Monthly Archives: February 2019

Spec Home Financing: Why Private Money is the Real Deal

February 24, 2019Uncategorizedbigdaddydennis

It’s doubtful that any builder has the cash in on hand to construct a spec home out thin air. Most developers need some form of capital to bring their visions into reality, and like any other form of real estate financing, there are a variety of options. When it comes to spec home financing, there are three broad classes, banks, credit lines, equity loans, and private money. When it comes to spec homes, private money is almost always your best bet.

The great recession still haunts conventional banks. Come in with a word like “speculative” attached to your application and expect a few raised eyebrows. In the case of spec homes, banks only offer loans to the most experienced developers, but there is a catch. Even if you qualify at a traditional bank, the loan they give you is based on a set percentage of the lands appraised value. Will 90 percent of a $50,000 plot cover the cost of constructing a $300,000 home? Probably not.

Credit lines are another option, but qualifying for a $300,000 line of credit is no easy feat. Another option might be leveraging your personal assets to finance your next project. Yes, you put your real house on the line to construct a home based purely on speculation. No matter how much you might believe in your project, this is not a sound idea.

None of these options are exactly great choices when it comes to financing the construction of a spec home, but never fear. Not all hope is lost.

Private money advantages when it comes to spec home financing

Private money usually refers to individual investors or lenders who act more like investors in the upside potential of your property (i.e., hard money). Private money offers an advantage over banks in that the loan terms are flexible, as draw schedules and interest rates are up for negotiation. But above all, these lenders are willing to offer funds as a percentage of a home’s projected value, which means your loan can actually cover the cost of construction. Private money might be more expensive than a home equity loan, but putting your actual house on the line to build a house on speculation is not a very sound strategy.

However, private lenders don’t just give money away. These are individuals or groups with their own interests, and you will have to prove to them that your project is worthwhile.

Tactics to increase eligibility for spec home financing

You need to convince private investors and lenders to get on board with your project. Below are some excellent strategies for increasing your eligibility for a hard money loan:

• Plan to develop an improved lot. It’s going to be hard to convince a seasoned investor to get on board if you intend to build an architectural gem in the middle of a desert landscape, a la Frank Lloyd Wright. Plan to develop your project on land that comes pre-connected to water, sewer lines, thoroughfares, and the basic conveniences of modern life. Building on land in an urban area assures private investors that your property will sell quickly.

• Plan a project that can be finished quickly. Private lenders and investors don’t want to wait out a plodding construction project. Investors want to get a return, ideally as soon as possible, so have a clear plan to build your spec home with construction preferably lasting no more than six months. The shorter the timeline, the more imminent the promised return and the more likely you’ll be able to get private investors and lenders on board.

• Develop a story: convince investors of the possibility involved with your spec home project. Spec homes are called spec homes because they are constructed based on speculation, after all. Your speculations should be based on market realities and not pure fantasy. Research patterns of supply and demand in the immediate area. Say a university campus is expanding in an area with limited apartment availability and you plan to build low-cost housing for students. Citing real market trends like these will help convince private investors your project is worthwhile.

Using specific details like these will help convince private investors and lenders alike to get on board. With private money, you can get your spec home off the drawing board and into reality.

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

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.

Hard Money Lenders: Finding the Help That’s Right for You

February 23, 2019Uncategorizedbigdaddydennis

Hard money lenders offer real estate investors the flexibility needed to finance deals that other lenders avoid like the plague. Of course, not every lender is cut from the same cloth. Learn some of the traits of the ideal hard money lender so you can find the help that’s right for you.

When it comes to hard money, you want to look out for hidden costs. In the case of rehab projects, sometimes the loan is given to the borrower bit by bit in the form of draws. Don’t get ripped off by making interest payments on money that you haven’t received yet. These hidden interest payments can cost you thousands of dollars. Seek out lenders who only charge interest on money as it is drawn if you plan to use hard money for a rehab or construction project.

If you can seek out direct hard money lenders, do so.

A direct lender is someone who already has the funds on hand to close your deal and typically has more room to negotiate. Direct lenders raise the capital to fund their loans themselves. In contrast, indirect hard money providers fund their loans from a pool of accredited investors. In most instances, these investors have a guaranteed rate of return on their investments. Due to this fact, indirect lenders have no wiggle room when it comes to the interest rate they can offer you.

Hard money is all about flexibility, and you want as much room to negotiate the terms of your deal as possible. Even a one percent reduction in interest rate could save you tens of thousands of dollars depending on the size of your loan, so seek out a direct hard money provider who has more room to negotiate the terms of your deal.

You can seek out hard money lenders that offer you the ability to write off interest payments on your taxes.

Say you’re a regular real estate investor. Perhaps throughout a given year, you’ve rehabbed three properties, taking out loans of around $300,000 at a 14 percent interest rate. In this case, throughout the year you’ve paid about $10,500 in interest.

Would you like to write that off that very healthy sum on your taxes? Then you need to seek out a hard money provider who can provider a 1098 mortgage interest form. Not every hard money provider can do this due to inexplicable and opaque regulations far beyond the scope of this article. If you are a regular real estate investor being able to deduct your mortgage interest payments could save you thousands of dollars each year.

In short, the ideal hard money provider saves you money in the following ways:

• They don’t rip you off with hidden expenses (i.e., charging interest on money they haven’t given to you)

• They’re able to save you money because they can offer you a lower interest rate

• The interest on the loans they provide can be deducted from your taxes every year

Loans for Flipping Houses: The Dangers of Hidden Costs

February 22, 2019Uncategorizedbigdaddydennis

Hard money lenders are the go-to source for financing when it comes to flipping houses. These lenders overlook the distressed condition of a property while giving loans as a percentage of a property’s potential value, but it is essential to carefully consider the cost structure of any hard money deal.

Some hard money deals are structured in two parts. The first portion of the loan secures the purchase of distressed property and the second portion of the loan covers the cost of renovations. The rehab portion of the loan is often distributed bit by bit as work proceeds, and this has important implications when it comes to the cost of hard money financing. The following examples will show why it is crucial to analyze the terms of any hard money deal.

In the first instance, our prospective house flipper goes to a hard money provider and proposes a two-month rehab project. The cost of closing on the ramshackle home will be $80,000, and the cost of renovations will amount to $30,000. Our first borrower takes out a loan for a total $110,000 with the rehab budget given out in two successive draws totaling $15,000 apiece. The lender offers a standard hard money interest rate of 14 percent. Work proceeds on the house things go smoothly, and our flipper resells his home earning a handsome profit of $55,320.

It seems like things worked out pretty well in this case, or did they?

You can save money by carefully considering the cost structure of hard money loans

Another flipper sees a similar property sale a block away from our first. She must have been spying on the first borrower because her proposed project is the exactly the same. The purchase price of the house is $80,000 and the rehab budget is $30,000. This borrower approaches a different hard money provider. They agree to a loan of $110,000 with a $30,000 rehab budget distributed over two draws at a 14 percent interest rate.

Suspicious glances are exchanged between the two investors as they pass each on the way to their respective work sites. Let us assume they finish work at the same time, and they resell their properties at the same sales price.

But, for some reason, our second flipper earned a profit of $56,020 while the first earned $55,320. Why? Because the second flipper carefully considered the terms of her deal. What was the critical detail in the term sheet the first flipper missed?

The first lender charged full interest on the total loan amount up front through the whole two month period, while the second lender only charged interest on the money as it was given out in draws. This tiny detail saved the second flipper $700.

Don’t make unnecessary interest payments on hard money loans

This hidden cost of hard money is something that is often overlooked, and it could cost you thousands in unnecessary interest payments. In the context of a house flip, $700 might be a small amount of money.

Let’s change the situation. What if our first house flipper’s project went on for 6 months and they had to pay that 14 percent interest rate on the full loan amount? They’d pay roughly five thousand additional dollars in unnecessary interest payments. In the context of a flip, $5,000 is a lot of money.

Don’t make interest payments on money you don’t have. Carefully analyze the cost structure of your hard money deal. If you don’t receive the full loan amount up front, ask your lender if they will charge you interest on the entire loan amount or just on the funds you’ve received from them. Analyze the terms of your hard money deal to avoid making unnecessary interest payments.

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

How to Use an Arizona Bridge Loan to Get the Home of Your Dreams

February 22, 2019Uncategorizedbigdaddydennis

An Arizona bridge loan can help homeowners as they transition between homes. This type of loan is a win-win if you want to move, have a buyer lined up, and your deal runs into unexpected difficulties.

Say you’ve put in an earnest offer on your dream home. The house is just everything. It has a pool, room enough for the kids, and separate space for an art studio. You made an offer on contingency because you’ve got a buyer lined up on your current home, but the deal just hasn’t closed yet.

As the deadline to close approaches, you find yourself packing boxes, all ready for the money to come through, and then you get a call. It’s your buyer.

“Listen, I’m going to need another 60 days before I can get you the money. We’ve got a mold issue we need to resolve.”

You then call up the current owner of your dream home, asking for a little more time, but they too are fully packed and ready.

They tell you, “Someone put in a full offer right after you. Maybe I’ll just call them. It’s too much of a hassle to unpack my whole house again.”

You ask for a week, and the seller reluctantly agrees.

You hang up, dejected and furious, certain that all hope is lost.

An Arizona bridge loan can help fuel the cost of your next move

Since your home hasn’t sold, you don’t have the money for a down payment on your next house. But, you realize you have about $100K in equity in your current home. You think, “Can’t I just borrow against that?”

You look up “bridge financing,” and you learn that these loans allow you to cash out up to 90% of the outstanding equity on your current home. At first glance, the 12% interest rate makes you shudder, but you sense it might be your only hope, so you bite the bullet. The $90,000 in bridge financing is more than enough to make a down payment on your next home.

The process is fast enough that you don’t even need that extra week, and move into your new home the next day.

You put your bridge financing to work, making a down payment on the second mortgage on your dream home. You are a bit nervous, because basically, you have two mortgages at this point in addition to bridge financing.

The 60-day window passes. You nervously sit by the phone waiting for the buyer of your old home to call, and sure enough, they do. It seems they’ve got their act together. The papers are signed, the money comes through. The proceeds from the sale of your old house pay off your first mortgage and that $90K in bridge financing. Now you only have one mortgage.

And you live happily ever after in your newly secured dream home.

Don’t let your move become a nightmare because of an unexpected difficulty. An Arizona bridge loan can help make your dreams come true.

The situation just described is a perfect example of when to use bridge financing.

The main risk with this type of loan is that you move from one home to another, but your former home doesn’t sell, leaving you on the hook to pay off the bridge loan. However, if you have a firm assurance that your home is going to sell in a handful of months, bridge financing isn’t such a risky proposition.

In short, don’t let an unsold home keep you from purchasing the home of your dreams.

Are Fannie Mae’s Subsidized Arizona Commercial Real Estate Loans a Win-Win?

February 22, 2019Uncategorizedbigdaddydennis

Fannie Mae recently began offering subsidized Arizona commercial real estate loans to property investors. Like any government program, there’s a catch. If you take out a loan under this plan, half of all the units in your apartment complex must be priced for the “lower middle class.” You’ll have to cap rents on 80% of your units. You might be wondering why you’d want to do something like that.

Rent caps could be coming to a neighborhood near you whether you like it or not. If you follow Fannie’s guidelines, you’ll get funding for up to 90% of your next property at a minuscule interest rate. This means you can secure your next apartment for next to nothing if you agree to earn next to nothing going forward.

Already across the country, local politicians are making vague speeches, full of mythical “teachers and firefighters who need affordable housing.” Local politicians, with eyes toward the distant future, are intent on stopping the supposedly rampant rent increases.

The implication? You might be legally obligated to offer subsidized housing in the not too distant future. You might want to consider taking advantage of the Fannie program sooner rather than later.

Because more localities are mandating subsidized housing, maybe Fannie’s subsidized Arizona commercial real estate loans are a good idea.

It might be in your best interest to cap rents preemptively on your next investment property and board the subsidy train.

In the worst case scenario, you might purchase a shiny, class-A high rise with an expensive loan, under the presumption of rising rents. If city council erases your profit projections and restricts the amount of rent you can charge per unit, you’re out of luck. Who knows, you might default as a result of their new mandate.

In politics, you know that the ends justify the means. Local politicians need to play their part as middle-class champions, and if rent controls lend credence to their act, don’t expect them to hold back. Sp, you never know if rent controls are coming.

But, what if rent controls don’t come?

Taking advantage of subsidized Arizona commercial real estate loans could cost you.

If you check the political headwinds and determine that rent caps are a foregone conclusion, taking out a subsidized loan on your next investment property might be a good idea.

But what if there’s a change in the agenda? Say the city councilors decide they should let the market determine rent, causing rent to skyrocket. Taking advantage of the Fannie program means you won’t be able to charge based on the market rate. As your fellow landlords enjoy rising profits, all you get is a lower mortgage payment. In the end, you want to make money, and preemptively limiting the amount of money you can make on your next investment property might not be in your best interest.

Then again, it could be a good idea. Taking advantage of Fannie Mae’s program is a matter of your own discretion. Maybe you could decide by flipping a coin?

Arizona Hard Money Loans: A Win-Win for Your Cannabis Business?

February 21, 2019Uncategorizedbigdaddydennis

Arizona cannabis business loans are hard to come by. So what if you run into a crippling business expense? The bank isn’t an option, equity is expensive, and crowdfunding offers no guarantees. So how do you find the help that’s right for you?

A hypothetical grower already has a dispensary lined up to buy his first crop, but then, the utility company raises his electricity bill, doubling his cost of electricity per kilowatt hour. Since it’s his first crop, he’s strapped for cash.

It is a catch 22; until his first crop comes in he won’t be able to pay his electricity bill, but if he doesn’t have electricity, he can’t grow his first crop. He’s stuck between a rock and a hard place. He needs a quick injection of cash, a small loan which he can pay off in 70 days after his plants mature.

Let’s assume he only needs $50,000 to cover the cost of electricity. Given his excellent credit score, he considers getting a personal loan from a bank first. All is well, but he hears a vague alert chime on the loan officer’s computer.

Without any explanation security officers escort him out of the building.

What are some other sources of Arizona cannabis business loans

Our poor grower isn’t interested in selling ownership to an equity partner. Selling 10 percent of his business just to pay his electricity bill is not a reasonable proposition for him.

So, he eagerly makes his plea on Kickstarter. It’s crickets from the peanut gallery, as his loan sits unfunded on the site. He can’t wait much longer as his little seedlings will wither and die if he doesn’t get money fast.

He hears from a friend about another type of alternative financing, one that might solve all his troubles.

Arizona hard money loans can help fuel short-term costs in your cannabis business.

He approaches a hard money provider. They offer him a loan on the condition that he pays it back in 120 days. He will also have to pledge his grow facility as collateral. The loan is a little expensive for his taste, but its either hard money or bust, so he goes ahead and closes the deal. The funding comes through in short order, and within 70 days his crop is in full bloom ready to be harvested and sold to a nearby dispensary.

With these funds, he’s able to pay back his loan quickly, and he earns enough money to cover his utility costs until his next harvest.

Because he already had a buyer lined up and he knew exactly when his crop would come in, he didn’t put much at risk by pledging his grow house as collateral. Hard money got him the funds he needed without having to sell ownership in his business or wait on the much over-hyped kick starter. If you are looking to “grow your business,” and run into an unexpected expense, hard money can help.

Arizona Hard Money Loans: Tactics to Pay Less

February 21, 2019Uncategorizedbigdaddydennis

Arizona Hard money lenders invest in risky deals that banks won’t touch, like house flips. In browsing the terms offered by various hard money providers, the double-digit interest rates might shock you. Take a deep breath, as there are some tactics you can use to lower the cost of your loan.

You ask why the cost of hard money is so high.

• It is short-term: No wants to pay 14% interest on a $250,000 loan for five years. This high rate incentivizes you to pay your loan back as quickly as possible. But why do these lenders want their money back so quickly?

• High risk: Because of the risk involved with flips, there’s no guarantee for you or your lender that you are going to make money. The high rate ensures the lender their going to make some return on their investment.

Because of the risk involved, hard money is expensive, but what if you could avoid paying such a high rate in the first place?

Tactics to pay lower interest when it comes to Arizona hard money loans

You can employ the following tactics to help you negotiate a lower interest rate.

• Find a lucrative, low-risk deal: The rule here is to find a house which you can secure at a low price and then assure your lender about its potential using comparable sales. For example, say you found a foreclosed house which you can get at a steep discount. The house might be selling for $150,000 while similar homes in the area are going for $300,000. A quick walkthrough reveals that it doesn’t need much work. You estimate the cost of repairs will be about $15,000. The house needs a few repairs, and its resale value is backed up by hard data. These are some talking points you can use to negotiate a lower interest rate with your lender.

• If you have experience, talk about it: Given all the risk that comes with flips, lenders prefer those who have a proven track record of successful projects. Talking up your expertise or even offering your lender business in the future might help you get a lower initial rate.

But even if your hard money provider doesn’t offer you a lower rate, here is a little rhyme that can help you

• Pay it back ASAP: Finish work in a few months and you can minimize the cost of your loan. Remember, you pay interest on a monthly basis, so if you finish work in a couple of months you reduce the cost of your loan, regardless of how high the initial rate is.

Don’t let the high interest charged on Arizona hard money loans scare you out of the flipping business.

Hard money is really your only option if you want to flip houses. Almost every flip is funded by hard money, and on average every flip earns a tidy $30K in profits, even though these lenders charge double-digit interest rates. You can make hard money less expensive by negotiating a lower rate with the strategies above in addition to paying it back ASAP.

Is an Arizona Bridge Loan a Win-Win for Your Business?

February 20, 2019Uncategorizedbigdaddydennis

Before taking out Arizona commercial real estate loans, you need to ask yourself a few questions. “Will income from the property pay my mortgage on a monthly basis?” and “how do I intend to generate a return? With quick profits from resale or do I want to earn a steady income over the long haul?”

Let’s consider the first question, “Will income from the property pay my mortgage on a monthly basis?” Hopefully, the answer is yes, but you aren’t buying a property to make mortgage payments. In the end, you want to make money.

Before taking out Arizona commercial real estate loans on short term investment properties, ask yourself these questions:

• What condition is the property in? When it comes to making a quick turnaround, you want to boost the property’s value as soon as possible while at the same time spending as little money as possible. Scout locations that require minimal work. Better yet, find properties where you can boost cash flow, and therefore raise the resale value without spending any money at all. If a property does need some work, lower your initial offer to account for these costs. For example, if a location needs $10,000 in repairs, you should reduce your initial offer by $20,000. That way, you earn a dollar in profit for every $.50 you spend bringing the property up to code.

• How occupied is the property? Properties with less than 85% occupancy don’t sell. A half-occupied apartment complex could take many months to reach that 85% benchmark. Securing new tenants will hinder resale and prevent you from achieving a rapid return on your investment. Save yourself some time and purchase properties that are as close to full occupancy as possible. Otherwise, have a clear plan in place to bring in new tenants before you invest.

Before taking out Arizona commercial real estate loans on long term investment properties ask yourself these questions

• What are the tenants like? If a prospective property is full of deadbeats who don’t pay rent on time, it is probably not worth your time. A wave of evictions coupled with the time it takes to find new tenants means you might not be able to keep pace with your monthly loan payments. Ask to look at the rent rolls before investing in a property, which will tell you whether the current tenants are paying rent on time.

• What is the neighborhood like? Earning an income from a property over the long haul requires two things: gradual rent increases and a steady uptick in property values. An area that is on the decline indicates declining rents, occupancy rates and declining property values. Before investing for the long term, get a sense of the neighborhood, or better yet, get some real data to see if property values in the area are on the up and up.

In short, before taking out a loan to invest in commercial property ask yourself a few basic questions:

1. Will income from the property at least initially pay for my loan?

2. How do you intend to earn a return?

3. And consider any factors that could prevent you from earning a return.

Answering these questions for yourself will give you a sense of whether taking out a loan on an investment property is worth your while.

Is an Arizona Bridge Loan a Win-Win for Your Business?

February 20, 2019Uncategorizedbigdaddydennis

You know the adage, “time is money.” Well, time spent waiting for money from the bank will cost you money. You might have heard the term “bridge loan” in reference to residential real estate, but these loans can help everyday business owners as well.

Bridge financing allows business owners to move quickly on time-sensitive deals. You might find a fantastic opportunity to expand your business or buy some inventory at a discount. You might need financing as fast as possible, but a bank won’t share your sense of urgency.

Months might go by before you can secure a business loan. While waiting on the bank, the opportunity might disappear entirely. With bridge financing, this isn’t the case, and the process is pretty simple:

1. Get a loan

2. Capture the opportunity

3. Refinance to a long-term loan or use your profits to pay back the initial loan.

Bridge financing gives you as a business owner the freedom to invest without being held hostage by the tedium of the bank application process.

How to use a Arizona bridge loan to benefit your business

• Bridge to refinancing: Say you own a clothing business. A fashionable storefront has opened up in the posh section of town. Lately, your sales have lagged, your margins are thin, and you have little to nothing in savings. You know if you moved to the new location, sales would increase, and the move might save your business.

But, your lagging sales prevent the bank from giving you a second mortgage on the new property, which is already generating a lot of interest from other buyers. What can you do?

You take on bridge financing, which allows you to make a full offer on the competitive property. You secure the luxuriant storefront, and your assumptions prove correct. Increased foot traffic results in a massive uptick in sales. The loan officer at the bank admires your increased profits, and you can now refinance to a long-term conventional loan.

• Bridge to profits: You might be in the furniture business, and your competitor might be liquidating a warehouse full of sleek Italian furniture. They are selling it off at a steep 75 percent discount. Seeing the margins, you decide you want to buy the whole lot, but you don’t exactly have the money to do this.

Using bridge financing, you buy up every item in the warehouse. The designer furniture gets a considerable markup, and it sells quickly to your target customers. You pay off the bridge financing with the increased profits and earn tidy sum yourself.

A commercial Arizona bridge loan doesn’t just benefit commercial real estate investors.

Looking at the examples above, you can see how bridge financing might benefit you as a business owner.

If you waited on a conventional bank loan in the above situations, you simply would have missed out. You might have gone out of business waiting to get approved for a second mortgage, or you would have never earned a generous return on inventory purchased at a discount.

If you encounter a business prospect that is a sure-fire bet but you need capital right away, opt for bridge financing instead. Time is money, and time spent waiting on a bank loan might cost you the opportunity to make money.

Arizona Commercial Real-Estate Loans: Should You Buy Low, Sell High Or Should You Boost Income?

February 20, 2019Uncategorizedbigdaddydennis

When it comes to apartment flips, you might think buying low and selling high remains the golden rule. Well, not exactly. Before taking out Arizona commercial real estate loans on apartment buildings, you need to learn to look beyond the initial sales price, and above all, look for ways to boost income.

It’s important to note that commercial properties are valued as follows:

• Annual income/market cap rate

Unlike residential flips, buying low and selling high, doesn’t always apply in the case of commercial properties. Because if you can raise annual income, by even a smidgen you can achieve a drastic return from your investment upon resale.

Before taking out Arizona commercial real estate loans, don’t just look at the sales price

To illustrate this point, let’s consider two investors who follow two very different strategies.

• Buy Low, Sell High: Our first investor might see a complex going for $100,000 in a middle-class suburb. Dollar signs flash through his mind because the sales price is too good to be true. Well, it is too good to be true. It is going to take 12 months of work to get all ten units up to a livable standard. The work will require $560,000 in hard money financing, taken at a 14% interest rate.

• Boosting Income: In the same neighborhood, another investor sees a different 10-unit building listed for $800K. Hopefully no one calls the SEC, because our investor has a bit of inside information. She knows that leases are up on all ten units, which will allow her to raise rents by $250 a month on each unit. However, she doesn’t want a bunch of disgruntled tenants on her hands, so she decides to add a pool to the complex to help justify her rent increase. She takes out a loan for $640K, again at 14% interest. The loan is expensive, but she’s confident her work will be finished in four months.

When using Arizona commercial real estate loans to invest in properties you can make a lot more money by boosting income

Remember that commercial valuations are valued based on annual income/market cap rate. In our scenario, both properties are in the same neighborhood. Let’s say the prevailing cap rate is 7%.

• Buy Low, Sell High: Our first investor brought the property up to a livable standard in 12 months, but because the property is only livable, he can only charge his ten tenants $1,000 a month in rent:

• 100 K/.07= $1,428,871 resale value.

Factoring in the cost of his loan, he earned $515,711 in profit. Not bad, but what about the other investor?

• Boosting Income: Our other investor simply added a pool and raised rent by $250 per unit. This increase added $50,000 to the annual income earned from the property:

• 150 K/.07= $2,142,857 resale value

Accounting for the cost of her loan, she earned almost double the profit of the first investor. She bought high and sold for even higher. By focusing on boosting income instead of making drastic repairs, she made more money in less time.

These examples make it clear: before taking on a loan to invest in commercial property, look beyond the sales price and consider how you can boost cash flow above all else.

Fix and Flip

News and Information on buying, fixing and selling homes for a profit

Monthly Archives: February 2019

Spec Home Financing: Why Private Money is the Real Deal

Private money advantages when it comes to spec home financing

Tactics to increase eligibility for spec home financing

Hard Money Lenders: Finding the Help That’s Right for You

If you can seek out direct hard money lenders, do so.

Loans for Flipping Houses: The Dangers of Hidden Costs

You can save money by carefully considering the cost structure of hard money loans

Don’t make unnecessary interest payments on hard money loans

How to Use an Arizona Bridge Loan to Get the Home of Your Dreams

An Arizona bridge loan can help fuel the cost of your next move

Don’t let your move become a nightmare because of an unexpected difficulty. An Arizona bridge loan can help make your dreams come true.

Are Fannie Mae’s Subsidized Arizona Commercial Real Estate Loans a Win-Win?

Because more localities are mandating subsidized housing, maybe Fannie’s subsidized Arizona commercial real estate loans are a good idea.

Taking advantage of subsidized Arizona commercial real estate loans could cost you.

Arizona Hard Money Loans: A Win-Win for Your Cannabis Business?

What are some other sources of Arizona cannabis business loans

Arizona hard money loans can help fuel short-term costs in your cannabis business.

Arizona Hard Money Loans: Tactics to Pay Less

Tactics to pay lower interest when it comes to Arizona hard money loans

Don’t let the high interest charged on Arizona hard money loans scare you out of the flipping business.

Is an Arizona Bridge Loan a Win-Win for Your Business?

Before taking out Arizona commercial real estate loans on short term investment properties, ask yourself these questions:

Before taking out Arizona commercial real estate loans on long term investment properties ask yourself these questions

Is an Arizona Bridge Loan a Win-Win for Your Business?

How to use a Arizona bridge loan to benefit your business

A commercial Arizona bridge loan doesn’t just benefit commercial real estate investors.

Arizona Commercial Real-Estate Loans: Should You Buy Low, Sell High Or Should You Boost Income?

Before taking out Arizona commercial real estate loans, don’t just look at the sales price

When using Arizona commercial real estate loans to invest in properties you can make a lot more money by boosting income