How to Make Money on Raw Land (Final)
In this final article, I will share the IMPROVEMENTS that a land developer can make to a piece of raw land and make money from it.
Also, I will discuss a little bit about how to get development loans.
There are basically TWO types of improvements that you, the developer, can make to a piece of raw land: hard and soft improvements, aka "tangible" and "intangible.
" Hard improvements, as the name suggests, involve bringing utilities to the site, as well as grading and paving, building and any other permanent changes to the property.
Soft improvements are zoning changes, planning approvals and financing-even architectural drawings.
Don't go trying to develop a parcel in the middle of nowhere or build an industrial park in the middle of a residential neighborhood.
But in the right, desirable area, most improved properties will be relatively easy to sell at a good profit.
Warning: With no track record, you are most unlikely to get a bank loan on raw land that you plan to bank.
You'll have to rely on loans against other income properties, personal assets or, as a last resort, unsecured loans such as credit cards.
For instance, Marc Asselin - a land trader in Florida, and his partners buy lots in the $20,000-$30,000 range and then resell them in the hot local market.
They got started in business by pooling money they'd raised from home-equity lines of credit on their personal residences, although now he says they have enough money in the bank that they hardly need to use the credit lines.
You can get development loans, however.
But you will be expected to have a substantial interest in the land, which you may then be required to put up for collateral.
Also expect the lender who is funding your development project to require that any outstanding loan on the land be paid off or made "subordinate" so that the maker of the loan on the raw land is in secondary position.
Generally, commercial real estate is usually a far better business than residential because it is more predictable.
Outside so-called trophy properties (think of the story of the Empire State Building), expect the commercial market to be far less speculative as more professionals are involved and values are more tightly tied to income production.
Still, even experienced property magnates can get carried away.
That's why you might want to stop and reflect for a moment before you make the leap into real-estate investing.
Also, I will discuss a little bit about how to get development loans.
There are basically TWO types of improvements that you, the developer, can make to a piece of raw land: hard and soft improvements, aka "tangible" and "intangible.
" Hard improvements, as the name suggests, involve bringing utilities to the site, as well as grading and paving, building and any other permanent changes to the property.
Soft improvements are zoning changes, planning approvals and financing-even architectural drawings.
Don't go trying to develop a parcel in the middle of nowhere or build an industrial park in the middle of a residential neighborhood.
But in the right, desirable area, most improved properties will be relatively easy to sell at a good profit.
Warning: With no track record, you are most unlikely to get a bank loan on raw land that you plan to bank.
You'll have to rely on loans against other income properties, personal assets or, as a last resort, unsecured loans such as credit cards.
For instance, Marc Asselin - a land trader in Florida, and his partners buy lots in the $20,000-$30,000 range and then resell them in the hot local market.
They got started in business by pooling money they'd raised from home-equity lines of credit on their personal residences, although now he says they have enough money in the bank that they hardly need to use the credit lines.
You can get development loans, however.
But you will be expected to have a substantial interest in the land, which you may then be required to put up for collateral.
Also expect the lender who is funding your development project to require that any outstanding loan on the land be paid off or made "subordinate" so that the maker of the loan on the raw land is in secondary position.
Generally, commercial real estate is usually a far better business than residential because it is more predictable.
Outside so-called trophy properties (think of the story of the Empire State Building), expect the commercial market to be far less speculative as more professionals are involved and values are more tightly tied to income production.
Still, even experienced property magnates can get carried away.
That's why you might want to stop and reflect for a moment before you make the leap into real-estate investing.