Are you ready to commit to a raw land investment opportunity or real estate new build strategy, but aren’t sure of the appropriate steps to take? Are you aware of the best real estate financing options for your particular situation? Don’t worry, you are not alone. A raw land investment doesn’t follow the same rules as your standard property acquisition. While there are certainly similarities, there are nuances you must be familiar with before you move forward, and financing is no exception.
I would be remiss if I didn’t at least acknowledge that financing a raw land investment comes with a slightly higher degree of difficulty than that of a parcel with an existing property on it. If for nothing else, traditional lending institutions have come to the conclusion that raw land purchases are slightly riskier than that of your standard home purchase. As such, you will need to mind due diligence to place the odds of receiving financing for your raw land investment in your favor.
Do your homework and gather as much information on the property as you can. Additionally, you will need to identify what it is you plan to do with the property if you hope to finance your raw land investment with a lender. Only once you’ve gathered the appropriate information can you set out to choose the type of loan that’s right for you and your raw land investment.
All that said, buying raw land can be a very lucrative endeavor if the appropriate steps are taken to mitigate risk and maximize efficiency. First and foremost, you must have an idea of what you are getting into. Once you have decided on a property, have the land surveyed to determine the property lines, as they may not be as clear cut as you initially thought.
According to Wiki How, “ A survey will also reveal any easements for access to the property, which refers to neighbor’s rights to travel through the property. Right-of-way issues are often critical to open plots of land because they are important for the purposes of improving or using that land over time and may affect your ability to get a loan.”
Outside of surveying the property, you will want to make sure you are familiar with the zoning laws. Your local municipality should be able to introduce you to any restrictions on the property. Not surprisingly, you want to make sure you can use the land for whatever it is you intended to do with it. “If your intended use for the land is not allowed by zoning laws, you may be able to apply to seek a zoning change from the municipal government,” according to Wiki How.
Receiving financing for a raw land investment is a complicated process, and one that requires a lot of ground work before you even apply for a loan. That said, it’s a good idea to enlist the services of an experienced lawyer. Prior to taking any action, especially if you are dealing with undeveloped land, consider hiring someone with legal experience to represent you in an impending transaction. If for nothing else, hiring a lawyer with experience in land deals will mitigate risk and ensure proceedings move smoothly. What’s more, their presence at your side will go a long way in protecting you from any complications that may arise over the course of the bidding process, and even through the financing process. Perhaps even more importantly, a good raw land lawyer will be able to negotiate a better deal on your behalf.
I highly recommend hiring someone to represent your land acquisition. While there are certainly exceptions to hiring professional litigation, it’s often better to spend the money it would cost to hire a lawyer than to deal with any misguided decisions inexperienced land buyers have been known to make on their own. Only once you have a competent lawyer, for that matter, can I recommend moving forward with making an offer.
Provided your offer is accepted, and you don’t have the cash on hand, you will have to come up with a way to finance your raw land investment. Start by contacting lenders and shopping around for potential loan options.
I can’t stress enough how important it is to shop around for your potential loan, as traditional lending institutions will not be your only option to finance a raw land investment. Instead of settling on the first loan that comes your way, exercise your options. The following loan options represent some of your best chances of receiving a loan for a raw land purchase:
It’s worth noting that these three options are in no way an exhaustive list of the loan options available to those looking to buy raw land, but rather a starting point. It’s important to understand that you have options available to you, and the only way to supplement your purchase in the best way possible is to shop around till you find a financing option you are comfortable with.
When it comes time to making a decision on the financing regarding your raw land investment, don’t hesitate to ask the following questions:
An investment in raw land is a huge step for residential redevelopers that specialize in your typical remodel, but a lucrative one nonetheless. While raw land investment is a bit more complicated, it can be extremely rewarding for those that take their time and mind due diligence. With enough work put in up front, financing a raw land investment may not be as difficult as you initially thought.