Large tracts of land are financed. The rate is 50% of the appraised value or purchase price, whichever is lower. After the initial investment, a lender will consider any financing up to 60% of the property value or higher.

The commercial and residential lots get services next. Then loan-to-value can go up to 80% of the appraised value.

A Detailed Project Plan

Generally, the requirements for land and development loans need to include a detailed project plan that provides budgets and timelines. An appraisal and environmental assessment are done.

Proof that the land has been rezoned for the intended use is essential. Permits for development and construction are also necessary.

The Financials

Financials and creditworthiness are important. There are a few choices between options like equity versus debt financing. For example,  it’s essential to remember that most projects need a level of equity through a strong relationship with a lender. The feasibility of any development project comes into play here.

Several metrics come into play here, such as historical vacancy rates and lease rates for certain types of development projects.

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