to fix and flip, you may consider taking on a partner that has experience. A drawback is that this will lower your profit, but it will be more impressive to the lender when considering the loan. Your credit will be looked at only to determine your interest rate. Here again, the right partner with good credit can lower your interest rate.
The loan to value (LTV) will be one consideration in the terms to repay the hard money loan, others will be the area the project is in and the terms you negotiated. Remember, the more risk the lender has to take, the high the interest rate. In addition to the interest rate, you will also need to pay closing costs, points, and origination fees, and these fees are often paid upfront for the loan.
The loan operates like an installment loan. Your loan will accumulate interest and you make monthly payments (in most cases) until the loan is paid off. If you can, you may want to pay off the loan early because of the high interest level you will be paying. There is a special niche that Arizona Hard Money Loans service. It includes if you have located an acquisition and have to act quickly or if you have bad credit, you may want to consider using a hard money lender. At Level 4 Funding, we work with hundreds of private Arizona Hard Money Lenders that specialize in various segments of real estate investing. Call us to find out if we have the right lender for you.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
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 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 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.