PRIVATE LENDING | ARIZONA
We live in Tempe, invest in Arizona, and fund deals with our own money. We are not mortgage brokers or bankers. Our loans are based on the equity in your investment property. We fund deals the bank either won’t or just take too long. No tax returns. No financial statements. No DSCR requirements. We do need your credit score but even if its bad we can often find a work around and we can show you how to get it for free.
We are collateral-based lenders so, if you have a chunk of equity, let’s talk. There are no online forms. There is no application. A phone call is usually enough for me to tell if we can fund your deal. Takes about an hour to underwrite, if you are organized when you first call.
To make your initial call to me productive, you should have these five things ready:
The property address.
Your opinion of its current value.
Do you own it, want to make an offer on it or have it under contract?
How much debt is on it?
How much do you want to borrow?
COMMON QUESTIONS
Q. How are you different from a bank?
A. Banks want your tax returns. We don’t. Banks take forever. We’re quick.
Q. Who do you lend to?
A. Anyone who has equity in investment real estate
Q. What do you mean by “investment” real estate?
A. You cannot be living in or intending to live on the property
Q. What kinds of deals do you specifically lend on?
A. Fix and flip, buy and hold, equity cash out and foreclosure bailout.
Q. How do I qualify?
A. You need collateral but it must be real estate, not a car or jewelry.
Q. What’s collateral?
A. It’s the portion of the property that you own, or will own, that is paid off relative to its current market value. If you buy it under what comps show it’s worth you are walking into equity/collateral from day one. If we lend you money and you don’t pay us we will foreclose and you will lose the house. Just like a bank, our position is secured by a Deed of Trust. You will own the property, but it is also acting as collateral if you don’t make your payments. The elephant in the room is equity.
Q. What is equity?
A. Say your home is worth $400k and you owe the mortgage company $300k. Your equity is $100k. It’s the money you would make if you sold it (ignoring capital gains for the moment). The secret sauce to Fix and Flip is finding a good deal. Let’s say you find a house that’s worth $400k but, because you’re charming or the seller is your Mom, you can buy it for $300k. You just walked into $100k of equity.
Q. What’s the first step?
A. Figure out what the house is worth. A purchase amount or appraisal is best but otherwise go to Zillow and Realtor.com and take the lower amount.
Q. How much do you charge?
A. It changes but right now from 11% to 14% per year, interest only. According to Nerd Wallet the average current interest for personal loans from a bank for people with good credit (690-719) is 14.12%.
Q. What? I can get a 30 year mortgage @ 7%.
A. Yes, but it takes a long time so that’s where hard money (that’s us) comes in. As a bridge of say 3 to 6 months to be sure you get the property now then refinance or sell later. The way to use hard money is to make cash offers, quick close, non refundable deposit and no contingencies. If you’re smart you will have institutional money lined up to take us out. The sooner the better.
Q. Is it true that just pulling your credit score will lower your credit rating?
A. Sort of. There are two kinds of credit “pulls”. Hard and soft. Hard is, for example, when you are applying for a credit card and and it can slightly lower your score. It shows the bank that you are actively seeking credit. A “soft” pull is a background check of your score and never affects your FICO Score.
Q. How can I get a soft pull credit score for free?
A. Go to CreditKarma.com and sign up for an account. Save as a pdf and email it to us: bill@billtonnesen.com. Credit Karma uses data from two of the three big credit bureaus, Transunion and Equifax. Their system is called “Vantage” but provides credit scores in the same 300-850 range. A “FICO” score, as oppose to Vantage is linked to Experian. You can get a copy of that score from myFICO.com but it costs $19.99.
Q. Will you loan in a second lien position?
A. No.
Q. What is a second lien position?
A. It is a debt that has a lower priority claim than a first position lien debt. If something goes wrong the first lien collects first and there is often not enough left to pay the second position. Sounds complicated but it matters to you because if, for instance, you owe $200k on a $400k house and want to borrow $80k you will actually have to borrow $280k so that our money takes out the bank that is in first position. But if your original mortgage interest rate is low, say 3%, then your payments will jump from $800/month to $1,500/month. Ouch. Interest rates rule the world…
Q. What is an Investor Cash Out?
A. You own a rental house worth, say $800K and you owe $400K. We loan you $560K (70% LTV) to pay off the $400K mortgage, pocket $100K, and prepay a year of interest. This gives you a year with no payments to either refinance or sell the property. This works for people who need equity money from an investment property and a traditional bank or mortgage origination process won’t work. Possibly because of a bad credit score, no income, or the need for speed.
THINGS TO KEEP IN MIND
We lend in Arizona only and we do not want to be a partner with equity in your deal.
WHAT MOST BORROWERS DO NOT UNDERSTAND
When you look for someone to borrow from, everyone looks like they have money to lend. Well, they do but it’s not their own. They are almost always the middlemen known as brokers, consultants, originators, underwriters or loan officers. They get the money from banks, funds, or people like us and you pay an additional fee for their help. That is not to say they don’t earn their money especially when the process can seem complicated even overwhelming. But. Another option is calling me directly. 602.725.7009
LEGAL
We do not sell, broker or originate Federally Regulated Mortgages (ARS Title 6, Chapter 9, Articles 1 and 2) or Consumer Loans subject to state licensing, bonding or registration under the purview of the Arizona Department of Insurance and Financial Institutions (AZDIFI). We do not lend on owner occupied properties.
We are short term, private, hard money lenders and do not accept investor money i.e. act as a fund or syndicate. As private money lenders we are exempt from the Real Estate Procedures Act (RESPA) regulations (12 U.S.C. section 2602 (1) and 12 CFR section 1024.2 x) with one exception, RESPA, section 8; therefore we do not offer referral fees.
This is my cell phone. Call or text anytime except from 3pm to 5pm.
Thanks,
Bill Tonnesen, Mom and Dad Loans
602.725.7009
Se Habla Español (My wonderful wife of 34 years, Pilar, is from Spain)
