September 2015 - First 4 Commercial

Key Points to consider when buying land.

There are several key issues to remember when purchasing a piece of land. Land tends to exchange hands between land agents, farmers and specialists rather than being advertised on the high street through an agent. Land can be purchased for a variety of uses and land agents generally source land directly from land banks which eliminates the third party and makes buying land a more simple process. Auctions also provide an alternative route.
• Before purchasing a piece of land it’s important to look at the ground conditions, this will affect the suitability of the plot. If you are buying land for farming purposes then check the soil type and its suitability for crops. Always check if the land is on a flood plain too.
• Access is key, how do you get onto your piece of land? Does that access point belong to you? Make sure that you will not be held to ransom after the purchase and that you have full access. Check the shape of your plot too as this will affect the type of property you may be wanting to build. Are there services on the land or will these need to be connected? If there aren’t any then the cost of these can be financially demanding. Does the land already have planning permission or has it been built on before?
• How will you pay for your land? Special finance is available for commercial and rural business as these purchases are considered more risky than a standard mortgage and property. It may be that you will need a larger deposit or have to offer solid security to the lender. Securing the right type of finance for your purchase is key to its success.


How to finance a land purchase.

Finding the right lender for a land purchase is highly important because asking the right questions will enable you to come up with a suitable package for your needs. Distinguishing between loan types within the financial service will ensure you get the right deal for you. These are just a few of the reasons a commercial land loan can be used for;
•Purchasing land to expand your existing business.
•purchasing new equipment.
•Restructure any existing borrowing to ease cash flow and therefore save money.
•Erecting new buildings or making improvements on existing ones.
•Setting up an irrigation system, wind-turbine or bio-fuel plant.
•Turning a derelict outbuilding into a holiday cottage for extra income.
•Laying a new road for access.
•Setting up a farm shop from the produce that you offer.
How to get it done.
1. Find out available agreements for land financing.
2. Check with the lender about the cost and value of the finance package.
3. Make sure the time frame for the financing loan sits comfortably for what you are able to repay. A land based loan is often based on a 10-15 year payback period whereas a standard mortgage is anything between 15-30 years.
4. Study the interest rates of the loan, look at what the available market rates are and make sure that interest rates your lender offers you are equitable.
5. Federal consumer advocate agencies and other finance experts always advise their clients and consumers to be aware of artificially high interest rates that will cost more in the long run.
6. Ask and question how much of a down payment is actually necessary for the land purchase to go through. Quite often a larger security deposit will secure a more fruitful land financing deal.
7. The more money that you have for as an upfront payment, the lower the cost will be to finance the remainder. It will also help in the application and approval process

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