Flipping houses is a fast paced form of real estate investing

Compared to traditional sources, a hard money lender imposes a higher interest rate. 

An 18% rate is normal in this business. This high rate usually discourages a lot of investors from tapping this form of financing. 

What neophyte investors do not know is that this rate will hardly matter. Remember, flipping houses is a fast paced form of investing. You need access to cash, fast. 

If you go to traditional loans, you must wait for around 30 days for the processing of your loan. 


By that time, some other house flipper could have snatched the fixer upper you want to rehab.

The first thing I do is thoroughly check out the company and its principles. I have found several ways to qualify a hard money lender's reputation. 

In addition to the traditional methods such as pulling a Dun and Bradstreet report, I actually call their competition and ask some very pointed questions.

In some cases, the low loan to values do not facilitate a loan sufficient to pay off the existing mortgage lender, in order for the hard money lender to be in first lien position. 

Because a security interest in the property is the basis of making a hard money loan, the lender usually always requires first lien position of the property. 

As an alternative to a potential shortage of equity beneath the minimum lender Loan To Value guidelines, many hard money lender programs will allow a "Cross Lien" on another of the borrowers properties. 

The cross collateralization of more than one property on a hard money loan transaction, is also referred to as a "blanket mortgage". Not all homeowners have additional property to cross collateralize. 

Cross collateralizing or blanket loans are more frequently used with investors on Commercial Hard Money Loan programs.

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Using a hard money loan to speed up construction

You are ready to start construction, but the loan process is slowing you down. 

You should consider obtaining a hard money loan to get going on your project today. 

Hard money loans can be obtained quickly and with little upfront cost to you. 

What are hard money loans and how can I obtain one?

These kinds of properties are meant to be purchased at a wholesale rate, as no Retailer would go out for such kind of transactions. The property may be very old fashioned or greatly ruined by tenants. 

It means you are required to invest a lot of money on its rehabilitation and fixation, according to the present market trends. You cannot perform the whole task alone, and you need an agency like hard money loans Virginia, to invest in the fixation of that property. 

Such properties are called whole sale ones, as lot of investment is needed on these.

To prevent such a scenario from occurring, always get the best deals when investing in real estate. Unlike ordinary bank loans, hard money loans are asset based. If the property, for which the loan is being made, has a high after repair value (ARV), then the loan application will be approved. 

Therefore, you should see to it that the property you want to flip or rehab has a good ARV to obtain hard money.

Commercial hard money is similar to traditional hard money, but may sometimes be more expensive as the risk is higher on investment property or non-owner occupied properties. 

Commercial Hard Money Loans may not be subject to the same consumer loan safeguards as a residential mortgage may be in the state the mortgage is issued. 

Commercial hard money loans are often short term and therefore interchangeably referred to as bridge loans or bridge financing.

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Research Your Hard Money Lender Before Doing a Deal

The hard money industry suffered severe setbacks during the real estate crashes of the early 1980s and early 1990s due to lenders overestimating and funding properties at well over market value. 

Since that time, lower LTV rates have been the norm for hard money lenders seeking to protect themselves against the market's volatility. 

Today, high interest rates are the mark of hard money loans as a way to compensate lenders for the considerable risk that they undertake.

Traditional commercial hard money loan programs are very high risk and have a higher than average default rate. 

If the property owner defaults on the commercial hard money loan, they may lose the property to foreclosure. If they have exhausted bankruptcy previously, they may not be able to gain assistance through bankruptcy protection. 

The property owner may have to sell the property in order to satisfy the lien from the commercial hard money lender, and to protect the remaining equity on the property.

There is also great concern about the practices of some lending companies in the industry who require upfront payments to investigate loans and refuse to lend on virtually all properties while keeping this fee. 

Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding in order to reduce this risk. Those who feel they have been the victim of unfair practices should contact their state's Attorney General's office or the office of the state in which the lender operates.

Hard money lenders only look into your property, not your employment status or credit score. They look into how you can pay them back when you said you're going to on a specific time.

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Alternative Ways to Fund Real Estate Deals

Since traditional lenders such as banks are not granting real estate loans, many investors are forced to look for alternative ways to fund their deals. 

This is where hard money lenders come in. 

Despite the banks tight lending policies, investors everywhere are still very active in the market with the help of hard money loans, which are now considered the king of the real estate financing business.

Hard money lenders are providing much needed liquidity in a badly damaged real estate market, helping the state recover from the devastating housing crisis.

While excellent credit is essential to a convention financing source it is not so important to a Hard money lender. 

If your exit strategy is to refinance the property the lender wants to ensure you can. 

But if you are going to sell, they are more concerned that you have a buyer that qualifies to buy the property. 

This goes back to the importance of a solid exit strategy.

Whether conventional or bridge financing both place a heavy emphasis on the property, which is the collateral. From a traditional lending perspective the value is always considered the lower of the purchase price or the appraisal. Another important factor is ownership seasoning. 

Standard guidelines view the value as the lower of the appraised value or purchase price for the first 12 months of ownership. A Hard Money Lender will consider the After Rehab Value with minimal consideration to purchase price. 

As such a conventional lender may lend 80% of the value to an investor while a HML lender only lends 65% of the ARV. The 65% may actually be higher.

The qualifying criteria for a hard money loan varies widely by lender and loan purpose. Credit scores, income and other conventional lending criteria may be analyzed. However, most hard money lenders primarily qualify a loan amount based on the value of the real estate being collateralized. 

Typically, the biggest loan one can expect would be between 65% and 75% of the property value. That is, if the property is worth $100,000, the lender would advance $65,000   $70,000 against it. 

This low LTV (loan to value) provides added security for the lender, in case the borrower does not pay and they have to foreclose on the property.

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The death of the Geo Metro AskTPREG 8

Remember the Geo Metro? I do, as a matter of fact the first new car I ever purchased was a fire red Geo Metro. Then I got in an accident at only 20mph and the car was completely totaled.

There is a reason that the Metro and Yugo and other cheap cheap cars are no longer around.

Today’s question of the day for AskTPREG is “why shouldn’t I use a discount real estate brokerage to list and sell my house?”

If price was the only thing that mattered in life, you wouldn’t. Price isn’t the only thing that matters though, I learned that when my Metro folded up like a well used accordion in an accident that wouldn’t have hurt many bicycles. If price was the only thing that mattered then we all would be eating off the dollar menu at McDonalds and driving Metros.

When you want quality, it usually costs more. Anyone who thinks they will get the same protection and reliability from a Metro as they will from an Acura is greatly kidding themselves.

Just like with doctors. You have a heart attack and head a stent put into your body you are not going to shop around for the lowest fare small town general practitioner are you? The same is with agents. There are different levels of service. Different levels of expertise and experience. And you are going to get different results.

Anyone who tells you it doesn’t matter, they will put your house in the MLS and that will get you top dollar is not doing you any favors.

Do you need to use an agent? Of course not. As a matter of fact if you want to sell your house on your own call me and I will gladly give you some tips. But if you don’t want to risk it, and you want to be sure your house is getting proper expose and you want top-notch service. We are here to help for that too. Call me at 480-270-4990 or call Nick or call Shar and any one of us will be glad to help you out.

 

 

Originally posted on Phoenix Real Estate Guy. If you are reading this anywhere but inside your RSS feed reader or your email client, the site you are on is guilty of stealing content.

(c) Copyright Jay Thompson. All Rights Reserved.

Article Source: The death of the Geo Metro AskTPREG 8

Phoenix REALTORS Getting Ready For New Supra iBox

Soon, REALTORS in the valley will be able to exchange their existing Supra lock boxes for a “new and improved” version. The new lock boxes that will be widely used by local real estate professionals is the Supra iBox BT LE.  These new lock boxes look very similar to our current lock boxes but are a little larger and more technologically advanced. One of the biggest features of the new iBox is the ability to control the boxes from most any smartphone without having to carry a separate fob. The boxes are compatible with Android, Apple and Blackberry. ( yes, their web site still mentions Blackberry. Please tell me YOU aren’t still using one of those. )

Here’s some of the features of the new Supra iBox BT LE that we will soon be using.

1. Smartphones and tablets communicate directly with the iBox BT LE without a fob.
2. iBox BT LE includes a large key container that can hold both gate cards and keys.
3. The shackle removes completely from the keybox for easier placement on properties.
4. It works with existing Supra Keys AND with most phones or tablets via infrared (IR), Bluetooth®
5. Advanced showing reports and communication tools via phone or web.

We have been told that the changes will begin in September of this year. The exchange will be one-for-one (an old box for a new box) at no cost to the owner of the lock box as long as you are an Active Subscriber and the owner of the box, as listed on SupraWEB.

To get your new lock boxes, all Subscribers will need to visit one of the Supra exchange centers, not a Support Center, to exchange boxes. The Support Centers will not be processing lock box exchanges.

Sure, there will be a “fun” transition period. Even if the new boxes are better, there will be a bunch of people who don’t like change. My advice? Just deal with it and have some patience. Fortunately, we have a bunch of boxes and will probably take some to the exchange center, exchange them for new boxes and then take the new ones to our listings to switch them out. We can then make another trip to the exchange center to exchange the rest of the boxes. To me, this seems like the easiest way to make sure our sellers are happy and that they don’t miss any showings.

Around here, we are pretty big fans of using a Supra iBox lock box instead of a combination lock box for access to homes. We think it is much more beneficial for our sellers if we can effectively monitor every showing instead of taking a chance on a lock box code being given out to a non-licensed agent. We also like being able to follow up with agents to see what type of showing feedback we can get from them.

I’m sure there will be a few challenges with people making the switch. Hopefully, we can all communicate and work together to make the transition as painless as possible. Remember the last transition? It wasn’t perfect, but the real estate universe didn’t end.

Originally posted on Phoenix Real Estate Guy. If you are reading this anywhere but inside your RSS feed reader or your email client, the site you are on is guilty of stealing content.

(c) Copyright Jay Thompson. All Rights Reserved.

Article Source: Phoenix REALTORS Getting Ready For New Supra iBox

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