Showing posts with label Buying Raw Land. Show all posts
Showing posts with label Buying Raw Land. Show all posts

Friday, April 15, 2022

What Is a Raw Land Loan and What Is It Used For?

Raw land is undeveloped land in its natural state; it's real estate that has no buildings, farm fields, or utilities. Raw land may not even have an access road.

Buying raw land presents the buyer with the possibility to do what they like, as long as it falls within zoning regulations. Raw land has also become popular as an investment. While buying raw land is an attractive option for some people, financing the purchase can sometimes be difficult.

Most Lenders Want Collateral

Since there are no structures or farm fields for the bank to hold as collateral, banks are often reluctant to finance raw land. If the buyer falls behind on their payments, the lender wants to be able to foreclose on a property they can quickly sell.

While raw land is attractive to some people, most people want to develop real estate. Most people do not want to deal with building a road, digging a well, installing a septic tank, and building a home from scratch. 

Also, that home will need an off-grid solar system and maybe even a rainwater harvesting system. Raw land is not something a bank can turn around and sell quickly.

Raw Land Loans

Fortunately, raw land loans are available. Raw land loans are generally obtained by developers who want to build an industrial park or a subdivision. Some companies, like Raw Land Lenders, realize that this is typically why someone wants one of these types of loans. However, it's also possible for individuals to get a raw land loan.

Typically, you’ll need to present a detailed plan of what you want to do with the land, such as build a home, factory, or start a ranch. The terms of the loan can vary depending on how you plan to use the raw land. 

Also, raw land loans typically have very short terms of just two to five years, often ending in a balloon payment. The closer the land is to being developed, the easier it will be to get a loan. 

Also, you may get better interest rates, better terms, and a lower down payment. There are lenders that specialize in raw land loans, and seller financing is also common.

Know Before You Buy

You may assume that buying raw land means that you can do whatever you want with it; that is sometimes true, but most of the time it's not. Before you buy raw land, check with the county for zoning and building codes. It may be zoned for a specific purpose, and there may be a time limit in which to begin building.

Raw land is often very affordable and gives you the chance to start fresh with a piece of property. It can also be a good investment as land prices continue to rise.

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