How and where can you finance land?
2 Replies
Nathan Trunfio
Lender from Plymouth Meeting, PA
posted over 3 years ago
We frequently run into deals where clients are looking to borrower on undeveloped land. We offer new construction financing, but we only finance construction on verticals.
I know that land can be tough to finance, but what are some options for simple land financing? Bridge financing of land that will be developed? Or land with raw materials, such as coal, oil, etc? I'm interested in BP feedback and advice on where to refer these clients!
Josh Caldwell
Real Estate Coach from Pittsburgh, PA
replied over 3 years ago
@Nathan Trunfio most traditional avenues are closed to raw land. There is simply no way to show a debt coverage ratio to the bank. This is well known in areas where there is a lot of raw land, so you have an opening to approach the owner about financing the purchase. Sir, what if I were to agree to your asking price and pay you X per month for Y months, would we have a deal? You can take this a step further and season the note for a year or less and sell the note on the secondary market to cash him out 100%. Does that help?
Amelia Fernandez
from Coral Gables, FL
replied about 3 years ago
There are some expensive land and development options, in the hard money area, but you are looking at bringing 20-30% to the table at a minimum and hopefully will have a large increase in the land value after development.