financing land purchase

[lyford]

I currently am sugaring on just under 8 acres that are made up of the wood lots behind my father's and my house. I would like to purchase more land, in the 30+ acres range. My issue is that I cannot currently come up with the money to purchase such a property outright. My question for you all is what kind of loan can i get to buy vacant land. I've been told by family and friends that i cannot get a mortgage on land unless there is a dwelling. Are there other options in terms of financing? I do know I do not want to lease trees or land. I will also be using this land to hunt and want to hand it down to my boy when the time comes. Just wondering what the rest of you have done. Thanks for any help/ideas. -justin

[maple flats]

The only options I know of are owner financed, lease to own, or personal loan. Another option I've used over the years was taking a home equity on my home and use that to finance a purchase. (I never did it on vacant land, only on rental property to cover the down payment, then I mortgaged to rest on the purchased property, it would work only if you have the equity needed to cover the loan amount. This option however puts you home at risk if you default. Be sure you can pay it!)

[unc23win]

You should just talk to a bank. Basically you either need either collateral or equity possibly both or a co signer that is willing to put their's up like your parents. Some loans you will need as much 20% down others might allow you to refinance what you already have and not require anything down. If you do have current loans with your local bank that might be your better option as I found out last year they banks kinda like to have all the pieces others don't like to share collateral. Depending on how much you want to borrow equity might be a cool way for to do it.

I got a line of open credit line loan based on equity for 10 years couple of nice things
1. I only have to pay 120th of what I borrow each month
2. Everything I pay I can borrow again within the 10 yr window.
3. A second loan will be even easier and probably could get more. Its a great way to expand and grow. So maybe you can't get 30 acres all at once. 120th of 20,000 is $166 just for reference.

[BreezyHill]

Justin,
Check out Farm Credit, This is right up their alley. They will help you with a business plan if you do not already have one. If you do have one then all the better in getting them on board with you. Since you are already in business of sugaring and are looking to expand all the better. You have real numbers to put into the business plan and have been baptized thru fire. Be certain to put in every conceivable cost right down to the actual cost of labor and show that this is an expense that you are using as a "down payment" type as you will not be paying yourself for your labor at the start. Include a five year plan rather than a three as the expense of machinery is for longer than the five even is. Include production number that you have had in the past and those that you expect from any upgrades like going from 20" of vac to 27". Be certain to use accurate number and provide the sources of these numbers like Cornell's Steve Childs or Dr Tim's data.
Feel free to ask my specific questions as I have done this in the past and got a loan in an industry that was/is dying and am still here and growing. Account for every penny in the business plan right down to caps for a spout and cleaning products.
It is much easier to have the answers at your finger tips than to say: "I will have to get back to you on that."
You only get one chance to make a first impression...make it a good one and they will be your friends for life!

Ben

[unc23win]

Not all Farm Credit offices are the same. I tried that route they had no interest whatsoever what the potential of the Maple business was they were only concerned with if I had enough collateral (which they wanted A LOT) to meet the requirements and if I could afford the payment nothing else mattered. I messed around with them for about 3 weeks and finally talked to the bank in town and had a loan within 2 days. As it turns out it is a way better option for me. I do remember people talking about Farm Credit last year and how wonderful they were apparently not always the case.

[jmayerl]

This sounds like you are trying to start up a business, so here are a few things I know you will need from personal experience.
1. A business plan showing all costs involved and projected profits for the next 10 years(real numbers from past history or from other producers) be realistic with this or you could lose everything a few years down the road.
2. Money down - probably 20% maybe more.
3. A perfect unblemished credit history for at least the past 10 years.

Take all of this to a farm credit service or similar place and you can go from there.

FYI - long term leasing is much cheaper if you can find somebody that will allow it, but I can understand wanting your own land, it's just that many people can't afford it.

[Clarkfield Farms]

I was in the mortgage business for -- IDK, 16 years maybe? There are/were several lenders that specialized in "raw" (bare, vacant, undeveloped) land. 10% minimum down payment, good credit. Rate and terms not always the best but hey, if nobody else will do it, sometimes it's a bargain at twice the price.

Farm Credit? um, SOMETIMES. Bank? Sure. IF they offer the programs. But if they don't, and sometimes even if they DO, if it's in the loan officer's/bank's/credit union's best interest to funnel you in another direction that's NOT in your best interests, THEY WILL. Mortgage broker? enh, maybe? Mortgage banker? Probably the best option, again provided that they have the right program FOR YOU. No matter what, keep a keen awareness of whether or not they're actually finding solutions for YOU, not themselves just to be the ones to get your business. Whether it's obvious or not, the money-lending business is EXTREMELY competitive and unbelievably cutthroat. One local credit union rep is well-known for lying no matter what just to keep you from walking out without a signed loan application. His attitude? "So my numbers are off. You think that at closing, if they want the place badly enough, they won't find the money someplace? Selling stuff, asking mom and dad, whatever. They'll get it." oh REALLY... Remember, it's YOUR money until you give permission for someone else to have it with your full knowledge and consent. Unless it's the gov't, and then ---....

And remember, a loan is just someone selling money to someone else. And "interest" isn't necessarily their only profit on the deal.

Be careful. It is a great idea to take out an equity loan, OR to do a cash-out refi of your home, IF YOU OWN your home. But that may not be the case since you state that you're sugaring 8-acres behind "my father's and my house;" does that mean that your father owns the house and you live with him, or that you both have your respective owned houses behind which the sugar woods lie, or -- ??? The main "be careful" is beware of being undercapitalized. It's one thing to be able to afford the monthly payments, but if you have nothing left in cash or in income-to-debt terms, then how can you buy what's necessary to expand? Will the land/expansion purchase(s) be able to support the new debt load, or will you need to increase your income, and if so, how? So yes, having a business plan is a crucial requirement, but NOT necessarily one that you'd want to "take to the bank!" In fact, MANY lenders and/or their programs frown on making loans for business or investment purposes if that/those loan(s) is tied to real estate, especially your primary residence. Some of those land-lenders that I mentioned before are adamant that you NOT buy a former or existing farm, and can add a clause that they can call the loan if an inspection by the lender reveals that you HAVE turned it into an agricultural enterprise. In fact, although laws change all the time, it used to be that you signed a statement at closing and/or with the commitment letter that you understood that no part of any of the proceeds from a HELOC (Home Equity Line Of Credit) was permitted to used for other real estate purchases or investments of any kind, STRICTLY to be used for personal funds and/or improvements to the mortgaged, primary-residence, premises. Period. Again, that wasn't with all lenders, and the laws have had changes over the years. I did my last mortgage back in 2007. So, having a business plan is necessary, but approaching a lender in that way may or may not be a bad idea.

I know that you state you don't want to lease trees or land, but it MAY be a very favorable option. You're in NY, bud, so face it -- with the state of property taxes in this State, real estate that's NOT income producing, AND GIVES A POSITIVE CASHFLOW, isn't necessarily a good "investment." The taxes are almost ALWAYS greater than any amount of appreciation, provided there IS any appreciation...vacant land is given more favorable rates, GENERALLY, as long as it's not in an area of lakes, etc. that would classify the area as "resort" or vacation. Forget about it then, if it is; they'll getcha!!! My point is this, Dave (maple flats) does very nicely with his leases, and they're good for the landowner as well. He knows more about that than anyone else I personally know, and it's worth at least exploring that idea; who knows, with the right lease(s), in the right areas, you may well make enough money to save up so that you don't need a loan. Given enough time and discipline, hey, you may even be the guy loaning the money.

And don't forget what "mortgage" means": Two words, "morte (more-tay)" and "gage (gah-jay)." Meaning, "Deathbound," or "bound unto death." If it ain't paid by the time you leave this life, well...

...just sayin'...

[spud]

YeastPimp,

That is some of the best advice I have read on bank's and loans. Thank you.

Spud

[lyford]

Thanks to everyone for your replies. I did not mean to give the impression that I am large operation. The syrup I have made is mostly used by my family and friends and I do sell a little to neighbors and coworkers of mine and my wife. I am currently a school teacher, and would like to become a much larger producer, hence the desire for more land. The land I use is behind the house I own, my 5 acres, and the 3 acres behind my father's house about 15min away. I'm thinking that between my job as a teacher, my wife also works full time, and my 2 children under the age of 4 starting a business is a few years down the road. Due to this I'm not sure Farm credit would be a viable option for me. Yeast Pimp you have given me a lot of food for thought, thank you. I have alot of reseacrh to do, and will keep you posted on my progress. Thanks again everybody!

-justin

[Clarkfield Farms]

aw SHUCKS, guys!!! You're making me BLUSH!!! :D doh!