This type of funding is defined simply as financing attached to unsold property. It is not a large part of the construction financing world, but is still defined as part of the list of available options. Normally these types of loans are obtained through non-conventional businesses set up for this and other outside-the-box funding.
Most banks and mortgage brokers generally don’t have a great deal of interest in small areas such as this. Very often they have little knowledge of what avenues an investor should take as result. Considering the unforeseen consequences which can arise in a large number of situations, this is not what you want to deal with when you have questions which no one seems able to answer, deadlines looming on the horizon and the chance of losing your money before the prospective project is even completed due to a unforeseen glitch.
While it is certainly a wise move to get a potential lender who knows the business, it is equally valuable to both you and the lender to have everything available and ready that outlines what you have in mind. Having details on your credit background (credit report, tax returns, bankruptcies and liens (if any) and how/when they were cleared, a detailed budget, information on the builder and details concerning the project – costs, bidders, contractor’s license, locations of property, etc—is a big advantage when you go for an appointment with a lender. It will not guarantee your loan, but it will show that you are serious about the project and help define a completion date for it, something that will be important in determining the repayment time for funding received.
You may have a partner to go in with you on the project. This sometimes is a plus since the would-be-lender will feel more reassured of having the loan repaid if there is more one individual with a stake in the deal.
Speculative home financing in Arizona sounds like a good thing, you think after having done some in-depth research into the field, but what are some disadvantages a borrower needs to think about?
These loans require collateral—if you put up property you own, there is always a good chance of losing it since you are dealing with knowing what the public wants before they even see it. A house, apartment building, office complex has to be attractive enough to make a buyer want to put down a tidy sum of money in order to obtain it.
The bigger the funding, the bigger the gamble taken. This calls for detailed research, consults with people you know that done this and certainly not throwing everything you own on a venture like this the first or even the second time you take it on. When you have done all these things, only then will you know that speculative home financing is the way for you or not.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
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.
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