Vacant Lot Creative Lending Inquiry

4 Replies

Hello BP,

I'm looking for creative ways to fund a project my parents and I are looking to purchase. This lot contains a couple acres middle of town for 500K. We have 20% down and a current home with equity that can be used as collateral selling about 320K. I'm an engineer with good income and fair credit.

Where it gets intricate...the vacant lot happens to have a small residential home (1000sqft, 2-1) and horse boarding stalls, however this is not found on title report. Property is generating income, but regular conventional loans do not recognize the home nor the income being generated. Currently there exist 50 stalls with 25 horses boarding for $300/month. This lot has plenty of history as this has been like this for more than 10years! County recognizes this lot as agriculture/ vacant lot.

I would like to avoid hardmoney due to the high interest and upfront cost unless a sound exit strategy can be provided...

nonetheless, we have reached out to local lenders and it gets rough to provide the 40% the typical land lot loans request which is why I'm looking for alternatives, if you know someone who can help me get creative, feel free to send me their line, thank you in advance.

@Hugo Cam this would seem like a pretty straight forward transaction to me.  If you are looking to buy a ranch/working farm then there should be plenty of lenders in your area that can accommodate.  Lean on your real estate agent in this regard.  He/She should have good lenders to help with acquiring this property.  Oh, and it will be EXTREMELY difficult for any loan to count the income produced from this property.  You will likely have to support the loan with your own income.  Maybe there's an exception out there somewhere...but let's just say 99% of your options won't count that income.

Thank you for the reply @Andrew Postell , that is exactly what happened. We found a local lender that was able to work out a good deal in order to place the property on contract. Most of the leverage was my income that made this happened. I'm extremely happy to inform i'm a new ranch owner with lots of potential :) thanks again for your response. 

Hi @Hugo Cam
This is a raw land investment, right now the market's going to head down. Don't buy raw land, that's a bad move.

When the market is in a correction or it's headed to a correction in this case it's at the top of the market and it's going to fall down. Raw land is not the thing you invest in, in almost all cases, and the reason why is when a market corrects back you end up with saturation of inventory.

Right now what you're going to see is that we're going to come out of the foreclosure moratorium. When we come out of the foreclosure moratorium you're going to see the banks unload a lot of properties onto the market. When you see those properties go into the market they are going to flood it with inventory which means you're going to have a greater supply and your demand will not keep up.

The market will be saturated they've got to sell all that vertical inventory before they're willing to start to rebuild new homes on new properties and then your land will have value. So the time that you buy raw land is at the bottom of the market, not the top of the market.