I remember the first piece of vacant land that I bought. It was 30 years ago and the price was $21,000 (a lot in those days) and we asked the seller to finance it for us with a Deed of Trust. Back then, interest rates were hovering around 15% and I think we got a “killer deal” at 12%….
I’ll never forget the feeling I got when all the papers were signed and I realized I owned a piece of property that I could go to for a picnic, work party or whatever I wanted to do. It’s an amazing feeling to own trees, dirt and wildflowers and maybe even a view. I’ve always seen buying land for myself as a forced savings account and I’ve bought a number of properties since then, and when the financial crisis of 2008 hit, I was sure glad I had them. I don’t know how I would’ve made it without having properties to sell.
So how do you finance vacant land? Right now, many sellers are offering financing with 20-25% down payment and interest rates around 6%. This could be a possible scenario for your purchase:
PURCHASE PRICE: $185,000
DOWN PAYMENT: $37,000
MONTHLY PAYMENT: $840.33 (principal balance amortized for 30 years at 5.5%)
Another option is conventional financing. A few local lenders will loan on vacant land. In most cases, you are going to be looking at an adjustable rate mortgage with a 20 year term. This can be a good option if you are wanting smaller monthly payments. If the property has utilities, you will need a 25% down payment or 50% down payment for a parcel without utilities. If a seller is insisting on an “all cash” offer, this could be a way you could still buy it. If your goal is to build a home on the property, an option is to buy the property with short term seller financing, get your building permit and then get a construction loan to pay off the property and do your build. Your construction loan can often include the costs for putting in utilities if you have proof of water and a septic design at time of application. There are many ways to make your dream a reality!
If you would love to own a piece of property, give me a call and let me help you brainstorm the best way for you to do it….you’ll be glad you did!