Financing Options for Raw Land

[Special Delivery]

Last year, my wife and I came upon a property that we decided to purchase with the long term plan of building our dream home on it. Due to atypical characteristics of the property, we were not able to get a second-home mortgage, and ended up getting an unsecured personal loan for $95k from Bankers Health Group, with 4% finance charge added to principal at 12% interest rate. We are aggressively paying this off (should be paid off in a total of 15 months) and are interested in alternative financing (outside of cash) to purchase property adjacent to ours once the first loan is paid off.

Does anyone have any experience in finding financing for undeveloped land? We would not be building on it, just leaving it wild and using it as buffer around our property.

[Gamma Knives]

Wow. You must have been motivated to buy that land. I do not have experience. Could see if seller is interested in financing for you? Is HELOC not an option?

[Nysoz]

I'm not sure if you can use this, but I just read the thread which is convenient. Would be a much better rate than what you're paying now.

First Republic line of credit. 100k-350k? 2.25%

https://www.bogleheads.org/forum/vie...ewpost=5912080

https://www.firstrepublic.com/person...credit#slide-2

[CK36]

Is the issue the "atypical characteristics" of the land so a traditional farm/land loan cant be secured, or is it because it is undeveloped? If its just because its raw land, you should be able to get a mortgage through one of the banks that specializes in farm and land loans. Most residential mortgage banks do not offer these. Sorry if I am missing something here.

[braindoc]

There are lenders that specifically do loans for land (developed or not). They are really hard to find and often area specific. Talk to some builders in your area. They should be able to help you find one.

[Special Delivery]

Is the issue the "atypical characteristics" of the land so a traditional farm/land loan cant be secured, or is it because it is undeveloped? If its just because its raw land, you should be able to get a mortgage through one of the banks that specializes in farm and land loans. Most residential mortgage banks do not offer these. Sorry if I am missing something here.

The property we purchased last year was roughly 8 acres, surrounded on 3 sides by stream and protected wetlands, with 2.5 acres of pond and 90% flood zone. It has on it a 2 BR 1.5 BA prefab with electricity, but without connection to city water or sewer, and therefor couldn't qualify as a second home. The sellers were a group of five heirs who didn't quite get along, and who wouldn't do seller financing. Their first offer (from another buyer) was cash at asking price, but who backed out two weeks later.

There are three separate holders of adjacent land we'd ultimately like to buy from, but only one is aware of my intentions. One is a developer holding 200+ acres adjacent to out property, another is a farmer with 200+ acres, the last is a real estate agent with 15 acres across 4 properties. All land is undeveloped, the majority is wetlands or flood plain. I suspect getting a loan from a bank specifically for the land would be difficult. The seller's agent tried to help us with the initial property purchase, but there were no local lenders. I may ultimately end up doing something similar to Nysoz's post.

[CordMcNally]

How are your financials? I'd cut you a deal and loan you the money at 9% with only a measly 2% finance charge.

[Hank]

It’s less than $100K. Why not just float this from petty cash vs. paying these rather ridiculous fees and interest rate?

On the other hand, you bought a mobile home on swampland and plan to double down with hundreds of acres of additional swampland (or “flood plain property”).

[CK36]

The property we purchased last year was roughly 8 acres, surrounded on 3 sides by stream and protected wetlands, with 2.5 acres of pond and 90% flood zone. It has on it a 2 BR 1.5 BA prefab with electricity, but without connection to city water or sewer, and therefor couldn't qualify as a second home. The sellers were a group of five heirs who didn't quite get along, and who wouldn't do seller financing. Their first offer (from another buyer) was cash at asking price, but who backed out two weeks later.

There are three separate holders of adjacent land we'd ultimately like to buy from, but only one is aware of my intentions. One is a developer holding 200+ acres adjacent to out property, another is a farmer with 200+ acres, the last is a real estate agent with 15 acres across 4 properties. All land is undeveloped, the majority is wetlands or flood plain. I suspect getting a loan from a bank specifically for the land would be difficult. The seller's agent tried to help us with the initial property purchase, but there were no local lenders. I may ultimately end up doing something similar to Nysoz's post.

So you will need to research banks that offer farm/land loans. They should be able to help. Only other issue with the property you currently own (if you are looking to refinance) is the structure since it is in a floodplain. Being in a floodplain makes it a federal requirement to have flood insurance on the structure for the duration of the loan. I have heard of people having difficulty getting an insurance policy for a structure in a floodplain not adequately elevated.

To find a bank that offers a land loan you will likely need to shop locally. If you don’t know of any, try going to sites like LandFlip.com, type in your area, and look for sponsors or even ask some of the listing agents. They will be able to point you in the right direction.

Hope this helps.

[Special Delivery]

It’s less than $100K. Why not just float this from petty cash vs. paying these rather ridiculous fees and interest rate?

On the other hand, you bought a mobile home on swampland and plan to double down with hundreds of acres of additional swampland (or “flood plain property”).

We don't have $100k petty cash. We could have done a $50k loan to ourselves from our TSP account (maximum allowed), but didn't for various reasons. The existence of the structure complicated the picture with banks, and it ended up having to be a cash purchase. We negotiated down from asking price so that the sellers shouldered some of the burden of our less than desirable financing, and decided we would just pay it off aggressively.

And to clear up the misunderstanding, we're not trying to buy 400+ surrounding acres, just 5 or so each from the three parties. The structure isn't a mobile home, and I suppose I was wrong in calling it a prefab (though that is how I think of it), but a modular with a foundation.

[Special Delivery]

So you will need to research banks that offer farm/land loans. They should be able to help. Only other issue with the property you currently own (if you are looking to refinance) is the structure since it is in a floodplain. Being in a floodplain makes it a federal requirement to have flood insurance on the structure for the duration of the loan. I have heard of people having difficulty getting an insurance policy for a structure in a floodplain not adequately elevated.

To find a bank that offers a land loan you will likely need to shop locally. If you don’t know of any, try going to sites like LandFlip.com, type in your area, and look for sponsors or even ask some of the listing agents. They will be able to point you in the right direction.

Hope this helps.

We would not be refinancing. We've got the title outright with no liens, and we'll just pay off the personal loan rather than try and involve a bank again for that specific property. In regards to elevation requirements, we're aware of federal requirements, and plan doing something similar to what Kamban did.

Thank you for the suggestion about LandFlip and listing agents.

[WorkingToFish]

You are trying to buy 200 acres of land from a developer? Will this not be a massive fortune of money?

Wetlands, eh? Any ducks on there?

[WorkingToFish]

By the way, I bought 5.5 acres of land about four years back. We have not built a house on it yet but are intending to. We got a land loan at 4.175% interest.

If some of the land is farm land there's gotta be some sort of loan for acquiring farm land. Even if you're not planning on "farming" it.

[Dont_know_mind]

If you can’t find a bank to lend you money to buy a property (even vacant land-but yours is not as sounds like there is a structure on it) and you’re a physician, maybe there’s a reason for this.

[TXDoc21]

Before embarking too too far on your dream home I would watch this movie. Hopefully you will just have a good laugh about it when it’s all said and done. Good luck.

https://en.m.wikipedia.org/wiki/Mr._...is_Dream_House