Options for land loans? (Dallas, Lucas: rent, credit, home builders)

[dreaminofvickery]

Hi All!

We are looking to buy a vacant lot in Dallas and then build a "custom" home later down the road (maybe 2-3 years). We have never gone this route, our first home was a all in one deal, so we are charting unfamiliar waters here. I have "heard" that getting land loans with big banks (like Wells Fargo, BofA, etc.) is very difficult or has undesirable rates and that you should go through smaller local banks. Is that true? If so, can anyone recommend a bank?

Any other thoughts, comments or suggestions would be very helpful if you have been through this process before or know info from someone who has!

Thanks!

[lakeside15]

I looked into this recently but decided against new construction. The big banks don't have great programs as you noted. There are a number of local/state/regional banks who specialize in this, Inwood National Bank, Frost, and Washington Federal are a few names that I recall. You typically need to put down 30% for raw land, FYI. I would speak to realtors and home builders that you are considering and ask their opinion as well.

[dreaminofvickery]

Originally Posted by lakeside15

I looked into this recently but decided against new construction. The big banks don't have great programs as you noted. There are a number of local/state/regional banks who specialize in this, Inwood National Bank, Frost, and Washington Federal are a few names that I recall. You typically need to put down 30% for raw land, FYI. I would speak to realtors and home builders that you are considering and ask their opinion as well.

Thank you, I will check these three out!

If you don't mind my asking - why did you decide against it? Were there any issues that made it too difficult / not worth it?

[lakeside15]

It was cost prohibitive for me. Lot and construction prices are really high.

[turf3]

You will find it very difficult to locate "vacant lots" in Dallas. Most land is sold to developers who divide it into lots and build houses on it. So they are not interested in selling you a lot; they want to sell you a house and a lot. You can buy a teardown in older parts of town; but builders are watching every lot that has a small old house suitable for teardown. I get multiple postcards every week. In the distant suburbs like Lucas you may find a few lots that were bought as lots and the owner may have decided to sell rather than building.

[cordata]

Buy a teardown and rent it out for a couple of years.

[dreaminofvickery]

Originally Posted by turf3

You will find it very difficult to locate "vacant lots" in Dallas. Most land is sold to developers who divide it into lots and build houses on it. So they are not interested in selling you a lot; they want to sell you a house and a lot. You can buy a teardown in older parts of town; but builders are watching every lot that has a small old house suitable for teardown. I get multiple postcards every week. In the distant suburbs like Lucas you may find a few lots that were bought as lots and the owner may have decided to sell rather than building.

We actually already found the lot, but I agree these type of lots are few and far between that developers haven't snatched up!

[dreaminofvickery]

Originally Posted by cordata

Buy a teardown and rent it out for a couple of years.

We thought about that but decided against it because we don't want the hassle and liability of being landlords - especially on an old, crumbling house!

[Johnhw2]

Originally Posted by dreaminofvickery

Hi All!

We are looking to buy a vacant lot in Dallas and then build a "custom" home later down the road (maybe 2-3 years). We have never gone this route, our first home was a all in one deal, so we are charting unfamiliar waters here. I have "heard" that getting land loans with big banks (like Wells Fargo, BofA, etc.) is very difficult or has undesirable rates and that you should go through smaller local banks. Is that true? If so, can anyone recommend a bank?

Any other thoughts, comments or suggestions would be very helpful if you have been through this process before or know info from someone who has!

Thanks!

Land or lot loans are risky. They are hugely levered to the residential demand and supply. They don't produce income to help with carry. so rates are high and the loans aren't very available.

I don't consider the sf market in dfw in a bubble as the fundamentals of demand are strong. Lots on the other hand are most likely in s bubble. High construction cost is one reason for this. When the demand for sf homes slows Used homes increase in demand and lots decrease as the price of a used home can be reduced where construction cost do not tend to other than the lot value or cost.

If you are set on waiting and insist on building new and unique take the risk. Otherwise wait and buy either used or new when ready to move.

[TeamLynn]

Local banks will be the way to go. Inwood, North Dallas, Frost, or perhaps any other.
Down payments will be larger....maybe as much as 40-50% and interest rate higher than home loans.
Have you also thought about borrowing from 401k?
Have you thought about borrowing from your credit union? They might not do land loans, but might do personal loans.

What part of town do you want to buy the lot?