Land Development Loans: How to Finance Commercial Properties

Land development loans for commercial properties are available financing sources for both institutional developers and individuals. Obtaining this type of financing to cover the purchase price of the land and even construction will involve a multistep process.

Step 1 - Property Preparation

Before seeking out land development loans, it can be helpful to prepare the initial plans for the property. To facilitate lending, it is useful to make sure these things are explored:

  • the property's ability to be developed, including zoning and access to utilities
  • the property's appraised value
  •  initial building concept so lender can see what the investment will fund

Step 2 - Application Process

The application process for land development loans is largely similar to other types of real estate financing deals. During this phase of the process, borrowers can expect to have to do such things as:

  • submit to a credit check
  • produce proof of a down payment
  • secure an appraisal on the land if it hasn't already been completed
  • possibly produce a market research study to show the need or demand for the
  • commercial property in question

Obtaining land development loans for commercial properties can be a long process. It can, however, pay off with the financing needed to cover real estate and development costs.

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