Posted by Michael Morrongiello on November 15, 2001 at 13:32:07:
Daniel:
Land as collateral is at the lower end of the “totem pole” in terms of acceptable and desireable collateral for most lenders… Land also swings wildly in its value or perceived value when the economy is either moving up or down.
Because of this - here is the down side; Often to obtain land loans one must put up 20% -30% or more in cash of the purchase price of the land in order to induce a lender to even consider such a loan.
Here is the up side;
Also because financing is NOT readily available, many land sellers are FORCED (For lack of a better word)to either steeply discount the sales price of their land, so that they can get cash, or to also provide financing for all or a part of the sales price by carrying back “paper”…
These circumstances allow for quite a bit of creativity in structuring land deals where a willing and motivated land seller can sell to you, agree to take back some or all of the financing, and then either retain the “mortgage paper” for the income it produces, or consider selling off some or all of the “paper” so that he/she can meet their cash needs.
Over the years, we’ve worked in this fashion with numerous land sellers and buyers who were wanting to somehow put together a “Deal” where a 30% cash down payment was simply not feasible.
To your success,
Michael Morrongiello