First Land Development Deal - Lender First or Property First?

Question

For those who have gone through their first land development deal, how did you approach financing the entitlement phase?

I’m currently working through the acquisition and entitlement strategy for acreage that I intend to take through the entitlement process and ultimately create luxury and estate-style homesites.

One thing I’m still trying to nail down is the timing of the lender relationship. Would you recommend connecting with a lender before putting the property under contract, so I understand what they may be willing to finance and what they would need from me? Or is it generally better to get the acreage under contract first, get the surveys, engineering, and entitlement information together, and then approach the lender with a more concrete project?

I’d especially love to hear how experienced developers handled this with their first deal and anything you wish you had known beforehand.

Michael Eskenasy · Answer

I’d talk to lenders before you put the land under contract — but I would not expect them to finance a hypothetical project yet.

What you want first is the lender’s box.

How much sponsor equity do they expect? Will they fund acquisition plus entitlement, or only reimburse soft costs later? What LTC/LTV do they tolerate? Full recourse? Minimum liquidity/net worth? Do they lend on raw land at all? What milestones have to exist before they advance another dollar?

You want to know those answers before you fall in love with a parcel.

Then get the right property under control with as much diligence runway as you can negotiate and start turning the concept into something financeable: survey, civil, utilities, access, preliminary yield, entitlement path, jurisdiction feedback, real soft-cost budget and a credible exit.

For a first development deal, I’d be much more concerned about controlling downside during entitlement than squeezing the cheapest debt out of the capital stack.

The dangerous version is buying the acreage first and discovering six months later that your lender wants 40% equity, full recourse and approvals you’re still 18 months away from getting.

So my sequence would be:

Lender conversations → define financing box → control property → diligence/entitlement work → lender underwriting → close only when the economics still work.

And before signing anything, I’d establish kill criteria. If density drops below X, infrastructure exceeds Y, entitlement goes beyond Z months, or required equity crosses your threshold, you walk.

On a first land deal, the ability to walk away cheaply may be more valuable than the ability to close quickly.