Commercial Land Loans

Raw land can be a tricky loan to acquire. Nearly all banks will not financing raw undeveloped land, however nearly all development project begin with the purchase of vacant land. This can be troubling for many developers, builders, or even residential home owners looking to buy a lot to build their property on. Of course it shouldn't be that difficult for those clients to obtain financing for their land deals, and that's why we have developed relationships with a variety of equity based and private lenders that love to finance these raw land loans!



Raw Land Loans

    Raw land loans are a bit different than your standard commercial loan. They require much more work to obtain the true value. Often a visit to the site and looking at proposed use of the land (if any is available) or talking with local government officials can aid in obtaining the value of the land. Most equity based and private lenders will finance up to 55% of the value of the raw land. There are many programs available for investors to purchase raw land.
 
    Lets take a look at some of the benefits and drawbacks to owning raw land:
 
Drawbacks of Raw Land
 
  • NO CASH FLOW (generally raw land does not generate any income to help service the debt on it)
  • LITTLE TAX INCENTIVES (raw land can not be depreciated)
  • FEW SOURCES OF CONVENTIONAL FINANCING (it's difficult to borrower on raw land through your local bank)
  • HIGHER RISK OF LOSING MONEY ON RESALE OF RAW LAND (It's critical to do all of your due diligence on the location, soil, weather, etc.)
  • LOW APPRECIATION VALUE COMPARATIVELY (generally raw land by itself can take longer to realize capital gains simply by owning it alone. It's best use is generally to build or develop)
     
     
     
    Benefits of Raw Land
     
     
  • HUGE APPRECIATIONS OF RAW LAND ARE SEEN IF PURCHASED IN AREAS OF HIGH GROWTH OR WHEN DEVELOPED
  • PRIVACY CAN BE A BENEFIT OF LAND OWNERSHIP
  • OWNER FINANCING THROUGH SELLER CAN OFTEN BE ACHIEVED AT SALES PRICES AND RATES WELL BELOW GENERAL MARKET VALUES
  • BUILDING OR DEVELOPING LAND FOR APARTMENTS, HOTELS, OR OTHER COMMERCIAL STRUCTURES CAN PROVIDE NEARLY IMMEDIATE REVENUES OF CASH FLOW
 
     These are just a few of the benefits and drawbacks to purchasing and owning raw land. There is a lot of work that goes into evaluating the true value of the land. Perhaps the land is being purchased solely because the investor feels that the area is going to experience huge growth and they want to capitalize on cheap land before the explosion occurs for a quick profit through appreciation. Another scenario would be to purchase the raw land and develop it for a quick sale to other interested builders or developers that can pick up the improved land for a quick build out of their own. Or maybe the investor wants to purchase and build a new subdivision or office complex for big returns on their investment.
 
    Regardless of the purpose of your purchase of raw land a savvy investor must become an expert in the art of valuing the land they are interested in purchasing or refinancing. Here are some helpful tips that our own raw land appraisal experts use when trying to determining the value of raw land.
 
 
Factors affecting the value of raw land
  • Site size and shape, represented by frontage, width and depth.
  • Corner influence equals visibility for commercial, or privacy for residential. Plottage, has assembly or combining of parcels been accomplished.
  • How much land is excess or surplus; surplus has less value than what is required.
  • Topography: Land’s contour, grading, natural drainage, soil, view and usefulness
  • Utilities: Sewers, drinking water, natural gas, electric, telephone, cable, etc.
  • Site improvements: Landscaping, fences, gutters, walks, drives and irrigation
  • Accessibility: Parking, location, streets, alleys, connecting roads and highways
  • Environment: Climate, adequate water supply, air quality, streams, rivers, lakes, oceans and the absence of any hazardous materials
 
    Some of these factors are familiar to the standard real estate investors while some of them will require a whole new field of expertise for you to master. Another factor to consider heavily is the zoning of your raw land. To determine the present zoning of your raw land you will likely need to become familiar with the following abbreviations:
 
  • A1: Agricultural with single family home
    C: Commercial business
  • CO: Commercial office
  • FP: Flood plain
    M: Industrial
    R1: Residential single family
  • R1H: Residential hillside
    R2 : Residential multifamily
  • RT : Recreational tourist/ Residential transitional                         hard money commercial land loans
 
    Now you can see why we are the premier source for COMMERCIAL RAW LAND LOANS in the U.S. Our commercial  mortgage professionals are prepared to put their years of experience and our access to these commercial mortgage loans to work for you! Contact US today or APPLY ONLINE for a same day response and let's start working together to help your Commercial  Vacant Land Mortgage project get funded as quickly as possible!