Land Loans

Acquisition, predevelopment, and horizontal development financing for raw, entitled, and infill land — placed by a broker who has stayed active in the land lending arena through every cycle since 2007.

Land loans are among the most challenging instruments in the commercial mortgage market. The collateral produces no income; the exit strategy depends on entitlements, market timing, and execution risk, and the universe of capable lenders is a fraction of what it was before the 2007 credit contraction. Financial Compound has remained active in this space when most brokers exited it — closing land loans on raw acreage, master-planned single-family tracts, infill multifamily parcels, and partially built-out residential developments. Whether the deal is a 200-acre tract requiring entitlement capital or a fully approved infill site ready for vertical construction, the placement strategy starts with matching the parcel’s risk profile to the right lender’s appetite.

What Is a Land Loan?

A land loan is a real estate-secured loan against a parcel of unimproved or partially improved property. Because land does not generate cash flow and carries elevated execution risk, land loans are priced wider than income-property debt, amortize over shorter terms, and require greater equity than conventional commercial mortgages. Lenders evaluate land deals on three criteria: the strength and timing of entitlements, the credibility of the borrower’s exit (sale, vertical construction takeout, or refinance), and the protective equity in the basis.

Within the broader category, several distinct land loan products serve different stages of the development cycle — and lender appetite varies materially across them.

Types of Land Loans We Place

Raw Land Loans

Financing for unentitled, undeveloped acreage with no utilities, no zoning approvals, and no immediate development pathway. Raw land loans are the highest-risk category and carry the deepest pricing. Capital sources are predominantly private debt funds, family offices, and specialized land lenders, with terms typically running 12 to 36 months at 60% LTV or lower.

Entitled Land Loans

Loans against parcels with approved entitlements — zoning, density, use permits, and tentative or final maps in place. Entitled land draws a substantially deeper pool of lenders because the regulatory risk has been retired. LTV ceilings rise to 65%–70%, and pricing compresses meaningfully relative to raw land.

Predevelopment and Entitlement Loans

Capital advanced to carry a parcel through the entitlement process — engineering, environmental review, traffic studies, plan check, and approvals. These loans typically convert into, or are taken out by, a horizontal development or construction loan once entitlements vest.

Horizontal Development (Lot Development) Loans

Financing for grading, utilities, streets, and infrastructure that converts entitled land into finished, sellable lots. Common for single-family tract developers, master-planned communities, and built-to-rent operators delivering pad-ready inventory to merchant builders or BTR sponsors.

Infill Land Loans

Loans against high-density urban or suburban parcels — typically zoned for multifamily, mixed-use, or commercial vertical development. Infill draws the most aggressive land lender pricing because exits are well-defined and demand is concentrated.

Land Bridge Loans

Short-duration capital used to acquire a parcel quickly — often to win a competitive bid, meet a 1031 exchange deadline, or close on a discounted off-market opportunity — while a permanent entitlement, development, or sale strategy is structured.

Typical Land Loan Terms

Land lending sits at the upper end of the commercial debt risk spectrum, and pricing reflects that. The framework below describes ranges we see across active land lender quotes today; specific terms are driven by parcel type, entitlement status, sponsor experience, and basis.

Term	Typical Range
LTV — Raw Land	40% – 55%
LTV — Entitled Land	55% – 70%
LTV — Infill / Approved	60% – 75%
Interest Rate	9% – 14%, often interest-only
Lender Yield Targets	12% – 23% IRR with 1.3x – 1.7x equity multiple
Origination Points	1 – 4 points
Term Length	12 – 36 months, occasionally up to 60
Recourse	Frequently full recourse; non-recourse with carve-outs available on stronger deals
Prepayment	Often open after 6–12 months

Who Borrows for Land

Our land loan placements typically serve developers and investors operating across the land lifecycle:

• Land developers assembling, entitling, and horizontally improving parcels for sale to vertical builders
• Single-family home builders acquiring finished or rough-graded lots for tract construction
• Multifamily and mixed-use developers are taking down infill parcels for ground-up vertical projects
• Build-to-rent operators securing horizontal development capital for BTR communities
• Master-planned community sponsors financing larger phased takedowns
• Land bankers and patient capital investors holding entitled or transitional parcels for future appreciation
• Owner-users acquiring land for a build-to-suit commercial facility, often paired with an SBA 504 takeout on the vertical phase

Why Land Loans Are Difficult to Place

Conventional banks largely exited speculative land lending after the 2008 cycle, and most have not returned in any meaningful capacity. Agency lenders (Fannie Mae DUS, Freddie Mac, HUD/FHA) do not finance land. CMBS does not finance land. SBA 504 and SBA 7(a) finance land only as a component of an owner-user vertical project, not as a standalone hold. That narrows the active land capital universe to private debt funds, family offices, mortgage REITs, and a small number of regional and community banks that maintain selective land programs — typically with strong existing-relationship requirements.

Lender selection is, therefore, the entire game. A broker without active, current relationships in this niche often cannot place the loan at all. Financial Compound has closed land transactions ranging from large master-planned tract developments to specialized infill high-density parcels, and we know which lenders will quote which parcels — and which will quote, then fail to fund.

What Lenders Look For on a Land Deal

Underwriting a land loan is fundamentally an exercise in evaluating the takeout. The strongest land loan packages address the following directly and credibly:

• Entitlement status — current zoning, approved use, density, tentative or final map status, and remaining approval risk
• Exit strategy — sale comps, vertical construction takeout terms, refinance pathway, or end-buyer commitment
• Sponsor track record — comparable land deals successfully entitled, developed, or exited
• Basis and protective equity — purchase price relative to current and post-entitlement appraised value
• Site characteristics — utilities, access, topography, environmental conditions, and any encumbrances
• Market context — absorption rates, comparable land sales, and the housing or commercial demand thesis supporting the exit
• Carry and reserves — interest reserve, property tax escrow, and contingency to cover the entitlement or development period

Why Borrowers Use Financial Compound for Land Financing

Financial Compound is one of a small group of commercial mortgage brokers that has stayed continuously active in land financing through every cycle since 2007. We operate as a borrower-side advocate, not a lender, which means our incentive is to place the right loan at the right cost — not to push a single capital source’s product. Our bench of active land lenders includes private debt funds, family offices, mortgage REITs, and selective regional banks across the country^*, and we know which sources will actually fund a given parcel type rather than simply quote it.

Recent placements include an untitled large master-planned single-family tract land, partially completed residential developments, infill high-density zoned parcels, and finished-lot inventory for production builders. We negotiate market-rate terms, hold lender points to a minimum, and structure the construction or sale takeout in parallel with the land loan so the borrower has clarity on the full capital stack from day one.

Land Loans — Frequently Asked Questions