Posted by Ed Garcia on October 01, 2003 at 10:19:15:
Morning to you Rick also,
Although everyone who has never attended the Lenders workshop (How To Get Lenders Fighting To Give You Money) thinks that it?s about financing and obtaining a WLOC (Working Line Of Credit). The truth of the matter is, the Lenders Workshop is designed to take an investor to their own NEXT LEVEL, by learning how to Properly UTILIZE LENDERS, DEAL STRUCTURING, which is paramount, and knowing what technique to use when structuring a deal with the understanding of RISK/ REWARD.
When I say structuring a deal with the understanding of Risk/Reward, what I mean is many times an investor will do a deal using lenders or institutional financing, when the deal is not profitable enough to warrant Signing your name on a loan demonstrating the liability of the loan.
It?s kind of like poker, to be good, you?ve got to lean when to hold them and you?ve got to learn when to fold them.
To be more direct about your question. When doing a land deal, most lenders who do land will do it at 50% LTV, if the property is in a metropolitan area and 25% LTV, if it?s in a rural area. Most land deals are either purchased with cash or seller carry-back. You could also do a combination of the two by purchasing with the lender financing 50% and the seller carrying 50%. Land is financed by banks not mortgage companies.
To subdivide the property or building on it, assuming that you?re doing the deal with little or no money. You?ll need to do the deal where the seller will agree to subordinate to a bank for the cost of doing the subdivision or construction. Obviously the selling factor to the seller for doing so is that you?re increasing the value of the subject property.