Land loans

[92saturnsl2]

Anyone ever take out a loan for a simple parcel of land? My 5 year plan involves buying some property, 5-10+ acres a county over where land is cheaper. Basic use would be recreation, mainly camping, hunting & shooting. I'd have no immediate plans to develop the property, but road and nearby electric access would be nice. I've seen a few 5-10 acre wooded lots going for around $30-40K.

I'd be looking at a new loan, it makes zero sense to pull equity out of my current home given current interest rates.

Anyone have any idea the normal loan terms for this type of loan? I'd anticipate a higher down payment, perhaps 10-20% which isn't a problem. But I have no idea what to expect as it pertains to the other variables, especially length of loan options. I'm certain I'd get better advice if I just drove down to a bank or credit union to inquire, but this is very early on in the process and I figured someone here must experience with this.

 

[MolaKule]

I went through this recently after a house became available with 23 acres of tillable land. My bank refused the loan app but suggested a local agricultural lending institute. So I applied through the agricultural lending institute but didn't get it because someone came through with an offer before the loan became approved.

 

[RhondaHonda]

I’d suspect you will need more than 10-20% down on a land purchase and a higher interest rate as well. I’m curious what the bank says. Maybe the seller will finance it. The cost of getting utilities to the site should you ever build on it can surpass the price of the land so look for something that has utilities on it or very close.

 

[2009Caraman]

For $40k why not just get a couple unsecured lines of credit. If you can get P+1-2% then its not too bad.

 

[Chris142]

My house was originally a homestead. They basically gave out 5ac lots back in the 50's. Looks like you are late!

Seriously Make sure that power is available as well as water and sewer.

 

[Sumboodie]

Interest rates are high and it's usually a 10-15yr note.

 

[Sumboodie]

I went through this recently after a house became available with 23 acres of tillable land. My bank refused the loan app but suggested a local agricultural lending institute. So I applied through the agricultural lending institute but didn't get it because someone came through with an offer before the loan became approved.

My brother was shot down for a house on 500 acres.
Ended up having to sub divide the property to 100 acres with the house lot.

 

[burbguy82]

Land loans are hard to get without a substantial amount of money down.

 

[92saturnsl2]

For $40k why not just get a couple unsecured lines of credit. If you can get P+1-2% then its not too bad.

Explain P+1-2%.

Unsecured lines of credit come with hefty interest rates even with great credit scores. Not sure that's a viable option as I intend to extend the loan term as far as possible-- this is an area where I can't possibly see anyone losing money on anything but the most undesirable land, it's only going up. Given it's for my family's recreation, it's a want, not a need. An investment of sorts, even if I don't do anything with it. The math has to work out.

It's motivating me to contact my credit union to see if the idea is feasible.

 

[eljefino]

When I bought my "camp," a little shack that only vaguely follows any sort of building codes, and wouldn't make good collateral, I wound up getting a personal loan for about 25% of the purchase price. Paid it down quite quickly. Was 15.8% or so. I have stunning credit, just didn't want to go through the hassle of a HELOC on my main property, with all the stupid appraisals and closing fees.

It's my WAG presumption that land loans want about half down. Feel free to correct me.

 

[2009Caraman]

Explain P+1-2%.

Unsecured lines of credit come with hefty interest rates even with great credit scores. Not sure that's a viable option as I intend to extend the loan term as far as possible-- this is an area where I can't possibly see anyone losing money on anything but the most undesirable land, it's only going up. Given it's for my family's recreation, it's a want, not a need. An investment of sorts, even if I don't do anything with it. The math has to work out.

It's motivating me to contact my credit union to see if the idea is feasible.

Well I have 2 unsecured loc for Prime +1%. Ive had them for a while and am not sure if banks are going that low these days.

 

[92saturnsl2]

When I bought my "camp," a little shack that only vaguely follows any sort of building codes, and wouldn't make good collateral, I wound up getting a personal loan for about 25% of the purchase price. Paid it down quite quickly. Was 15.8% or so. I have stunning credit, just didn't want to go through the hassle of a HELOC on my main property, with all the stupid appraisals and closing fees.

It's my WAG presumption that land loans want about half down. Feel free to correct me.

This is very helpful info. I don't know where you are in ME (rural area or not), but I imagine the dynamics are similar where I am. The "taking money" out of my house isn't an option for those reasons you mentioned-- fees, current interest rates, it just wouldn't make financial sense.

When you say personal loan for 25% of purchase price, was the other 75% cash or financed? If I draw this plan out 5 years, putting 50% down should be feasible. There's no telling though; the longer I wait, the more expensive the land gets around here within a reasonable driving distance.

 

[RhondaHonda]

$30k for 5 years at 7.5% is $600 a month before taxes. Is that something you’d be willing to pay to speculate on some vacant land or have a place to camp? 5 acres isn’t much for recreating so buy the biggest piece you can afford.

I’d imagine if utilities are on the site you’d be closer to $100k in many areas.

 

[nwjones18]

My folks bought some land a few years ago. Loan was through Ag Georgia. Believe it was 20% down 25 years rate was only slightly higher than local mortgages. The way that bank works your loan makes you a member and they do profit sharing. They get pretty much 1% of their interest back each year through the profit sharing.

https://www.aggeorgia.com/

 

[Owen Lucas]

A little off topic but I watched a few YT videos from a guy and his son who bought old / abandoned rail sidings.

They rehabbed the track and brought everything up to code and now rent out the rails for storage to the rail companies.

 

[SwampSurvivor]

We were going to do this on the neighboring property. They wanted 35% down.

 

[92saturnsl2]

$30k for 5 years at 7.5% is $600 a month before taxes. Is that something you’d be willing to pay to speculate on some vacant land or have a place to camp? 5 acres isn’t much for recreating so buy the biggest piece you can afford.

I’d imagine if utilities are on the site you’d be closer to $100k in many areas.

I'm not speculating, the appreciation is a given in this area and I'm not doing it to make money. If a 5 year car-type loan is the only thing on the table, it's a hard pass; in that case I'll wait a few more years and pay cash.

We were going to do this on the neighboring property. They wanted 35% down.

What was the loan length they offered? That's what I'm most curious about.

 

[SwampSurvivor]

I'm not speculating, the appreciation is a given in this area and I'm not doing it to make money. If a 5 year car-type loan is the only thing on the table, it's a hard pass; in that case I'll wait a few more years and pay cash.


What was the loan length they offered? That's what I'm most curious about.

For ours it was 15 years. We weren't given the option of more or less.

It was a ... situation ... and it made the most sense to "secure" the money with a loan then if the deal went through, we were going to pay it off.

Turns out the seller never intended to sell with us and was jerking us around to get more out of someone else.

 

[burbguy82]

Turns out the seller never intended to sell with us and was jerking us around to get more out of someone else.

That is supposed to be against the rules when dealing with realtors. One of the few advantages of working with one.

 

[daves87rs]

A little off topic but I watched a few YT videos from a guy and his son who bought old / abandoned rail sidings.

They rehabbed the track and brought everything up to code and now rent out the rails for storage to the rail companies.

Like that idea…..