3 Things You Should Know Before Getting a Land Development Loan

Have you been waiting for the right time to purchase land for your ideal office? You’ve come to the right place. The number of businesses operating in the U.S. land development industry is 13,373. Building from scratch is much more complicated than applying for a regular mortgage on a property.

Whether you’re buying land for acquisition, refinancing, development, or a joint venture, nearly all construction and development start with obtaining raw land. Here are different things you should consider and review before getting a land development loan.

Types of LD Loans

Usually, these loans are provided in either of two forms. A development loan is a straightforward agreement in which you must repay the amount with interest in regular installments. In contrast, a secured purchase loan provides a lender with extra security as you’re required to put up collateral but with a lower interest.

If the land you’re buying is already developed and only requires further infrastructure changes, you should consider an acquisition and development loan. This type of loan usually covers the land’s purchase and any enhancements before the development stage begins.

Survey the Land

When you’re considering a land development loan, make sure you have a professional study your property for any issues. Its condition and applicable regulations should allow construction to occur, so you should check for zoning and land-use restrictions.

You should also check if the land is serviced via the city sewer or a private septic system and whether there is a need to install a private well. Whether they’re recorded or not, find out whether there are any property liens.

Check for Accessibility

Inspect if the property has access to public roads and utilities to prevent it from becoming a problem after development. There shouldn’t be any easements that block the way or impact usability, even if your business doesn’t involve a lot of client interaction. Your employees and suppliers shouldn’t have a problem physically reaching you.

You should also protect your investment by doing a title search and, if you can, obtain title insurance for the property.

An important thing you should consider is that the debt term is longer when you’re working with raw land compared to an already developed site or one that requires improvements. This is because an undeveloped property goes through several different phases of planning and processing.

Ready to work with private commercial lenders in New York? Having a rich history of funding over $2 billion in transactions, GCP Fund offers acquisition and development financing, asset-based lending, bridge loans, mezzanine finance, and much more! Speak to a specialist today to get expert guidance and support through the entitlement process!

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