Any advise for land development loans?

Question

Just bought a 72 acre property to develop in Newland NC. I did a Budget /Forecast and I need 2 million for infrastructure but most Banks in the area do not do these type of loans. I need to know what route should I take, I have reached to some private money lenders but most of them are located in other states. I need some guidance.

Jay Hinrichs · Answer

do you own the land free and clear ?

your development cost for what you describe at 30k a lot seem in line.   is this well and septic ?

these are very tough loans to get unless you have a pretty hefty balance sheet and or a lot of experience.

but if your exit is 130k a lot and you have 100k a lot of equity before soft costs. you should have no problem with what would amount to a 20 to 25% LTV first loan .

I have done these for folks as a lender/JV partner .. I did one in Orlando area and in an area hour north of Atlanta.  although both were built out as rent to own.

If your selling lots your going to have absorption issues most likely.  so you will have factor in a pretty long hold time and a lot of carrying costs.

Luis Perlish · Answer

@Nick Belsky My 72 acres has zoning approval and entitlements. I need around 1.6 M to do a bridge, knock down some trees and gravel roads to start pre selling. My first concept plan is for about 50 lots in the 72 acres, private river lots (toe River Newland, NC) and Mountains views. Just looking for infrastructure only, my Rev will come from the average 130,000 per lot + cabin construction referral.

Nick Belsky · Answer

@Luis Perlish

The acreage would be the problem for most of my lender or the low loan amount.  The ones I use who would do this type of development will be a minimum of $7MM. Other's will go lower on the loan amount but that acreage is going to be tough.  Are you looking just for infrastructure at this point or is the $2MM for vertical as well?  Are you subdividing it into lots? How about zoning approvals? Entitlements?

Cheers!

Barry Ruby · Answer

@Luis Perlish Hi Luis, what stage of the entitlement process is this site? Is it “shovel ready”?

In any case, I’m interested in taking a look at your package to see how your planned project looks and works.

Camile Case · Answer

You have a better chance of getting a land loan in a non-rural area - 100k+ population. Rural is tough when it comes to a lender's exit strategy.