commercial mortgages

Land still tough to finance

Land banking, land development, land servicing all continue to be tough deals to get financing for. Banks and lenders are happy to lend you the money if you have enough pre-sales (of completed lots) to cover up to 100% of their loan. Private lenders have too much land sitting in their portfolio and don’t have an appetite for anymore.So what does a borrower do? A borrower should make sure that they have LOTS of equity and can demonstrate some income to be able to pay for fees and maybe even interest.Whether you are looking to develop 10 acres or 100 acres, a bank or lender wants to know what the exit strategy is and how they will be paid on a monthly basis. Some mortgages can include an interest reserve (meaning the interest gets added to the balance each month) but the land better be a great piece of dirt and the lender would have to like your deal.

There are still many opportunities for land development but you will need to spend more time figuring out your financing options before you commit to a transaction. Talking with a bank is helpful and talking with a broker can be helpful but at the end of the day you need to demonstrate that you have equity outside of the land (meaning your personal guarantee is worth something) and that you either have an existing income stream or will be very close to having one if the land development is completed.

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