Larger institutional players are now doing build to rent communities as well.The financial modeling for these projects would need to be built custom for the specific use as you will have various scenarios to model like  finished lot scattered infill, finished lot subdivision and raw land and or unimproved scattered lots.

Loans would be for raw land acquisitions and value add development.

Supply is outpacing the demand.Some folks will look at the raw numbers of STRs and say that is saturated even though good STRs are still booking well.A place that has a lot of draw will continue to have that draw so buying a place there isn't necessarily a bad idea.

Is it possible to purchase raw land directly from a town/city where they own the land?

You can purchase residential real estate, commercial real estate, and even raw or improved land in your IRA, and that's just naming a few.

I also have one piece of raw land (there used to a residential home on the property decades ago so there is at least water on the property) in the south bay in a low socio-economic area that is drawing a lot of interest from developers.I own the land free and clear through my LLC and I realize this is a vacant lot but development sites near public transit are hard to come by these days and properties in the area are selling for around $40/SF.

Not sure if you're talking about raw land or tear-downs but either way take a look at redfin and see the kind of prices that lots are going for.

One of my best performing assets was a ugly 2up 1down bilevel that is now a much nicer 3up 2 down. a ~12x12 raw laundry room in a suited house is a bedroom ~$3,000 later.

Did you buy raw land?

Both are generic ordinances that once stopped people from using raw shipping containers and random metal buildings for housing that caused blight in communities.