financing recreational/hunting land

[mrjigger]

I am looking into purchasing some hunting land. I have found a few places that will finance bare land, but none of them have really stood out from the rest.

I am beginning to think there really are not very many options.

Considering the price of land these days, I am not really looking to spend a bunch of money, maybe $50,000 top end.

I am also considering selling a portion of the timber on the property I buy. Could this play a part in the financing?

I am looking for long term financing.

For those of you who have financed hunting land, how did you go about securing financing, where?, term? etc.

what about setting up a LLC or some other sort of business.

Are there any tax type advantages to doing it this way?

any tips??

thanks

[blue_healer_guy]

home equity?

[sparcebag]

I personally at this time would NOT consider buying till we see how the finance situation turns out in the country.

Prices could plummit any time now,They sure cant go up,I believe there maxed out in our bubble created by wallstreet,large finance inst.The bubble is bursting now and no one really knows what will happen!

That money may save your butt,unless you plan on raisin all your meat & groceries on that land.

[BoxMN]

I don't know, I think the bubble has already burst, and the rates are low - not 4% low, but historically low still for sure. Maybe prices will still go lower some, but you can low ball places right now and get them.

To answer the land loan question, here is what I did when I bought the land my cabin now sits on... I first called the places around home (not in the area when the purchase was made) and nobody wanted to play becasue they didn't know the value. I then called the local banks in the area, and they were all helpful and gave quotes on rates, etc.

I ended up going with a local bank and getting a "land loan". It was set up with 30 year fixed rate payment schedule, but it did have 3 year limits. So essentially every three years it came due, which scared me at first. But I made every payment on time, and if you do that no bank in its right mind would drop you. The rate was a bit higher on land only, as that is the type loan most likely to go into default, I think it was a bout .75% higher than normal 30 year fixed at the time.

Not sure what other options there are now, but go to the Sponsor forum and there is a great mortgage guy who can answer all these questions for you, and unlike me he knows his stuff

Good luck on your search and purchase! Just make sure you can afford it, and then go get it! I am so glad I did get my cabin about 7 years ago! And at the time I was laughing at myself for spending so much money on a hunk of land. Now best thign I ever did.

[mrjigger]

I agree whole heartedly with you spacebarg. Thanks for the concern. At this time I have really just been looking.

I am not one to jump into anything.

thanks again.

[wood_dog]

We found a mortgage on our seasonal cabin with a local bank. Those places know the local market. They are holding the mortgage, not selling in the secondary market. I called them last year inquiring about some other options. They want to keep me as a customer and are willing to look at options that better fit my current needs. I've been really happy. I did need to call around, but I'd be willing to bet you'll find somebody that wants your business at a fair price.

[PerchJerker]

I agree with the others, local bank. That's what I did even though I have some banking and mortgage connections here in the metro, it was just much much much easier with a local bank. Same for insurance, I found a much better deal with a local agent than with the agent that has all our other policies.

It's highly unlikely that selling timber would play a part in the financing, especially if you're talking about a $50,000 property. Years ago you might be able to get away with buying property that was undervalued when considering the value of the timber, but no longer. In other words, if there's timber value on the property you're going to pay for it in the purchase price.

Regarding setting it up as a business, the hobby-loss rules are designed to prevent write-offs from "shell" businesses. Basically you need to produce income (or at least revenue) for it to be a business. Although for timber and it's long harvest period there are some very advantageous tax rules regarding expenses. But for the purchase of your property, you wouldn't be able to deduct that until you harvested timber, and then you could use it to reduce the capital gain.

The timber value on small tracts is not what it once was either. It sounds like you're looking into this carefully, which is very wise. I'd suggest you look carefully at what you would get for your timber if harvested, there's not as many loggers or mills as there once were, so there's likely to be more transportation costs involved and less net money to you. At least until the construction industries take off again. Just a heads-up.

[fisherdog19]

The situation our country is in will most likely not reach or affect the land or lot value in rural areas, and in some areas like where I live, home values are not declining. There are many markets that are feeling the pain but most of them are metro areas.

A local bank is going to be the best bet for a land loan that encompasses a large amount of acres as they know the area and are willing to lend on them and there are no secondary market products for land. A home equity loan is your only other option, and will give you a lower rate without having a balloon payment on your loan every few years like a local bank will have. If you ever decide to sell the land then you can pay off the home equity loan and be done with it. Keep in mind that you will be able to deduct the interest you pay on a home equity loan from your taxes but not if you have a loan on just the land. I'm here to help if you want to run anything by me, even if you are working with a local lender and want to run what they offer you by me so you know if you are getting a good deal.

[Lip_Ripper Guy]

Given the condition of the finance market, many sellers are willing to do a contract for deed. I have been looking at about 5 different pieces of land, and all 5 owners are willing to hold a c/d. Depending on the requirements of the banks, you could have the owner hold a 2nd for the amount the bank requires as a downpayment, provided they will allow the bank to hold the #1 position.

[luckey]

Frequently land like you are looking for is sold by a retired farmer who may well not want to pay a hefty tax on the sale. This is usually a great time to set up a Contract for Deed. I know a number of properties purchased this way. (I bought several this way also). Good deal all around and very simple. One short page and your done.

[fisherdog19]

A C4D is a great option, but the seller carried second may be unattractive to some local banks because it is financed to 100%. The risk there is that the buyer has no money in it therefore no risk, so walking away won't be as big a deal cause they won't lose any down payment money. Just something to think about.