How to finance drilling a well

Question

I got 10 acres in Joshua tree at auction. We will camp on it and list it for profit. But I’d love to do more and per the county that starts with a well. Local companies say 400-500’ deep and $30k-$70k.  I’d like to move forward with it eventually but not sure how to finance? Any ideas?

Wyatt Wolff · Answer

Youre going to want a one time close construction loan... I am not sure that you can finance all of that in on an existing home, but you should be able to on a new construction. Shoot me a PM brother

Eric Mcginn · Answer

That would be a whole lot cheaper! Unfortunately the county doesn’t allow it unless it’s grandfathered from the 70s. I was considering a tiny home and still might build one afterwards but yes I’d definitely be looking at a used mobile home. Seems like $40k would get me one with a HUD tag. Plus solar ~$15k plus septic ~$8k plus a little site prep and trenching and transportation and permits $15k

So $78k + roughly $50k for the well + $14k land = $146k

And there aren’t any available on even half the land for under $350k so it seems like there’s a lot of potential. I’m just having a hard time seeing how to financing works, I’m used to doing commercial loans on multi units or SFH, never done new construction or development.

Wyatt Wolff · Answer

So lets go low side: land is worth 45k. You paid 14k. Thats 31k in equity. You could use that in a land in lieu deal so you have less or no cash to close. (Assuming its allowed in your state) If you finance a permanent property (mobile homes count), then you should be able to attach that to the loan.

That would be my approach. Otherwise, I would make it a camp, and propably build an above ground water tank and have it trucked in (look at what that would cost, your average usage, and then use that to calculate your cost basis per month). That actually might be cheaper than a well

Eric Mcginn · Answer

Thanks for the response! I’d like to put a structure on the property but my understanding is that the county won’t approve permits until there’s water on the property. It’s hard to say what equity I have in the parcel, there aren’t as many recent comps for vacant land vs homes. In terms of sold comps, maybe $45k and as far as what else is for sale currently, more like $60k-$80k. I own it outright and paid $14k at auction.

How to finance drilling a well

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