Posted by Michael Morrongiello on March 30, 2008 at 11:21:57:
Land collateral in general from most “paper” investors standpoint is considered to be at the lower end of the collateral Totem pole as far as desirability is concerned.
Its produces NO income, requires taxes to be paid (as you very well know otherwise you can lose it)and its the least “liquid” form of Real Estate primarily because its very hard to readily obtain financing with traditional financing sources (hence it often HAS to be seller financed in order to even sell it)
That being said good, well seassoned, Lower Loan to value level secured Notes on land properties can be readily sold to generate cash liquidity.
There are also (3) Three types of land sub set categories most paper investors look at;
Buildable improved land lots (typically 5 acres or< in size, with utilities to the site or on the site)
This is most desirable…
Improved land parcels - may be commercially zoned, have frontage, and also have “some” improvements in the form of being platted, fenced, paved road accessible, and with utilities as noted above.
Raw Acreage - essentially just raw dirt, no improvements whatsoever. This is the least desirable of land collateral.
As to what % can be paid for a good well seasoned, low LTV land Note, it will depend on the type of land category above, the buyers original down payment commitment to the property, their credit profile, credit scores, and the naturally the actual repayment terms of the Seller financing which was provided.
Expect 20% +/- or more discounts as a general rule - however there as also ways to simply sell off a “part” or portion of a land Note as well to create liquidity.
Best to your success;
Author of the following home study courses;
Paper Into Cash - The Convertible Currency - How to Effectively Create Marketable Real Estate Notes
The Unity of Real Estate & “Paper” - Advanced techniques for both the acquisition and disposition of properties using Real Estate “paper”