Land Loans ? Best Land Loans Inside Secrets ...

If you?re trying to determine if raw land should be considered real estate, yes it is. Without vacant land, you would have no new construction and that my friend would send the economy into a deep depression, because construction loans for best land is still a big business. Best land loans are hard to come by, because it is a risky investment for both the lender and borrower. Answering the obvious question of why the bank should give you a loan application to apply for a land loan is a dicey one.

I am sure you have rosy proposals of what you?re going to build on the vacant land, but it is just still a proposal and banks hate making vacant land loans on your fancy proposals. Some raw land is very valuable and the trick is how to use Land Loans Inside Secrets to get past the initial bankers skepticism.

Bankers are in business to make money by giving out loans and land loans are on the bottom of the list of any bankers preference. I mean think about it, the collateral most times shows no income, it is undeveloped and all fancy projections are based on hope about how the economy is going to continue to do better. In any economic downturn like we find ourselves in, raw vacant land loses more value than any other real estate.

Land Loans ? How do You Explain the Risk

It is a justified fact, that lenders want a return on any loans made and any default is costly to the bank. Banks have huge files of land loans gone bad. You as a real estate investor must be ready to answer some obvious questions about your loan application for vacant land loan. Land loan Bankers want to know:

What are you going to do with the Raw land? Forget how much you need to borrow for a minute here. You need to use your imagination and come up with compelling reasons to justify what you intend to do with the vacant land. Need to put up a swanky building or shopping mall? Do you have some preliminary drawings to show the banker?

Your preliminary drawing should show how many residential units or how many commercial spaces. Do you have projections of housing requirements in the area? Do you have projections about the need for a shopping mall in the area? If you need local authorities approval, do you have some conditional approvals you can show the banker?

Next is the funding for your vacant land project. Do you have conditional funding lined up and how much? If it is a group of investors, do you have every real estate investor involved in your raw land project contribution in an escrow? Please do not tell the banker you trust your investors would pony up the money when the time comes.

You need concrete proof of the funds for the vacant land project and not hopes, wishes and trust in your fellow real estate investors. Would you be willing to personally guarantee the land loan? Yes is what the banker wants to hear and no, would create additional hurdles before you can even be approved for the barest minimum land loan possible. Bankers want your financial neck on the line before making any land loan as a way to guarantee performance on your part.

Land Loans ? How Much are you Looking to Borrow

Appraisals on raw land is subjective in general and the criteria used can be traumatizing when the numbers come in. Usually vacant land is valuable when positioned in fast growing areas. Lands in most big cities would eventually go up, if the city is growing and not shrinking population wise. So, trying to come up with how much you want to borrow is tied to the appraisal numbers. Lenders are known to be very conservative when it comes to lending to buy vacant land.

Land loan ratios of 50% to 65% of the appraisal numbers is the standard practice if you have good credit and much less ratios if you have bad credit. The best Land Loans Inside Secrets tip to use, is to ask for a lot more than what you need. If you need $200,000 tell the lender you want to borrow $300,000 and the raw land is worth $600,000. You see, lenders do not like to give you the actual amount you want to borrow when it comes to raw land loans, even if the appraisal comes in okay. Use your imagination and the lenders would just give you the land loan number you really want.

Land Loans ? Please Know What You?re Doing

Do not go for land loans if you?re a novice real estate investor. Many unfortunate variables can wipe you out before you begin. If you?re looking to build on the land, do your homework thoroughly. You cannot have handshake deals with contractors. The successful builders have guarantees of performance clauses buried in any contractors agreement. You need strict timeframe built into any agreement with the contractor regardless of weather or any act of God. Since you?re paying, put the contractors neck on the line based on well written performance models.

Your land loan application will be approved, if you have followed some of the best land loans inside secrets listed above. Just a word of caution, be dependable in all your undertakings and expect same from others. Pay attention to your intuition as a warning sign against fraudsters and crooks and that my friend will get you going on your way to a successful real estate investing portfolio.

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Related Posts:

What Is A Construction Loan?

Residential Construction Loans ? Building the Dream Home

Commercial Real Estate Loans ? The Key to Your Success

Manufactured Home Loans: How to Get the Best Deals?

What Are Commercial Hard Money Loans?

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