Hard money land loans are also referred to as private money land loans. They are a way a person can get funding to purchase vacant land. These loans are an alternative to traditional loan sources, which are often difficult to get for vacant land. Let’s learn more about these loans.
How Can Hard Money Land Loans Be Used
Hard money land loans are an ideal way to get funding from private lenders for vacant land. Traditional methods of lending are challenging to find because there is a higher risk of lending money for vacant land. Risks include possible foreclosures, the potential for low income, and developmental costs. In addition, there are factors about the land that may impact the potential for acquiring a loan. These factors include location, type of land, and the possible uses for the land.
Why Do the Risks Matter?
Private lenders are concerned about the risks when it comes to hard money land loans. Vacant land may be challenging to sell, which means it may not become profitable and suck up money. If the purpose of buying the land is to turn it around to sell it, that may be difficult. This is often the best way to make money off the land. However, the land must be developed before it can be sold. A hard money land lender is not in the business of acquiring land and does not want to get stuck with the land they cannot sell. When the property cannot sell quickly, other costs can begin to accrue, such as property taxes.
What Do I Need to Know About Hard Money Land Loans?
You most likely need a higher down payment when receiving a loan for vacant land. You will need about 50% of the purchase price in cash to purchase vacant land.
Before you consider hard money land loans, it is critical that you understand the risks involved and the purpose you have for the land you want to purchase. These types of loans are a great option if you are interested in purchasing vacant land. Some vacant land is easier to obtain a loan than others, which is why factors like location, type of land, and status make a difference. In 2019, there were over 8,000 estimated hard money loan lending organizations and companies. Get the help you need from a reputable company and secure your loan today.