So all foreclosure fees, attorney's fees, lender advances to protect the collateral, etc.

How can I use his current house (under land contract) as collateral for the loan?  

Commercial loans aren't always 25% down, get in the business now, learn cross collateralization techniques, blanket loans.There are other techniques to acquire ownership, like a TIC, look for tired landlords wanting to retire, distressed owners and properties.

The law doesn't care.Due diligence dictates that your lender checks out your borrower (i.e. their collateral) since they might get to know one another more than they want at some time in the future.

I would like to finance it through an LLC and provide the house as collateral.

Another questions, what has your experience been with applying for a revolving business line of credit and then using the real estate purchased as collateral on that line?  

Do you know much about the prospect of using personal savings or other investments as collateral in obtaining a loan?

Hi Tory,If you will be lending and securing the loan out of state, the law of the state where you are securing the loan would most likely apply, but I'm sure there are exceptions to this.I would think that you need to check for the laws in Massachusetts also.In California and in other states, but not all, you must be a licensed to secure loans with real estate, there are probably exceptions to this rule.If you secure loans with real estate in California with a licensed broker, the loan is exempt from usury laws, again, there are exceptions to this rule like lending less than 30k in senior position (or less than 20k in junior position) and there is something that attorneys talk about regarding charging an unconscionable rate but that would be getting way too detailed...Another important consideration is that if the proceeds of the loan are used for personal use or if the collateral will be owner occupied, then that triggers a bunch of other regulations, this is why most hard money lenders only lender for non owner occupy business purpose.

We simply collateralize the paid for home that we had.  

If you can self-fund the tentative map process, I would *imagine* (I don't know for sure) that you could find a bank-like financier for all the construction work in order to get the final.Unless you're quite experienced or have significant assets to pledge as collateral, I haven't heard of someone doing debt-only financing for a project like this.