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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 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
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FP: Flood plain
M: Industrial
R1: Residential single family
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R1H: Residential hillside
R2 : Residential multifamily
-
RT : Recreational tourist/ Residential
transitional
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!
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