I own slightly more than 9 acres of vacant land in my corporation. It is worth between $1,200,000 and $2,000,000. My first mortgages are coming due and the existing lenders want the vacant land out of their portfoilio and will not refinance. The land consists of two properties adjacent to each other with first mortgage balances of about $107,000 and $158,000. What is my best option for refinancing these and pulling out some cash for operating income????

There are no standard programs for financing vacant land, so your options will likely depend greatly on the competitiveness, etc in your area.

When I hear that, I'm thinking using the cash you pull out of your land to finance operating losses - which could be a real reason the bank wouldn't want to lend you the money. Whereas the LTV would be very good, that's always unappealing.

Is that a possibility?

Rick:

The good news is that if the land is worth that much, you should be able to get a lender. The bad news is that a mainstream regulated lender does not base its lending decisions based on collateral. There needs to be a viable source of repayment.

Something else that caught my attention was your mention of ”… pulling out some cash for operating income” There is no way that cashing out some of the equity should be considered “operating income”.

I don’t know all the numbers, the situation or your plans. However, I think that speculating on land can turn into an expensive way to make money if the land does not appreciates as much as you expected. After all, cash goes out to pay debt service and taxes, but none comes in until you sell it.

Good luck.

Where is the land. What is it zoned for. Why not develope the property and then you can get the cash you need. to get cash now you would more then likely have to go hard money and that might not be worth it because of cost of the money, you could take on a partner using one parcel to back him up thus giving you the money for your corp and develop the other and make an large amount of cash after development and sales of the lots and new homes that are built.

if you own the property outright, then what is the big deal about lending on the value of that property? i could get a loan to purchase the property for 70% of it's value. the land does have a cash value just as a house would.

Lending based solely on collateral without taking the repayment as the primary concern is called "collateral lending". Regulated institutions such as commercial banks try to avoid those situations.

Is not a matter of I have this asset and how much can you lend me on this asset?

Is more like how is the bank is going to get repaid? Do I have to wait for you to fail so that I can get my principal back?