Hard Money Loans On Raw Loan?

All experienced mortgage brokers know that the second hardest loans to place are loans secured by raw land. ( Church loans are the hardest!). Few lenders want to lend on a property with no cash flow; fear having to liquidate a property with a long term sales frame; and have no desire to go through a long foreclosure process if the borrower defaults.

In response, we have developed a program providing liquidity for the land holder. We determine the amount we would be comfortable lending (typically less than 40% of value), and purchase the property at this price. We provide the borrower with an option to buy the property back within 12-24 months, at prices increasing by an amount equal to our desired rate of return (interest), commensurate with our perceived risk.

The borrower also pays an origination fee (points), which covers the brokers commission as well as our fees.

If the borrower truly has a viable exit strategy, this setup should be no problem for him. If he has no way to repay the loan and is just trying to get cash, then he won’t go for it and we have avoided a foreclosure situation. In any case, the borrower isn’t burdened with monthly interest payments on a property with no cash flow. We have completed two of these this year.