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)
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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
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HUGE APPRECIATIONS OF RAW LAND ARE SEEN IF PURCHASED IN AREAS OF HIGH GROWTH OR WHEN DEVELOPED
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PRIVACY CAN BE A BENEFIT OF LAND OWNERSHIP
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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
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Site size and shape, represented by frontage, width and depth.
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Corner influence equals visibility for commercial, or privacy for residential. Plottage, has assembly or combining of parcels been accomplished.
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How much land is excess or surplus; surplus has less value than what is required.
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Topography: Lands contour, grading, natural drainage, soil, view and usefulness
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Utilities: Sewers, drinking water, natural gas, electric, telephone, cable, etc.
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Site improvements: Landscaping, fences, gutters, walks, drives and irrigation
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Accessibility: Parking, location, streets, alleys, connecting roads and highways
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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
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!