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Message
Land Financing Question/Help
Posted on 6/13/14 at 10:00 am
Posted on 6/13/14 at 10:00 am
Here is the scenerio:
My wife and I have 50 plus acres in a trust on Cheniere Lake and we are developing areas of it into a trailer park (lake front). We have 5 trailers in place fully paid for. We have purchased for cash a double wide repo that is on the 1.6 lakefront acres adjoining our property and we have an agreement to buy the 1.6 acres and the other double wide that is on the propety.
The purchse price is $65,000 for the land and the remaining double wide. Obviously the land is collateral and will appraise at or above the $65,000. We have also offered and the bank previoiusly accepted my mobile kitchen (bank used $70,000 value and my truck (bank used $8000 value) for collateral to seal the deal. That is $78,000 plus the value of the land.
The bank has now come back and asked for 25% down and not to use the mobile kitchen as collateral. We want to use the $16,500 for remodeling and cleanup.
Do any of you have any financing suggestions where the collateral might can be used versus the down payment? I read last night about biggerpockets.com. Does that website have investors looking for financing options?
TIA
My wife and I have 50 plus acres in a trust on Cheniere Lake and we are developing areas of it into a trailer park (lake front). We have 5 trailers in place fully paid for. We have purchased for cash a double wide repo that is on the 1.6 lakefront acres adjoining our property and we have an agreement to buy the 1.6 acres and the other double wide that is on the propety.
The purchse price is $65,000 for the land and the remaining double wide. Obviously the land is collateral and will appraise at or above the $65,000. We have also offered and the bank previoiusly accepted my mobile kitchen (bank used $70,000 value and my truck (bank used $8000 value) for collateral to seal the deal. That is $78,000 plus the value of the land.
The bank has now come back and asked for 25% down and not to use the mobile kitchen as collateral. We want to use the $16,500 for remodeling and cleanup.
Do any of you have any financing suggestions where the collateral might can be used versus the down payment? I read last night about biggerpockets.com. Does that website have investors looking for financing options?
TIA
5
Posted on 6/13/14 at 10:23 am to Ambassador
Is this your first time you are borrowing money for this deal?
If so, I'd shop it around to some smaller banks. They might be more willing to participate.
Are you trying to get 100 percent financing? I don't see that working anywhere.
If so, I'd shop it around to some smaller banks. They might be more willing to participate.
Are you trying to get 100 percent financing? I don't see that working anywhere.
Posted on 6/13/14 at 10:35 am to LSUFanHouston
Yes, it is our first time financing any part of this. I was hoping for 100% due to the amount of collateral we were offering. If we have to put that money down it will just delay us getting the properties ready to rent. We will go that way if we have to but we are looking for other options.
Posted on 6/13/14 at 2:41 pm to Ambassador
probably going to be hard to get a bank to finance land with out cash of at least 20% down. most banks i've dealt with are still trying to get repossessed land off the books at a loss.
Posted on 6/13/14 at 3:31 pm to Ambassador
The collateral is good for helping get approved for the loan and potentially getting a better rate. However, any bank is going to want to see some sort of equity in the deal.
The trailers that you have on the land you already own... have you started leasing these out?
Are you talking to a mortgage officer, or a small business loan officer?
If "the deal" is considered only the purchase of new property/trailer, then it's going to be darn near impossible to finance anything more than 80 percent of it, especially if you don't have a track record.
However, if you re-work the script, to where you are applying for a small business loan, you may be able to get some more flexibility. Because your business already includes all the land and trailers you already own free and clear, so you have a significant amount of equity in "the business" even though you have no equity in the new land purchase.
The trailers that you have on the land you already own... have you started leasing these out?
Are you talking to a mortgage officer, or a small business loan officer?
If "the deal" is considered only the purchase of new property/trailer, then it's going to be darn near impossible to finance anything more than 80 percent of it, especially if you don't have a track record.
However, if you re-work the script, to where you are applying for a small business loan, you may be able to get some more flexibility. Because your business already includes all the land and trailers you already own free and clear, so you have a significant amount of equity in "the business" even though you have no equity in the new land purchase.
Posted on 6/13/14 at 4:17 pm to Ambassador
quote:
My wife and I have 50 plus acres in a trust
Tell us more about that trust - thanks.
Posted on 6/13/14 at 7:07 pm to Ambassador
Your going to be hard pressed to get any bank to use a mobile depreciating asset as collateral.
Posted on 6/13/14 at 8:03 pm to Ambassador
Is this located in Monroe?
Posted on 6/13/14 at 8:48 pm to LSUFanHouston
quote:
The trailers that you have on the land you already own... have you started leasing these out?
Yes, all five are leased. Two of the trailers have tenants that have been in them for over two years, two are right at the end of their years lease with no intentions of moving out, and the third is a month old.
quote:
Are you talking to a mortgage officer, or a small business loan officer?
The bank I have been dealing with has been working it as a small business. I spoke with another small bank today and they feel good about the loan and would only ask for 15%. He is working it as a small business loan.
Posted on 6/13/14 at 8:51 pm to nelatf
quote:
Tell us more about that trust - thanks.
This is family land. My father-in-law wanted his children to be able to be able to develop the land but did not want them to be able to sell it or to mortgage it. He placed it all in a trust, divided it within the trust, and allowed us to start developing the land.
Posted on 6/13/14 at 8:52 pm to thibtigerfan
quote:
Is this located in Monroe?
It is in West Monroe.
Posted on 6/13/14 at 9:45 pm to Ambassador
This is a pretty risky loan, you need to find someone with some serious flexibility on programs and terms
Posted on 6/13/14 at 10:29 pm to Ambassador
quote:
I spoke with another small bank today and they feel good about the loan and would only ask for 15%.
I'd shop it around, but that may be the best you will get. As others have said, this is a risky loan.
Posted on 6/13/14 at 10:46 pm to Ambassador
quote:
This is family land. My father-in-law wanted his children to be able to be able to develop the land but did not want them to be able to sell it or to mortgage it. He placed it all in a trust, divided it within the trust, and allowed us to start developing the land.
pretty shitty thing to do IMHO.
Posted on 6/14/14 at 6:55 am to diat150
It does limit what can be done. He would like for all of us to build own homes out there but now everyone would have to pay cash for their home. Don't know if he realizes that yet.
This doesn't effect us that way cause we don't want to build there. If we purchase this other land then we can use it as collateral to expand with each new trailer one at a time. We want to avoid big debt. Eventually we could have 60 lakefront rental units.
This doesn't effect us that way cause we don't want to build there. If we purchase this other land then we can use it as collateral to expand with each new trailer one at a time. We want to avoid big debt. Eventually we could have 60 lakefront rental units.
Posted on 6/14/14 at 8:04 am to diat150
quote:
pretty shitty thing to do IMHO.
This
Kudos to you for trying to do something with the constrained situation he's handed you. Being cash-poor is tough sledding in a venture. I know a Wharton School of Business grad who says everything he learned in his graduate program there could be distilled into one term: "cash flow".
Good luck.
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