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Vacant Land Loans by Private and Hard Money Lenders - YouTube
Channel: Private Lender Link
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are you seeking a private hard money
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loan for vacant land
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in this video i'm going to explain the
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guidelines for getting the land loan
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the different classifications of land
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the typical pricing
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and how to find direct lenders that do
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consider vacant land loans
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i'm rocky botani ceo of
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privatelenderlink.com
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where investors and brokers find direct
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private hard money lending companies
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throughout the united states
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if 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 be notified
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every time we release a new video
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a very small percentage of private and
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hard money lenders in the united states
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will consider land as collateral for a
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loan
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the reason is no lender wants to end up
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owning a piece of land
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you see private mortgage lenders are
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always thinking about the worst case
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scenario which is
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if you default on the loan they have to
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foreclose
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and they may end up owning the property
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most private lending companies that do
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end up with a property after foreclosure
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will quickly try to sell the property
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and land is the hardest property type to
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sell
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with the smallest pool of potential
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buyers so
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in order to justify the risk of lending
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on vacant land
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the lender will be much more
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conservative than they are with loans
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for
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improved properties so here are the
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guidelines for getting a land loan from
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a private or hard money lender
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let's start with the loan purpose
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private lending
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is only for investment purposes if
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you're buying land on which you're
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eventually
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going to build your dream home that's a
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consumer purpose mortgage
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and not something a private lender will
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consider
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if you're cashing out equity on a piece
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of land
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the funds must be used for business or
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investment purpose
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next let's talk about leverage the
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maximum loan value
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is 50 that's the same whether it's a
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refinance or a purchase loan
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if you're buying land you'll need to
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have a cash down payment of at least
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50 of the purchase price or some lenders
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will consider using equity in another
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investment property
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instead of cash this is called cross
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collateralization if you're refinancing
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or cashing out equity
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the maximum is 50 of the as as-is value
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and no lender will consider a second
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mortgage on vacant land
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so it has to be a first position
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mortgage not all lenders will go up to
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50 percent
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some lenders max out at 25 and some go
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up to 40 percent
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and there are a few factors which could
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determine the lender's maximum leverage
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on each deal
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including the location the type of land
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the land status and its potential use
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now let's briefly go over the various
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types of land
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and statuses because this will be
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discussed when you request a land loan
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first the location is one of the most
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important factors and most private
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lenders will
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only consider land if it's in an urban
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or suburban area
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some lenders only consider infill land
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which means the lots surrounding subject
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property
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are developed with buildings on them if
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your land is surrounded by other vacant
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lots
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it will be less attractive for a lender
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if the property is
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timberland meaning it's filled with
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trees in a force-like setting
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a very small number of lenders will
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consider it but the ltv
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has to be extremely low say under 20
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if the subject property is agricultural
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land that may be more attractive to
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lender than timberland
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because it likely generates income
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however agland
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also has a limited pool of lenders that
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will consider it if you do find a lender
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for ag land
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the first thing they will ask is what
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type of crop is grown on
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land another classification of land you
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may hear is covered land
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this term is primarily used in
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commercial real estate deals where
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there's an existing structure on the
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property but the plan is to tear it down
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once the new development project is
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approved some commercial property
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private
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lenders provide bridge loans for these
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properties with a plan to be paid off by
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construction loan
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in addition to the land classification
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the lender will ask for the status of
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the land or
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the development stage first is it
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entitled
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has the city or county approved it for a
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specific use such as a single-family
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home
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multi-family retail etc and title land
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is more attractive to lender than
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unentitled land
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because it's easier to sell just in case
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they end up owning it
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if the property does not have any
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utilities connected to it
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it's referred to as raw land if it does
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have water
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sewer electricity connected then it's
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past the stage of being raw land
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and may just be called vacant land
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whether it's entitled or not
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if your land has building approvals and
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is considered shovel ready
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then you're ready for a construction
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loan however some investors will get
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their land to the shovel ready stage
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and then sell it to developer if this is
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the case
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a short-term bridge loan can be a good
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financing solution
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until the property is sold once you've
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determined that your landlord qualifies
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based on the loan purpose
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the ltv the location and its stage the
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lender will want to know what your ex
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strategy is how will the loan be paid
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back are you planning to develop the
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property
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and have the land loan paid off by
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construction loan are you planning to
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sell the land
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will another one of your investment
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properties be sold off to pay off the
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land loan
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if you don't have a solid exit strategy
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it will be very difficult to get a loan
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from a private lender
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so what's the typical pricing for land
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loans this varies by region
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location and many other factors but it
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typically ranges from 10
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to 15 plus two to four points
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i've seen some land loans go down to
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eight percent for entitled land
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and prime urban locations with an
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extremely low loan of value
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most lenders will require you to make
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monthly interest payments since land
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doesn't generate any income
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you'll have to show the lender that you
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have the ability to make those payments
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to avoid having to make monthly interest
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payments during the loan term
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you could ask the lender to build an
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interest reserve into the loan
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but not all lenders will consider this
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when you use our website
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privatelenderlink.com to find the lender
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you can filter the search results to
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easily find out which lenders consider
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land loans
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from the loan type list select either
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private money hard money
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residential bridge or commercial bridge
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the first three will have similar search
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results
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commercial bridge tends to show lenders
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that only lend on commercial properties
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with a minimum loan amount of 1 million
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dollars next type in a state or major
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metro area and hit enter
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look for the filter section and click
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refine results
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from the property type field select
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residential land
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or commercial land click on each
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lender's profile to learn about their
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guidelines
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rates fees and much more scroll down to
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the section
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for land loan criteria and you'll find a
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few additional details about
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the requirements for land and their
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maximum loan to value
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maximum loan to cost and a few other
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details when you're ready to reach out
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to lender
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click the green contact button to find
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their phone number
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and a form to send a simple email and
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you can even visit the lender's website
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or you could fill out a detailed loan
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request form if you found this video to
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be helpful
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please click the like button and be sure
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to check out our other videos about
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private and hard money lending
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thank you for watching and see you in
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the next video
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