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If you are interested in creating a real estate investment portfolio, land investment is actually a great way to get started. In Colorado, land is plentiful and inexpensive compared to other forms of real estate. That being said, securing a land loan can be more difficult than a mortgage or new construction loan. Ultimately, the type of land you want to buy will determine the requirements necessary to qualify for a loan. There are 3 main types of land loans available, each with its own considerations. 

Types of Land Loans and Their Requirements

Raw Land Loans

Raw land is considered the highest risk when it comes to land loans. This land is completely undeveloped with no plumbing, electricity, roads, or other amenities. While raw land can still be a good investment, it can be more difficult to secure financing. This is because this type of land has no immediate infrastructure to support development, and is therefore a greater risk for investors. 

You can help your chances by presenting a detailed plan for how you intend to use the raw land for future projects or development. This will lower your risk in the eyes of a lender, who can understand the potential of your project. Some examples of how raw land has been used in the past include:

Of course, you are not limited to what others have used raw land for. Just make sure you have a good plan in mind before you approach a lender. You will also need a fairly high down payment. The FDIC has established a minimum down payment of 35% for raw land, though private lenders can set their own standards.

Unimproved Land Loans

Unimproved land has a few more developments than raw land, like older infrastructure or road access. It still does not usually have utilities, like water and electricity. Many unimproved land parcels once had a structure on them that was torn down. They are sometimes referred to as “undeveloped” land areas, although they are still much more conducive to property-building than raw land. 

Again, you will need to present a detailed plan for how you will use your unimproved land and make it worth the risk for you lender. You will also need a great credit score and a minimum down payment of at least 25%, in most cases. 

Improved Land Loans

Improved land loans are much less risky for investors, since they are ready for immediate construction. Improved land has the basic infrastructure and utilities to support a house or other structure. These land areas are often referred to as “lots,” and they are ideal for investors looking to build their own home. 

Since the costs to build on improved land are much less, the risk is also much less for lenders. This is reflected in the minimum down payment, which is only 15%. You may also have a little more flexibility with your credit score, although that will depend on the lender you choose and any applicable federal regulations. 

Finding Land Loans in Colorado

Pine Tree Financial Partners works with all types of real estate investors. Whether you are looking to build your dream home in the country, or wanting to buy improved lots for new construction homes, we are here to help you. Even if you don’t think you qualify, give us a call. We review each candidate carefully and determine qualification case by case. 

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