How To Get Loans To Purchase Land
So you want to find out how to get financing for land deals. You’ll need to know the requirements to get the loan and purchase the property of your dreams. I will walk you through exactly how I finance properties so you can do the same. But before we get into that strategy be sure to check out my new video series, How To Buy Land Really Really Cheap. It has twenty-plus videos breaking down exactly how we purchase properties ridiculously cheap, and it’s only $149! It’s an amazing value for anyone looking to get ahead in the land game.
Find And Pitch Private Or Hard Money Lenders
Now let’s get into it; how can you finance land? What are the requirements, and how do you get started? There are three ways I use to finance land. The reality is banks don’t like lending on land, and I’ve never used a bank to purchase a property, so I can’t give you any feedback on that. But I can share with you several easier ways to get land financing to buy the property of your dreams.
The first strategy is using private money lenders. These investors will loan you money based on your personality—I hope you have a phenomenal personality. I get tons of money based on mine. They also may lend based on the asset. I love using private lenders to purchase properties. In my circle or marketplace, a lot of people know me. They know I’m a credible and trustworthy individual. They know if they loan me money, they get their money back plus interest. So if you’re looking for private investors and are new to the game, think about people you know. Don’t go bugging your sister, brother, mom, or dad, but look for real people with money ready to rock. Find a couple of legitimate investors and pitch them the idea of purchasing property, with them putting up the money while you do the legwork. Most importantly, tell them how you’ll pay them an interest payment each and every month along with principals so they will make money on the deal. They need to know you could pay it off. Then when you get the deed, you will both make money. Or, if the investor you work with holds the first lien position on the property, they remove the lien when you pay them off.
So start on your phone and look for people that have money. Maybe they own small businesses or big businesses. Perhaps they’re retired, and they have a gang of money in the bank. Go to them and say I just found this sweet property that I could pick up for $25,000. Now I could flip this thing for $50,000, but just in case I can’t, would you be interested in putting up the money for me? We’ll purchase it for $25,000, and in exchange for investing up front, I will pay you $945 a month for 36 months. So you’ll get paid in full even if I don’t flip it. And if I flip it early, you’ll get all your cash back plus a couple of points. Points meaning you could sweeten the deal however you want. Typically, if I take the property, I’ll flip it and pay off my investor early. They get a couple of interest payments on the front end, and then I’ll throw them a little extra, or I’ll just let it run full term, so they get the interest we agreed on. So they turn that $25,000 into like $36,000. They get an insane return and line up to loan me more when I’m ready for the next deal.
Now let’s pivot to hard money lenders. Hard money lenders don’t care about you at all. They want to know what the deal looks like, and if it looks good, they will fund you. So if you truly have a property worth $50,000 that you could pick up for $25,000, a hard money lender will loan you the money. They’ll put up all the money and charge you an interest-only payment in most cases plus two to five points. A point is one percent of the borrowed amount. So if it’s two points, two percent of the $25,000, they’re going to roll that into the deal. In most cases, they’ll charge you like fifteen percent interest monthly on that money. The interest goes on forever until they get cashed out in full. When you flip the property, they get cashed out. You get your profit, the new buyer gets the property, and everybody wins.
So private lenders and hard money lenders are some of my favorite ways to finance properties.
Use Credit Cards And Seller Financing
But there are two other strategies that are even easier than pitching people. The next one is credit cards. When you deal with investors, many of them will accept credit cards as payment for the property. However, this is more of low dollar type stuff like $5,000 and lower. You could throw that on your credit card. Maybe you find a phenomenal deal in Florida, a quarter-acre lot for $2,500, and you know it’s worth $7,500, and a wholesaler is just cleaning it off their list. You can put that on your credit card and make payments to your creditor, whoever that is, Capital One, Citibank, whatever. You’re going to make those payments and take down the property. Then you can exit this deal in two different ways. One way is to sell or finance the deal. So if your payment is $50 a month to the credit card company, you could flip it or finance it for $100 a month. You take that $100 payment, and you’re going to take $50 to make the credit card payment every month on the loan you took out. Then you get to pocket $50 a month in profit. This is a fantastic way to leverage other people’s money to get a deal and create passive income. You could also flip it, pay off the credit card, and use your profit to buy another deal and keep the whole thing going.
Then finally, the last strategy is seller financing. Now seller financing is incredibly common in the land investment game and commercial real estate if you are interested in looking at that world. But seller financing; let’s go back to that scenario where we found a property worth $50,000. Let’s say the owner only wants $25,000, and they’re super motivated to never pay a tax bill again. So they’re willing to sell or finance the deal just to eliminate the headache. So this $25,000 deal you can negotiate saying look, I’ll give you $500 a month for the property’s principal payment until we’re paid in full. Then you’re going to deed it over to me and I’ll sign a promissory note saying I’m going to pay you each and every month until we’re squared up. Now, if the motivation is there, they will absolutely agree to this structure. So write up the contract and be an ethical individual and send your payments each and every month to pay off that nice seller. Your reputation as an investor is on the line, it’s crucial you hold up your end of the deal. Then go ahead and flip this deal for a fat profit and jump-start your land investment business. Seller financing deals happen when you target really motivated property owners or sellers; the best way is through direct mail marketing. I have countless videos on how to do direct mail on my channel so check those out if you need some more direction.
Wrapping Up
So that’s the best way to finance your deals without stepping into a bank and getting that cold heart of rejection. Leverage hard money, leverage private money, use credit cards, and try out seller financing. All these ways work. I know because I’ve used every single one of these strategies. So try them out and let me know how it goes!
Check out my YouTube channel if you’re interested in more land investing tips. Also, if you have any questions about the land investing business and need some coaching, shoot me an email at michaelalder34@gmail.com or check out landflippingmichael.com. Then, we can see if we are a right fit for each other and lock you in for a coaching call.
