Commercial Raw Land Loans

Hard money loans for raw land are a little different than obtaining hard money for improved real estate. Raw land can be collateralized at a rate of about 50% LTV (loan to value). Improved commercial properties command 65% or even 70% LTV loans in some instances. When determining "value" in "loan to value", for either type of property – improved or raw land, the following rules apply:

Purchase of a property: ‘value’ = the purchase price of the property

Refinance of a property: ‘value’ = the purchase price of the property until the property has been owned for at least one year or significant capital improvements have been added to the property

Refinance after 1 year: ‘value’ = value per a written real estate (not business) appraisal of the property

Hard money loans for raw land are commercial loans. Rates and points range from 10% to more than double that figure, depending on the lender and the property assets. The most advantageous raw land is an urban or suburban lot with clear building or usage prospects. Proceeds from raw land loans can be used to develop the land or any other business purpose, including the purchase of additional land.

If you are purchasing raw land and require a hard money loan to do so, expect to be able to collateralize a subject property with reasonable prospects at 50% LTV. If you require more cash to make the purchase, consider collateralizing additional raw land or improved real estate properties to make up the shortfall. Hard money lenders will want you to have at least 20% equity in the project in order to fund your loan. Collateralizing additional real estate can often satisfy this requirement.