Can I get a line of credit on land?

7 Replies

Hello BP,

I am still extremely new and have never invested, but have just been researching, educating myself, and brainstorming on the potential ways I can get started. I am leaning towards a fix and flip but am wondering, like many other first timers, how to purchase a property without any money. I dont have enough money saved to put as a down payment on a traditional bank loan and I dont own a property that I could use a HELOC on. HOWEVER, what I do have is land. Myself, as well as several other family members own this land through a Trust. I know that I would have to get their approval before taking out a line of credit on the land since they have rights to it as well. But, I wasn't even sure if banks would provide such a loan. Does anyone have any experience with lines of credit on land or any insight at all?

My uneducated guess is that if you look hard enough, you can find someone to lend you money on any asset, including land. Whether it's easy to find that lender is probably the real question. I own some land, too, and if I wanted to take a line of credit on it my first call would be to the bank that I financed it through. My second call would be to the agent who brokered the deal, who sells lots of land. Maybe that's a start?

Originally posted by @JT Spangler :

My uneducated guess is that if you look hard enough, you can find someone to lend you money on any asset, including land. Whether it's easy to find that lender is probably the real question. I own some land, too, and if I wanted to take a line of credit on it my first call would be to the bank that I financed it through. My second call would be to the agent who brokered the deal, who sells lots of land. Maybe that's a start?

 That's a start. I'll definitely look into that. Thank you.

You can get an unsecured line of credit without land. So yeah, you can get a lender to loan you money on a line using the land as collateral. Most lenders are likely to value this collateral very little though because it is hard to liquidate in the event they have to take it to secure their debt. If you look at many REO lists from banks much of what is on their books is land. There is a reason they're conservative with lending with land as collateral.

Thank you for your reply Bryan. However, I am not sure what an "unsecured" loan means. How will that affect using the loan to purchase a property?

Your question is too broad for anyone to help out much.  You need to define what you'll use the money for.  Are you buying other land, improved property, or something else?  If improved property what type?  Strip malls, development projects, garden apartments, SFRs, etc. all have different lending climates.

An unsecured loan is one where you don't need collateral to secure it.  My point above was that lenders will loan to the right borrower on an unsecured basis.  So yes, you CAN get loans using your land as collateral.  Whether or not YOU can will depend on many things, like your credit score, track record, experience, character, cash flow, etc.  

You should consider talking to a local small regional bank. Ask around at your local REIA and find out which small banks are best for doing small credit lines. Read on BP and in other material about what you need to do to prepare for meeting with the bank and start shopping.

"@Bryan Hancock  " Thanks for your reply. I was mostly just curious about if I could even leverage land into a loan. I am still in school and educating myself on investment strategies but have been leaning towards flips. Thank you again for the advice, it definitely helped know what steps I need to take next. 

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