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Covered Land Bridge Loans for Commercial Real Estate Developers - YouTube
Channel: Private Lender Link
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have you heard a lender advertise that
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they lend on covered land
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and wondered what that means in this
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video i'm going to explain the meaning
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of covered land
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the typical lending guidelines for these
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properties and how to find private
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lending firms
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that will consider them i'm rocky
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battani
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ceo of privatelenderlink.com where
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investors and brokers can easily find
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direct
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private hard money lending companies if
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you're in the investment real estate
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business and want to gain insights into
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private mortgage lending
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subscribe to our channel and get
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notified every time we release a new
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video
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covered land is a piece of commercial
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real estate that has an existing
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structure on it
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which is slated to be torn down to make
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way for a new development in the near
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future
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the property types are primarily
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multi-family office
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retail industrial and hotels it could be
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an old shopping center that will be
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redeveloped
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into apartments or an old hotel that
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will be taken down
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to build a new office building whatever
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the case is a short-term bridge loan
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can be used by cre investors to acquire
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covered land
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or refinance their existing mortgage
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during the pre-development phase
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here are three scenarios in which an
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investor or developer could use a bridge
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loan
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number one the property investor is
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purchasing covered land and plans to get
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it entitled within one to two years
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and then sell the project the bridge
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loan would be used to finance the
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acquisition which will be paid off with
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the sale of the entitled project
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to a developer number two the investor
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already owns the property
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wants to develop it and needs to cash
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out equity which will be used for
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pre-development soft costs
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a bridge lender would provide a
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short-term refinance loan
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which will be refinanced by a
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construction loan
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and number three the property investor
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is a developer who wants to purchase
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covered land
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which is already entitled but not shovel
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ready
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the bridge loan would be used to finance
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the acquisition which will be paid off
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with a new construction loan
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once the project has building permits it
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may be possible to get financing for the
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land purchase
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and the vertical construction both from
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the same private lender
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but only a small percentage of private
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bridge lenders provide ground up
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construction loans
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and not all of them will consider
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funding the covered land purchase
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some only provide funding when the
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project is shuttle ready
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so the property investor typically has
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to get two separate loans one for the
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covered land
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pre-development and another for the
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vertical construction
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next let's talk about leverage and
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pricing the maximum
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loan to value or loan to purchase price
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typically ranges from 50 percent
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to sixty-five percent of the as-is value
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it varies based on the location
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and the development stage if the project
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is entitled and located in a primary
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urban market
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you may be able to get up to sixty five
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percent for
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unentitled projects some lenders will
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still go up to 65
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if it's in a prime location and the
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lender will determine the leverage based
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on the az's value
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not the future value of the project once
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it's built covered land is still
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essentially land and would be a risky
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loan for any private lender
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so most lenders will be conservative
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when it comes to the leverage
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the key element for lenders considering
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covered land loans is the exit strategy
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whether the plan is to pay off the
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bridge loan with a sale or a
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construction loan
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the lender has to feel confident in the
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ability for the project to get entitled
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and or approved as for the pricing the
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interest rates typically range from
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eight percent
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to ten percent but it could go up to
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twelve 12
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as with leverage the pricing two varies
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based on the location and the
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development stage
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plus the investors experience and
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financials could be a factor as well
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all lenders charge an origination fee
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which typically ranges from 1
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to three points if you're seeking a
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commercial real estate bridge lender for
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a covered land deal
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use our website privatelenderlink.com as
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a resource
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there's no fee to search and no
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registration required
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first get to the cre bridge lenders page
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at privatelenderlink.com
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commercial once you've entered a state
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or major metro area and you see a list
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of lenders
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look for the refine results section on
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the left and from the property
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type field select commercial land at the
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time of this recording we don't have
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covered land on this list but plan to
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add it in the next few months
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view each lender's profile to learn
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about their guidelines rates
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fees and much more if you want to reach
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out to them
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click the green contact button to find
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their phone number and a form to send an
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email
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or complete the detailed loan request
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form
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if you found the content in this video
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to be useful please click the like
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button
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and be sure to check out our other
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videos about private and hard money
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lending
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thank you for watching and see you in
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the next video
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