Land & Lot Loans 101: From Raw Dirt to Funded Deal

Land loans finance the acquisition of undeveloped or partially developed land. They are fundamentally different from other investor lending products because there is no existing structure generating income. The collateral is the land itself, and the value depends heavily on entitlements, zoning, and what the borrower plans to build.

Lenders categorize land into three tiers: raw land (no improvements, no entitlements), entitled land (zoning and permits approved), and improved land (utilities and infrastructure in place). Each tier carries different risk and pricing. Raw land is the highest risk and lowest leverage.

The most sophisticated investors use land acquisition as the first step in a multi-phase strategy: buy the land, build on it with a GUC loan, stabilize the property, then refinance into a long-term DSCR loan. A broker who understands this pipeline can earn three funded transactions from a single client relationship.