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Getting financing for "Land Only" - where to start?

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  • Getting financing for "Land Only" - where to start?

    The 'other half' and I have a small farm (6+ acres) that is financed in his name. We've been here since 2007. We are fairly rural.

    Recently the additional pasture we lease has come up for sale and we are interested in purchasing it. I'm looking for input on financing.

    We've got enough cash to put 20% down. This land is right in front of our property and our drive way is actually an easement through this land. Naturally that is why we want to buy it. We were considering selling in 4-5 years and thought 'our' existing property layout would be more marketable with the addition of the property in the front (including the driveway, again even though it is an easement).

    This land isn't 'wild', it is open pasture, fenced with a shelter, and it is road front property. County water, electric is all 'right there', there is no septic or well on it.

    Right now our farm & house mortgage is in my SO's name, with a VA loan. We recently refinanced to a lower rate (yay for us).

    At this time he probably could not get a land only loan, his credit is great, but he is a full time student at this time and in the Army Guard, so his income is not high. I work full time and have the farm business. My credit is 'ok' (not bad, just not excellent) and the only thing I show as far as expenses is my $200 mo car payment.

    We are not married, and just have not gotten around to it.

    So we started talking about this land purchase and a lot of 'what ifs' came up.

    What if we purchased that and we (as in 'he') went from having 6 acres to 10 acres, does that change our agricultural status?

    Would it be better off for the long run (resale) if it was purchased in his name since his name is on the deed for the house/barn. I know the run in we had in the beginning when we purchased the initial house/barn was that getting a loan for that from one seller would not cover buying the front property that is owned by someone else.

    If I did buy the land up front (on my own) and we got married by the time we decided to sell, would it be difficult to get these two propertys deeded in a way that a buyer could easily purchase them together (and not have the issue we had)?

    Then I got to thinking, what if he took over the boarding business as income... (which is fine by me because we split the chores 50/50 and just apply the income to our mortgage).

    I'm sure a lot of my questions depend on where you are located (county, state, etc).

    I'm just getting thoughts out of my head.

    A friend suggested I start at the local farm credit and ask an extension agent about acreage/agriculture tax rates etc.

    Thanks.

  • #2
    Yes, give the local Farm Credit folks a call. A year ago we bought out farm. The 100yr old house on the property scared off the traditional banks so we had to get creative. Farm Credit has all kinds of different ways to finance land. In the end we wound up getting a loan from a community bank, that's another option they were pretty flexible with their terms. For the AG status question and the deed questions give your city/county zoning department a call. They deal with this stuff all the time and will be glad to help.

    Comment


    • #3
      Yes, Federal Land Bank or Farm Credit or even check with your USDA for low interest loans, right now 2.5%, if that purchase qualifies, which it may do, depending on your business.

      Comment


      • #4
        Farm Credit or AgCredit. If you can't find their numbers call your County Extension Agent or Farm Service Office.

        G.
        Mangalarga Marchador: Uma Raça, Uma Paixão

        Comment


        • #5
          Yes contact your local Farm Credit or Ag Credit office. Most traditional lenders will not even speak to you about a loan if you're talking about more than 5 acres... especially if there is no house involved.

          The deeds are a minor issue. You can always have the land re-deeded if needed when it comes time to sell. If you find that it's easiest for you both to apply for the loan to purchase the additional land (your income plus his credit) then you'll probably have both of your names on the deed.

          In my area, a boarding/sales operation on 10 acres should qualify for the agricultural exemption but that varies greatly from state to state and the interpretation varies even within counties here in my state.
          "Farming looks mighty easy when your plow is a pencil, and you're a thousand miles from the corn field." --Dwight D Eisenhower

          Boston Terrier Rescue of NC - www.btrnc.org - Adopt for Life!

          Comment

          • Original Poster

            #6
            So I had another thought, and maybe I should start another thread.

            What about a 'construction' loan and building something small? Anyone with experience with that? And I do mean small.

            We are 5 miles from a private University and we've boarded a few university student horses. On Craigslist I've seen ads for students looking for boarding for themselves and their horse to go to that school.

            I'm thinking small like 400 - 600 sq ft http://www.busyboo.com/wp-content/up...-haberae-2.jpg

            Like I said, our existing place has a 3 bedroom, 2 bathroom, 1 office room, 1750 sq ft home on it. 8 stall barn, arena, etc. At re-sale time would a small place like this be appealing to a buyer if they could either put a trainer or barn helper in it or rent it out to a university student?


            Hmmmm.

            Comment


            • #7
              Many of the issues you mentioned are very local.
              Perhaps this one is, too. DH and I had a home/acreage but purchased vacant land elsewhere. Lenders (at least in that area) would not finance vacant land. What we did was take a home equity loan and purchase the land "cash". Of course then we sold our house and paid off the home equity loan.
              Other people would find a builder who would purchase the land for them, contract to build what they wanted on it, then a lender would loan the money for them to buy the land/home back from the builder.
              I don't know if that's how it works everywhere.

              Comment


              • #8
                Construction loans have their own set of rules. You'll still run into the issue where conventional lenders will not loan money on more than 5ish acres of land. We're currently dealing with this and we've had to subdivide a building lot out of our 24 acres so that we can get a conventional construction loan. We could've gone through Farm Credit for the construction loan without subdividing but their interest rates are several points higher than what we can get through a conventional lender. Plus, I'm not sure if you can get a construction loan rolled into a land purchase loan.
                "Farming looks mighty easy when your plow is a pencil, and you're a thousand miles from the corn field." --Dwight D Eisenhower

                Boston Terrier Rescue of NC - www.btrnc.org - Adopt for Life!

                Comment


                • #9
                  Most conventional lenders will not finance land only. The best way to go is an ag based lender as above posters mentioned.
                  Come to the dark side, we have cookies

                  Comment


                  • #10
                    Depending on the area, some banks WILL finance land, but typically require 35 to 50% down. You can't finance it with a VA or FHA loan, but often banks will carry a land loan "in house."

                    Comment


                    • #11
                      In our area financing for raw land cannot be found, it must have a water source, not sure of your area, but I would pursue private financing unless some kind of Ag loans are available.
                      "We, too, will be remembered not for victories or defeats in battle or in politics, but for our contribution to the human spirit." JFK

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                      • #12
                        If you buy the land, you will then need to go to the town to get them to re-zone the entire property as one parcel. Even if BF buys it in his name, you won't be able to just "add" it to your existing property unless it's rezoned as one entire parcel.

                        Edit: You may have better luck with the financing if you get that zoning pre-approved, so you can tell the lender that you are just increasing the size of your existing property rather than buying a separate lot.
                        I realize that I'm generalizing here, but as is often the case when I generalize, I don't care. ~ Dave Barry

                        Comment

                        • Original Poster

                          #13
                          GUIN - Re-zoned? When the original owner sold all of this farm land (back in 2007) I don't think any of it had a change in zoning. Maybe I'm misunderstanding the use of the term (zoned as in agricultural, single family, industrial etc). When he put it up for sale he had it re-surveyed (and the property lines changed on the deed maps with the county) so he could sell off the pieces everyone wanted.

                          Currently what we originally purchased is shown on the county maps as two separate parcels (parcel A and B) but my other half purchased it with one loan (a total of 5.49 acres with the house on parcel A with 1.30 acre, and the barn on the balance of that labeled as parcel B).

                          Anyhow, the piece we are looking at buying is 3.96 acres, so we shouldn't run into the issue of a lender not wanting to finance over 5 or 10 acres.

                          I'm going to talk to a few lenders this week and hash out the idea of buying the land only or get a construction loan and which one of us would be trying to secure it.

                          A friend of ours buys rentals for income and she says she just bought another rental (as business income) and had to put 15% down and pays 5.75% interest, and that the income gets factored into the equation.

                          At least I have SOME inkling of what may be.

                          Comment


                          • #14
                            Do not be surprised if your construction loan plan has glitches because you do not plan to make the house your primary residence.

                            Comment


                            • #15
                              Originally posted by trubandloki View Post
                              Do not be surprised if your construction loan plan has glitches because you do not plan to make the house your primary residence.
                              Where did the OP say that it was not a primary house? What I understood was that they might sell it in 4 to 5 years.
                              "We, too, will be remembered not for victories or defeats in battle or in politics, but for our contribution to the human spirit." JFK

                              Comment


                              • #16
                                Originally posted by Calamber View Post
                                Where did the OP say that it was not a primary house? What I understood was that they might sell it in 4 to 5 years.
                                My understanding is the OP was considering building another small dwelling (guest house or trainers quarters?) on the new land, hence getting a construction loan. It's harder to get a construction for a private individual if the building being constructed is not the primary dwelling.

                                As for the zoning, the previous poster was referring to the fact that when you resell everything in 4-5 years you will be selling two separate properties. Unless you have the two properties combined into one parcel. Contact your local zoning department to see if that's possible and to get see about preapproval which could help with the purchase.

                                Another option is to see if the current owner will finance the sale of the property.

                                Comment


                                • #17
                                  Originally posted by Calamber View Post
                                  Where did the OP say that it was not a primary house? What I understood was that they might sell it in 4 to 5 years.
                                  This post here.

                                  Originally posted by Seeker_11 View Post
                                  So I had another thought, and maybe I should start another thread.

                                  What about a 'construction' loan and building something small? Anyone with experience with that? And I do mean small.

                                  We are 5 miles from a private University and we've boarded a few university student horses. On Craigslist I've seen ads for students looking for boarding for themselves and their horse to go to that school.

                                  I'm thinking small like 400 - 600 sq ft http://www.busyboo.com/wp-content/up...-haberae-2.jpg

                                  Like I said, our existing place has a 3 bedroom, 2 bathroom, 1 office room, 1750 sq ft home on it. 8 stall barn, arena, etc. At re-sale time would a small place like this be appealing to a buyer if they could either put a trainer or barn helper in it or rent it out to a university student?


                                  Hmmmm.

                                  Comment


                                  • #18
                                    We were able to get a land only loan. It was not a problem at all.

                                    Comment


                                    • #19
                                      I would do a very thorough check on the zoning and combining of parcels. Around here, anything under 40 acres loses its ag status if any changes are made. Those plots fall into estate status with more restrictions and of course, higher taxes.

                                      Spend some time at the zoning office and get everything sorted out first.

                                      Comment

                                      • Original Poster

                                        #20
                                        And no, I am not going 'owner financing'. This land belongs to my X-father-in-law. :-P

                                        Regarding the questions or statements about zoning changes. I stated the amount of acreage we have now (6+), and the land we are inquiring about is 3.69. So I'm not sure about zoning changes if we go to sell.

                                        Neither piece is 'zoned' as agricultural farm land... the kind that gets the land tax breaks. In order to do so you need X amount of acres, which we do not have. And even if we did, you have to be into farming activities for X amount of years to begin to get the land tax rate, and then if/when you sell you have to pay (most, some) of that back. So it isn't even worth it. Our taxes are not killing us, by any means. Trust me, when I leased about 12 acres from the X-in-laws it was farm land and because they had over 40 acres I leased it real cheap (the lease was the yearly taxes). When they began selling it off and it got down to this one piece left, the rent on that doubled because his tax rate went up. Even though it doubled it didn't kill me.


                                        Anyhow... I've talked to two separate friends of mine who both buy homes and repairs them, and uses them for rentals, so I got the low down on financing for that.

                                        We've opted to just go the 'land only' route. We're pursuing financing with the local farm credit agency.

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