My mother is looking at purchasing land in Florida as an investment. She lives in Colorado. She does not plan to build on it but hold on to it until land values increase and then sell. This is her first time doing anything like this and is wondering about financing. She is older and I worry she is not aware of the options out there.

She has talked to someone about an equity loan on her house which she owns outright but I am not sure how that would work since the value of her house is less than the land purchase ($350,000). What are typical interest rates on land loans vs. home equity loans. Would it be better to have her home as the collateral vs. the land? How do you go about getting financing on land when you are in another state.

Don't even know all the questions I should be asking. Any help on the matter would be appreciated.

AH

There is a lot of risk associated with pledging one's home for an investment, as most States will protect your home in the case of financial distress.

Then again, getting a loan on her house should be one of the cheapest sources of borrowed funds. I am guessing that on top of the loan on the house, she will be getting a loan for the land.

The question here is:

Can she afford all this debt service, when she is essentially buying a non-productive asset and is "speculating" on the appreciation?

Risky, Risky, …..

"My mother is looking at purchasing land in Florida as an investment. She lives in Colorado. She does not plan to build on it but hold on to it until land values increase and then sell. This is her first time doing anything like this and is wondering about financing. She is older and I worry she is not aware of the options out there."

You want to make sure she has a purpose and plan first of all. There are numerous other investments in FL that will give you higher rate of returns while you're in Colorado. One of the beauties of Commercial Real Estate is Industria! A property that pays for itself, and self sustains the dscr. (Debt Service Coverage Ratio) If you buy raw land that's not producing a thing, you are starting negative at least 20% (DSCR) If she insists on purchasing the raw land, there are AGriculture Loans that can be done, but then you start messing with Gov't Farming Loans. They can take forevvvvvvvvvvvvvvvvvvvvvvvvvver and then you find out that they can't do it. After all third party reports are done. Just be careful. I have not chosen this Property Type for my client's because it's just tooo risky.

The best avenue and cheapest is certainly the equity from her house. Now that being said. In the state of FL your home can't be taken from you if you declare bankruptcy ( I am not an attorney nor can I be certain that is the case. If you're curious please seek council for confirmation) now in CO I don't believe that statute holds true. So L.U. has expressed a very Serious Question that you need to be sure you are comfortable with and understand. You are pledging your home that can be taken away, if for some reason the real estate investment falls through. So you walk away with ziltch. Depending where in FL, and what you plan to do... it's quite possible a greater rate of return could be received in purchasing precious metals hahaha okay sorry back on track.

She has talked to someone about an equity loan on her house which she owns outright but I am not sure how that would work since the value of her house is less than the land purchase ($350,000). What are typical interest rates on land loans vs. home equity loans. Would it be better to have her home as the collateral vs. the land? How do you go about getting financing on land when you are in another state.

Typically the Ag loans are greater than 5 acres. The closest I personally have come to an ag loan is through Land Development. Aquisition, Construct/Perm. which if you can wait long enough, your turn will be next. What is the proeprty description. There is gov't funding for sensitive areas, that house manatees, or the Osprey or anything on the protected list in FL.

I would strongly recommend you weigh your options and re-evaluate purchasing just plain raw land. Now if there's something desireable about the property, or it's locale by all means you make the decision. If it's just dirt, and the trends and progressions aren't favorable... just look at it with a jaundice eye....

Sorry if I've interjected too much personal perspective, but I wanted to just give you a direct perspective. I hope you don't mind my cander. GOOD LUCK!