Raw land as opposed to improved property is much more difficult to finance through traditional lenders. The main reasons are that it generates very little income, development costs can be expensive, there are no buildings or improvements that can be used as collateral, and it is often considered speculative.
For those reasons mentioned we find that sellers are often our first choice regarding financing. It is typical for a seller of raw land to accept 10 percent down and the rest to be paid over time at a specified (below market) interest rate. This would be an example of an installment land contract. Other forms are contract for deed, mortgage and note and purchase money mortgages. In these cases, a real estate attorney usually drafts these contracts and a bank will act as an escrow agent to facilitate verifiable records of payments received. The seller often retains the deed until the property is paid for in full.
If you want to investigate bank financing, then you may start out by offering 30 percent down with a seven-year mortgage, with the bank getting an extra percentage point over and above the current interest rates for standard loans. This may not be accepted, but it does give you a starting point to see just what they may be willing to do.
If you plan on building on your land, then having a development plan with an appraised set of blue prints for the project will help the lender in justifying your loan. If you can use equity from other property, then paying substantial down payments may also be an option.
Final words of caution here are to know values and don't overpay. Always offer less when possible and research recent sales of comparable properties. The larger a parcel is, the cheaper it tends to get per acre. Ask an agent what an acre of land tends to go for in the area that you are considering; try to buy more than one acre.
When buying residential lots, builders try to keep raw land costs down to 10 percent of the overall value of the project. If streets and utilities are already in place, then they will use 25 percent as their guideline. If you can combine or assemble parcels or achieve zoning changes with property, you have a good chance of immediately increasing its value.
Always physically inspect the property and do your research before obligating yourself to buy it. And try using contracts with contingencies put in to protect yourself. In essence, these are really options that let you control the deal while you investigate and research the land's potential to satisfy your objectives. Happy Hunting and buy the high grounds!
About The Author
By Dan Auito, mailto:magicbullets@alaska.com, a real estate investor for the past fifteen years & has bought, sold, and rented seventeen properties to date, totaling more than $1.3 million - all on a blue-collar salary before the age of forty. Grab your free tip sheets & more at: http://www.magicbullets.com/home.php
There is more to buying raw land than meets the... Read More
Most people who complete a self build will go on... Read More
Learn how to sell your property faster and at the... Read More
When it comes to investing, everybody has certain goals and... Read More
Sue and Chuck DeFiore have the perfect solution for you... Read More
It's high time someone advocated the use of common sense... Read More
You've decided to prepare your home for sale. Whether you... Read More
A Single's Game of Real Estate (Getting started in your... Read More
The home selling and buying process can be confusing, particularly... Read More
Considering the rapid rise in home prices over the past... Read More
With the never-ending changes in our Real Estate Markets real... Read More
Bankruptcy Will Stop Your Sale - At Least For Now... Read More
Description: Even in uncertain economic times like these, history shows... Read More
Another real estate writer's mini course, full of promises and... Read More
One of the most common causes for disputes occurring after... Read More
You may be of the opinion that you don't need... Read More
As sure as the spring flows at The Fountain of... Read More
1. Make sure units are larger than 1800 square feet.This... Read More
In an earlier article, we presented various options for ensuring... Read More
Starting real estate business is not that simple. Multiple aspects... Read More
If you have a current mortgage and are unhappy with... Read More
Lease Purchasing affords the tenant/buyer a wonderful opportunity to get... Read More
Real estate investment and development has never been a more... Read More
Homeowners who are seeking a property appraiser often ask "How... Read More
Real estate investing has become popularized today because of real... Read More
Many people are familiar with the concept of sub-dividing a... Read More
Ireland has recently witnessed an upsurge in the number of... Read More
When I was a young child I had many annoying... Read More
There are many frequently asked questions and any local real... Read More
Several months ago, the 3,000-member California Association of Mortgage Brokers... Read More
Psssssssssst, Want to know a great way to make FAST... Read More
So, your selling your home. Prepare yourself both physically and... Read More
Home buyers and sellers should think twice before jumping into... Read More
When preparing to sell a house, you should always consider... Read More
Buying and selling property is not as easy as you... Read More
Are we in a housing bubble? To answer that question... Read More
You could be facing a dilemma when considering payout options... Read More
Buying real estate can start with a look in the... Read More
With today's planned lifestyle communities, golf and boating enthusiasts have... Read More
If you have recently purchased some real estate for investment... Read More
How would you like to start a bidding war for... Read More
How do you find a house for ten or twenty... Read More
You've listed your home for sale, you have a Buyer... Read More
Today's real estate consumer has a lot to consider during... Read More
Luxury homes are lots of fun to inspect. Sure, the... Read More
It's amazing how important the sense of smell is to... Read More
Whenever you own a piece of land, you will be... Read More
Getting a survey before you close on any real estate... Read More
HOW TO SELL YOUR HOME FOR TOP DOLLAR1. Make your... Read More
Buying a house can be a daunting task, even for... Read More
Location:Frequent travelers will absolutely delight in this town! As part... Read More
Most people in America rent a personal dwelling!Just think how... Read More
There isn't a realtor in existence who wouldn't tell you... Read More
In the sales contract, the sellers of your new home... Read More
First, let me state that I'm not an attorney and... Read More
Foreclosure under a mortgage requires a court ordered sale conducted... Read More
Doesn't it seem like everyone you know has a friend,... Read More
Almost anyone can become a rural property owner; if you... Read More
Here is a step by step guide for buyers looking... Read More
When it comes to real estate investing, most beginners find... Read More
Many experts say you can't lose if you put your... Read More
Why hire rental property management? Because doing it all yourself... Read More
In this country millions of homes are sold every year.... Read More
In today's tight housing market, many buyers are looking for... Read More
Consider the statistic in the title for a moment.8/10 millionaires... Read More
As an active real estate investor you probably already know... Read More
Real Estate |