As a landowner, you most likely have plans on how you would like to see your property developed. Maybe you just purchased a few acres to build that country homestead. Maybe you bought a larger parcel with hopes of doing some farming, timber harvesting, building a pine-straw business, a hunting camp, or simply a country retreat. You may have plans to construct a pond or even build that “barndominium” or dream home. Whatever your objectives, you will most likely have to invest in some improvements to make the property conform to your needs and meet its potential. And to do so, you may need land improvement loans to carry out your grand vision.
Your chosen improvements may take the form of road construction or improvements to have access to the far reaches. Existing structures like bridges may need to be brought up to speed. You may want to do some clear-cutting to create crop fields or food plots or some thinning and selective harvesting of timber and then replanting the removed trees. It could be the stringing of utility lines or even building a fishing pond.
So many options and opportunities and unless you have deep pockets chances are you will end up borrowing money for land from a financial institution to make your property ownership dreams a reality.
Seeking A Financial Institution For Land Improvement Loans
1916 was an interesting year for the USA. We were on the brink of declaring war on Germany. General “Black Jack” Pershing was off in Mexico chasing Mexican activist Pancho Villa, Woodrow Wilson became U.S. President and First South Farm Credit Was founded.
Today First South specializes in offering financial services for the rural community, covering farming operations including crops, livestock, assistance in financing rural home construction, and a broad range of rural property improvements. It has grown to encompass 40 branches with 9,000 members meeting the financial needs of rural customers in Alabama, Louisiana, and Mississippi.
To get the inside track on how First South Farm Credit can assist landowners who want to improve their property I interviewed Taylor Hart, the manager of the FSFC office in Opelika, Al.
“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,” Hart said. “Whether it be roads, barns, ponds, timber management as in thinning or clear-cutting, controlled burns, or establishing wildlife habitat. We also finance the construction of homes and even barndominiums.”
Hart explained that each land improvement application is unique and is evaluated on an individual basis. Based on the circumstances, terms and rates may vary. Still, a basic rule of thumb is that First South Farm Credit, depending on the project and the specifics, can typically finance for up to 30 years and loan up to 85% of the value.
“We can either use a cash contribution or, if you own the property free and clear, we can use the land as collateral in lieu of a down payment for the loan,” Hart said. “It really all depends on the nature, scope, and intricacies of the project.”
According to Hart, typically, the shorter the term of the loan, the lower the interest rate is going to be. With big-ticket items, the longer term may be more attractive in order to keep the payments a bit more manageable. On smaller loans, shorter terms allow for a quicker payoff. There is also no prepayment penalty with this type of loan for improvements on the land.
What Can Be Financed For Land Improvement Loans
Road Construction and Repair
“’The road, trail, or even small bridge construction, or repair, may increase the value of the property by allowing easier access, increasing the utility of the parcel and expanding the opportunity to take advantage of the recreational opportunities,” Hart pointed out. “If you have a piece of property with no internal road system the only way to move around the property is on foot. Opening up some roadways is an opportunity for increased access which adds value to a property.
Timber Management and Property Clearing
If you own an appreciable amount of timber you may want to use it as a long-term renewable revenue stream and harvest that wood either on a specific section basis or by selective cutting. If you go forward on a clear-cutting basis, you can turn that timber-harvested acreage into agricultural land, food plots, or replant seedlings.
In addition, regardless if it is clear-cut or selectively harvest your timber, that “staging area” or loading ramps where trees were loaded onto log trucks once everything is cleared out are perfect spots for wildlife food plots.
Pond Construction
First South can also finance the building of ponds.
“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.
Collateral Improvement
When I use the term “collateral” I am referring to things of value on a tract of land. It may be pine straw harvest, replanting of seedling trees when you selectively harvest trees, clear cut to open up areas for agriculture or foot plots, controlled burns, or even creating 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 pointed out.
“Replanting isn’t going to visually enhance the property and it will be based on a long-term investment basis which is most likely going to be a 30-year program. It can add value to a property and, depending on the specifics, we can provide financing,” Taylor said.
“Conducting controlled burns which gets rid of the underbrush and puts carbon back in the soil benefits tree growth and wildlife habitat and we can support that effort,” Hart explained. “Most of our control burn people have access to government programs to enhance and improve timber stands.”
Home Construction
Regardless of whether you want a “brick and mortar” home or a “Shouse / barndominium” First South Farm Credit can help. Depending on the individual profile and the amount of equity in the property FSFC can typically loan up to 85% of the value with terms to be decided based on the creditworthiness of the borrower.
The pandemic that we have gone through has made it more desirable to live in rural areas away from the hustle and bustle of city life.
Standard Financing Terms
A 15% down payment can take the form of cash or the actual owned “free and clear” property. First South will typically take the whole tract unless the land owner wants to survey out a smaller portion. This usually comes with a cost the landowner does not want to incur.
