Private Lending Resources

5 Essential Tips for Securing a Land Loan

July 8, 2024

Are you about to embark on a construction project and need funding?

A land loan might be exactly what you’re looking for.

Real estate investment opportunities don’t come up every day, and this type of loan is especially helpful for time-sensitive projects.

What is a land bridge loan?

A land bridge loan, or land loan, is a loan to finance the beginning stages of a project until more permanent financing is secured. It’s a short-term loan targeted toward buying or refinancing a property, generally with the goal of refinancing into a construction loan.

architecture group looking at plans on table

Land loans are incredibly useful to developers because their target is to empower the developer to secure land and secure a project that perhaps might otherwise get tied up because of funding issues with more traditional lenders. Bridge loan lenders work directly with developers to restructure existing debt and make sure their real estate investment project gets completed.

Private money lenders for real estate, such as RoseRock, a direct private lender in Dallas, Texas, offer alternative financing options that aren’t available from traditional lenders. These creative short-term loans for real estate developers provide opportunities such as short-term loans for real estate projects with no loan-to-cost maximum.

When applying for a land loan, you’ll need to start by finding a trusted direct lender. It’s important you find someone that you know you can work well with for the duration of the project.

You want to be sure of their integrity and experience. It’s also important your private lender is someone you have good, open communication with. Working with a private money lender for commercial real estate projects vs. traditional bank financing helps ensure you’ll have a more timely loan and have the funds for your project available when you need them.

Two workers on construction site

A few more reasons a land bridge loan might be helpful to you:

  • You have a project planned and ready to get off the ground but are experiencing a lack of funds to begin the work.
  • If you’re competing against a rival builder for a parcel of land, a land loan can be used to get funding to buy the property before the competition.
  • You want to purchase land before completing the entitlement process.
  • The land’s current value has significantly increased since the purchase date, so you want to refinance and use some of that equity for current project expenses.
Stack of folders with papers

Direct private lenders such as RoseRock offer specific protections for their borrowers, such as:

  • Verifying value through a licensed, third-party appraiser.
  • Closing their loans through a licensed title company.
  • Requiring surveys for collateral property.
  • Provide a loan proposal or term sheet detailing fees and terms before processing starts.
construction equipment on job site

Direct lenders such as RoseRock typically offer land loans based on the land’s as-is value with terms up to twelve months and a 10-15% interest rate. You’ll also need to factor in the closing costs, which varies depending on the lender and title company for each individual transaction.

Before you approach your direct lender for a land loan, you’ll want to make sure you have all of your paperwork in order, a solid proposed timeline for the project, and liquidity needed for closing costs, monthly interest-only payments and other project-related expenses. You’ll be a more desirable candidate for a land bridge loan if you can prove that your project is a solid investment with a feasible repayment plan and timeline. Make sure you have a firm business plan, an exit strategy, and documented proof your project is viable.

Embarking on a real estate construction project can be a daunting endeavor, especially when it comes to obtaining the necessary funding to complete the project.

A land bridge loan can be an excellent option for capital, depending on your project. Contact your local, trusted private lender today to get started.

© RoseRock