The Quick Read: Hard money raw land loans are private, asset-based loans. Investors use them to buy or refinance vacant, unentitled parcels. Banks routinely say no to these deals. Raw land produces no rent. It carries no construction budget either. So lenders size the loan against the bare-dirt appraised value instead of income or comparable rents. Expect leverage well below what a rental property or fix-and-flip deal gets. Expect a real down payment too, or cross-collateral in place of one. And expect a lender who wants a documented exit plan before funding anything.
Key Takeaways
- Raw land has no rent roll. There’s nothing to divide a payment against. That’s the structural reason land moves through hard money instead of any rental-income loan, DSCR included.
- Banks and most conventional or agency lenders decline raw land outright. Scotsman Guide reports that traditional lenders view raw-land deals as nearly impossible to fund.
- Leverage on land sits well below general hard money conventions. It often lands closer to half the appraised value rather than the higher ranges seen on income-producing collateral.
- Lenders expect a down payment, or a cross-collateralized second property. They also expect a documented exit strategy and, in most cases, a personal guarantee.
- The land’s stage — raw, unimproved, entitled, or shovel-ready — is the single biggest variable in how much leverage a lender will offer.
Key Terms Defined
- Raw land: a parcel with no utilities connected — no water, sewer, or electric service — and often no direct road access.
- Unimproved land: land with partial utility access that hasn’t been fully prepped for construction.
- Entitled land: a parcel that has cleared zoning, platting, or permitting approval for a specific use, even before physical infrastructure exists.
- Shovel-ready land: fully entitled and physically prepped land — utilities, grading, and access in place — where construction can start without further approvals.
- As-is value: the appraised value of land in its current, unimproved condition, as opposed to a projected value after development.
- Exit strategy: the borrower’s documented plan for repaying or replacing the loan — sale, refinance into a construction or long-term rental loan, or another takeout source.
- Cross-collateralization: pledging equity in a second property as additional security in place of cash, often used to cover a down payment shortfall.
Why Banks Won’t Touch Raw Land — And Why Hard Money Exists
Ask a bank to finance five acres with no structure on it. The conversation ends fast. Scotsman Guide puts it plainly: commercial land loans are among the hardest deals to finance. Banks and many alternative lenders typically won’t touch them.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Jul 23, 2026
Prefilled with local estimates — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
As of Jul 23, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
The gap isn’t random. Conventional and agency mortgage products qualify a borrower against income and debt ratios. DSCR loans qualify a property against its own rental income, measured against the payment. Raw land supplies neither one. There’s no lease tied to bare dirt. There’s no comparable-rent survey. There’s no cash flow of any kind. So the entire coverage-ratio framework that makes rental-property DSCR lending work has nothing to calculate against. That’s exactly why raw land financing lives in hard money and private-capital lending instead of any bank product or investor-loan grid. Lendmire’s broader overview of hard money land loans covers how these files get structured across property types. This piece is narrower. It’s about raw, unentitled parcels specifically — the toughest end of that spectrum.
How Underwriting Actually Works, Step by Step
Underwriting on raw land runs through a fairly steady sequence. It doesn’t matter if the parcel is five acres of pasture or a downtown infill lot.
1. Classify the land’s stage. Raw, unimproved, entitled, or shovel-ready status sets the lender’s risk appetite before anything else gets discussed.
2. Size leverage to the as-is appraised value, not what the land might be worth once developed. The appraisal itself compares bare-land sales, not rental comps. It’s a fundamentally different exercise than the income-property appraisal DSCR lending depends on.
3. Require skin in the game. A down payment, or equivalent equity, confirms the borrower isn’t walking away if the deal stalls.
4. Expect a personal guarantee. Non-recourse land loans are the exception, not the rule.
5. Structure around the lack of income. There’s no rent to service the debt during the hold. So many lenders build in an interest reserve or an interest-only period funded through the loan itself.
6. Order land-specific diligence. This means a current survey, zoning or entitlement documentation, comparable land sales, and typically a Phase I Environmental Site Assessment to check the parcel’s history before anyone takes title.
7. Confirm the exit plan before funding. Sale, refinance into construction financing, or eventual refinance into long-term rental financing — the lender wants to know which one applies before the file closes.
Raw, Unimproved, Entitled, Shovel-Ready: The Stage Sets the Terms
| Land Stage | Utilities / Access | Typical Lender Appetite |
|---|---|---|
| Raw | None connected; often no road access | Most conservative — lowest leverage, longest diligence |
| Unimproved | Partial utility access | Somewhat more workable, still cautious |
| Entitled | Zoning/permits cleared, infrastructure may lag | Better leverage; development plan carries weight |
| Shovel-ready | Utilities, grading, access all in place | Best terms among vacant land; closest to a construction file |
An unentitled parcel with no road frontage is not the same underwriting exercise as a shovel-ready lot with utilities stubbed in. Both show up on a tax roll as “vacant land.” But lenders price the gap between them aggressively.
Down Payment, Cross-Collateral, and Guarantees
Across the wholesale network Lendmire places files through, overall hard money leverage on the strongest collateral types can run high. Stabilized rental property, multifamily, and commercial deals can reach up to 90% LTV for experienced, well-qualified borrowers, subject to lender guidelines. Raw land almost never gets anywhere near that ceiling. It’s the most conservative collateral type in the book. There’s no rehab budget backing it. There’s no lease backing the number either, the way there is on a fix-and-flip file, where up to 100% of the rehab budget can be financed on top of the purchase leverage. Land has no renovation budget to stack. The underwriting stops at bare-dirt value.
Montegra Capital frames the ceiling this way: developed property in a private lender’s book might reach up to 65% LTV. Raw land borrowers generally shouldn’t expect more than roughly 50%. Scotsman Guide has documented land deals structured around 60% of an as-is appraised value. This is an illustrative example, not a universal number. But it lines up with how conservatively land gets priced compared to income-producing collateral.
A minimum down payment is standard, not negotiable in most cases. Scotsman Guide reports a typical floor around 20% of purchase price on hard money deals broadly. Lenders enforce this so the borrower keeps meaningful skin in the game. Land deals often land at or above that floor, given the lower leverage ceiling described above. Some hard money lenders will accept a lien on a second property as cross-collateral when a borrower is short on cash. That lender credits the equity toward the down payment. In some structures, the lender also rolls carrying costs into the combined loan balance instead of requiring cash reserves up front. Investors weighing that structure may find Lendmire’s piece on no-upfront-payment hard money land loans useful for understanding how those arrangements get pieced together. The no-hassle hard money for land overview covers what a streamlined application process typically looks like.
Guarantees are the norm, not the exception. Non-recourse land loans are uncommon even within private lending broadly. Lenders want a personal guarantee. If the sponsor lacks a developed track record, bringing on a co-sponsor or an experienced partner can matter as much as the appraisal itself. Credit requirements vary by lender and file. Some hard money programs in the network carry no fixed minimum score. They weight the deal’s equity and exit plan instead. Others expect a working credit history before extending land-specific leverage. Loan sizes in the network’s business-purpose hard money book generally run from roughly $100,000 up to $60 million. Raw land deals tend to cluster toward the smaller end of that range, given the leverage constraints described above.
Terms, Interest Reserves, and Why the Exit Plan Comes First
Raw land loans are short-term by design. Bridge terms of roughly six to twelve months are standard across the network. Some lenders offer 2-, 3-, or 5-year structures instead, with interest-only periods for borrowers who need more runway before a sale, refinance, or entitlement process wraps up. There’s no rent to service the payment during the hold. So many lenders build an interest reserve into the loan proceeds, rather than expecting the borrower to carry costs out of pocket.
That reserve acts as the substitute for income underwriting on a rental deal. The lender doesn’t qualify the file against a coverage ratio. Instead, it qualifies the file against enough reserve capital to cover carrying costs until the land sells, refinances, or gets built out. This is exactly why the exit plan gets scrutinized before the file ever moves to closing. A lender funding a parcel with no income stream needs to know precisely how the loan gets repaid. That could mean sale to a builder, refinance into construction financing once entitlements clear, or, for a buy-and-hold investor, eventual refinance into long-term financing once a structure exists and produces rent.
Practitioners who work land files across a range of lenders tend to notice the same pattern. A strong, specific exit plan moves a marginal file into an approvable one faster than almost any other single factor, including a slightly better credit score. That plan might name a buyer type, target an entitlement date, or point to a construction-takeout lender already lined up.
Where the General Rule Breaks: Edge Cases
The 50%–65% LTV convention isn’t fixed. A few situations move it meaningfully in either direction. Every figure here varies by lender and program. Guidelines, property type, leverage, and credit profile all apply.
Entitlement progress changes leverage more than almost anything else. A parcel that’s cleared zoning and permitting milestones gets underwritten differently than raw acreage with no approvals at all. The lending decision leans heavily on land value and development stage, rather than the dirt alone.
Full purchase-price funding happens, but it’s rare. Scotsman Guide notes that some lenders will fund the full purchase price of a parcel if circumstances are right. That’s typically reserved for an unusually strong site or a sponsor with a deep development track record, not the standard first-time buyer scenario.
Bridge-to-permanent stacking is the common pattern, not the exception. Land loans are frequently structured as a stepping stone. The borrower uses a short-term land loan to secure the site. Then they line up construction financing, or, further down the line, long-term rental financing once something is built and leased.
Credit issues and raw land collateral compound. A borrower with a credit blemish is, on its own, a reason a bank walks away. A raw land deal is, on its own, another reason too. Put them together, and the file pushes firmly into hard money territory with little room to negotiate leverage upward.
From Raw Land to a Rental Property: The Refinance Path
For a rental-property investor, hard money on raw land is almost always a bridge step, not an end state. The sequence runs like this: land acquisition, then entitlement or construction, then a stabilized, rent-producing property, then refinance into long-term financing. There’s no version of a DSCR loan that originates directly against bare land. DSCR lender review runs on the property’s rental income clearing its payment, and land has no rent to measure against. Investors sometimes discover this the hard way. They assume a 30-year rental loan is available on a cheap parcel. It isn’t. None of the appraisal frameworks that generate a rent figure used for lender review — the Fannie Mae Selling Guide’s Form 1007 single-family rent schedule, or Form 1025 for two-to-four unit properties — have anything to analyze on bare dirt.
Once a structure exists and is producing, or immediately capable of producing, documented rent, the deal moves into different territory entirely. Lendmire is a mortgage broker (NMLS# 2371349) that arranges DSCR investor loans through select lenders across a network spanning 40 markets, including Washington, D.C. Lendmire typically sees these refinance files sized against how comfortably rent clears the new payment. That’s a coverage floor that starts around 1.00x on select programs in the network. Stronger ratios generally open better leverage and terms, subject to lender guidelines, credit profile, and property review. Lendmire’s complete DSCR loans guide walks through how that qualification math works once a build is finished and leased. Hard money and DSCR financing aren’t competing products here. They’re sequential steps in the same build-to-rent strategy. Investors planning that path from the outset tend to size the land loan with the eventual refinance already in mind.
DSCR loans are business-purpose investor loans. They’re reviewed differently than an owner-occupied mortgage, since they’re built around the property’s income rather than a personal debt-to-income calculation.
Common Misconceptions, Corrected
“Any hard money lender will fund a raw land deal.” Not true. Many private and bridge lenders that happily do fix-and-flip or rental-backed loans explicitly avoid raw land. There’s no income to lean on, and no renovation value-add either. The pool of lenders willing to touch bare dirt is meaningfully smaller than the pool willing to do rehab or rental-property bridge loans.
“I’ll buy land cheap and refinance into a DSCR loan once I build.” The sequencing is right, but the timing assumption usually isn’t. A DSCR loan can’t be originated on vacant land at all. It only becomes possible after there’s a structure with documented or immediately achievable rental income.
“LTV on land should look similar to LTV on a house or a flip.” It doesn’t, and it’s not close. General hard money conventions run meaningfully higher on income-producing or renovation-backed collateral than on raw land. Land gets priced at the conservative end of the spectrum, because there’s nothing backstopping the value but the dirt itself.
“Non-recourse is standard in private lending, so it applies here too.” Non-recourse land loans are the exception. Personal guarantees are standard on land specifically, since there’s no income stream behind the collateral.
Tax treatment can depend on how the land is used and held. Investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Loan approval is never guaranteed, and nothing here is a commitment to lend. Every scenario described here is subject to lender approval and to borrower, property, and program guidelines, which vary and can change. This article is general information, not financial, legal, or tax advice.
Frequently Asked Questions
Can I get a hard money raw land loan with no down payment?
It’s uncommon, but not impossible if a borrower has enough equity in a second property to cross-collateralize instead of putting cash down. Most files still carry a real down payment requirement. Lenders that waive cash down typically compensate with lower overall leverage or a stronger guarantee structure.
How much can I actually borrow against raw land?
Less than most investors expect, coming from a rental-property or fix-and-flip background. Land-specific leverage generally lands well below general hard money conventions — often closer to half the appraised value. There’s no income or renovation budget backing the number, only the dirt itself.
Can I use a DSCR loan to buy vacant land?
No. DSCR loans qualify against the property’s rental income clearing its payment. Raw land produces no rent, so there’s no coverage ratio to calculate. A DSCR refinance only becomes possible once a structure exists and is producing, or is immediately capable of producing, documented rental income.
Does entitled land qualify for better leverage than raw land?
Generally, yes. Land that has cleared zoning and permitting milestones is underwritten with more confidence than unentitled acreage. The lending decision leans heavily on development stage in addition to bare-land value.
What happens when the hard money land loan term ends?
The borrower executes the exit plan agreed to at closing. That’s usually a sale, a refinance into construction financing, or, for a buy-and-hold investor, a refinance into long-term rental financing once a structure is built and leased. Lenders confirm this plan before funding, precisely because there’s no income stream to fall back on if it doesn’t materialize.
If you’re buying or refinancing a rental property once construction is done and want to see how the numbers work, Lendmire can help compare DSCR loan options based on the property’s income, credit profile, leverage, and investor goals. Reach the team at 828-256-2183 or through a pricing quote request.
Many investors treat hard money as the acquisition tool and plan the exit up front – see refinancing out of a hard money loan with a DSCR loan.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 40 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review. This works well for self-employed operators and for portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investment property review
See how the DSCR math works for your investment property
Lendmire can review rent, leverage, property type, and DSCR fit before you get too far into the deal.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Scotsman Guide – Stick Your Landing
2. Montegra Capital – Got a Raw Deal? The Basics of Financing Undeveloped Land Loans
3. Scotsman Guide – Mine the Hard Money Landscape
4. Fannie Mae Selling Guide – Rental Income (B3-3.8-01)
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.
