Often, people are landowners sitting on land that can be developed. Some landowners sit on land to sell to someone else, harvest timber and pine straw, a hunting camp, retreat or they might want to build a nice home one day. Most of the time you will need to do some sort of improvements to your land. If you need to do a big improvement, you could need a land improvement loan.
First South Farm Credit, which was founded in 1916 is the perfect place to go when a landowner needs a loan. They offer financial services for rural communities, covering farming operations including crops, and livestock, assistance in financing rural home construction, and other types of rural property improvements. They offer services for landowners in Alabama, Louisiana and Mississippi.
“If you are playing or working in the dirt, we want to be in there with you as long as you are improving the value of that dirt, which is the collateral for the loan. Whether it be roads, barns, ponds, timber management as in thinning or clear-cutting, controlled burns or establishing wildlife habitat,” says Taylor Hart, manager of FSFC in Opelika, Al.
Land improvement loans do have standard financing terms. This 15% down payment can be either cash or the property (free and clear). As mentioned earlier, a land improvement loan can cover many things. Road construction and repair come under this loan and will also potentially increase the value of the property. These can include roads, trails, or small bridges that allow easier property access. “Opening up some roadways is an opportunity for increased access which adds value to a property,” explains Hart.
Other things it can be used for are timber management and property clearing. Landowners can use this timber as a long-term renewable revenue stream and harvest the wood section by section. If you clear-cut it all at once and use the property for agricultural land, food plots or replant seedlings.
Pond construction also falls under this type of loan. ” The general thought is that any type of water feature increases the value of a property whether it is for fishing, duck hunting, or irrigation of crops. Water has a way of relaxing people. We typically look at the cost as well as the value that will be added by the water feature,” Hart said.
Another item that can be considered is a collateral improvement which are things of value that are on the property. These are things such as replanting of seedling trees after harvesting them, pine straw harvest, clear cut to-open areas for food plots, controlled burns or fire lanes.
“In terms of pine straw harvest, typically you have to have longleaf pine and the implementation and management of the operation increases the value of the property because you have developed a stream of income,” Hart stated.
If you want to use the property in the future to build a home you can also get a loan to build. Depending on your profile and the amount of equity you have in the property you can obtain a loan for around 85% of the value.
If you are in the market for some land or have some land and need advice on what to use it for, check with a local realtor. A local realtor can help you through the whole process.