Understanding Private Money Land Loans: What Every Investor Should Know

When it comes to financing land acquisitions, traditional lenders can be slow, conservative, and outright unwilling to fund the deal. That’s where private money land loans come in—offering speed, flexibility, and a way to seize time-sensitive opportunities without jumping through a thousand hoops.

Let’s break down what private money land loans are, how they work, and when they make sense.

What Is a Private Money Land Loan?

A private money land loan is a short-term loan secured by a parcel of land—raw, entitled, or improved—funded by a private individual or non-institutional lender, rather than a traditional bank or credit union.

Unlike conventional lenders, private money lenders base their decisions on asset quality, exit strategy, and equity position, not just your FICO score or DTI ratio.

Why Use Private Money for Land?

Banks generally hate lending on land. It’s risky. There’s no income-producing asset. Entitlements may be uncertain. And the resale value can be volatile.

Private lenders understand these nuances. They're comfortable lending against land because:

• They price for risk

• They underwrite the deal, not just the borrower

• They care about what the land could be, not just what it is today

When Does a Private Money Land Loan Make Sense?

• Entitlement or zoning play: You’re acquiring land to push it through city planning, rezoning, or subdividing.

• Bridge to construction loan: You’ll be building within 6–18 months, and just need to control the dirt now.

• Time-sensitive deal: Seller wants a 10-day close? Good luck with a bank. Private money can fund in days.

• Poor credit or complex financials: If your tax returns are a maze of write-offs or you're in a credit rebuild phase, private lenders care more about the equity than the paperwork.

• Land flip: You’ve got an off-market deal at 40 cents on the dollar. You just need the capital to close.

Typical Terms for a Private Money Land Loan

• Loan Amount: Usually 50% of land value (LTV)

• Rates: 10% – 14%

• Points: 2–4 points depending on size and complexity

• Term: 6 to 24 months

• Interest-Only Payments

• No Prepay Penalty (in some cases)

• Close in Days, Not Weeks

Risks to Be Aware Of

Private money is powerful, but it’s not cheap. You need a defined exit strategy—whether that’s selling the land, refinancing with a construction loan, or flipping it to another investor.

If you overpay for land or can’t execute your business plan fast enough, you’re burning cash monthly with no income coming in. Do your homework. Know the comps. Understand the zoning. Have your permits lined up or your buyer ready.

Final Thoughts

Private money land loans can be a game-changer for developers, investors, and entrepreneurs who know how to spot opportunity. If you need speed, flexibility, and creative structuring, this is the lane.

But don’t go into it blind. Work with lenders who know land. Ask about their track record. Make sure they understand your vision—and that you’ve got a clear path to execution.