Financing Rural Land

Bill here,
One of the things that surprise folks is that financing vacant rural land is a lot different than financing a home in the city. You will often find that the normal folks who finance homes are not comfortable financing vacant ground. They often want to finance it using a balloon payment in 3 to 5 years. That's because they view vacant land as property that will soon have a home on it. So they finance it short term and assume that you will eventually build a home, because that's what they are really comfortable doing.

Another problem with lenders who primarily finanace homes is that they really struggle to properly appraise vacant land. They will often send out their appraiser who is an expert in appraising homes, but is out of their element when financing rural property. Some day I'll do a blog on some horror stories I've had with some wild appraisals.

But what if you don't intend to build a home on the land, but would like to have a mortgage for 20 or more years? Well don't despair there are some lenders out there that do know exactly what they are doing, and are very good at appraising the land. But be forewarned you will not find the exotic financing schemes that you see in home mortgages. You should be prepared to put at least 20% down when purchasing vacant land.

Another common scenario is when the seller finances the sale. This is often advantageous to the seller from a capital gains tax perspective and allows you to buy property with a lot more flexibility than is often found in using a mortgage company. We have several properties where the owner is open to doing the financing, so give us a call and we can talk about it.

If you are thinking about buying some rural land and will need to finance it give us a call or send us an email and we'll be glad to point you toward some lenders that work in the area where you want to buy and who are comfortable financing this type of property. We can be reached at 913-440-4125 or email us at info@ruralkc.com