HELOC would definitely be the easiest way to go. You likely won’t get the best rates, but you won’t have to deal with the lender having to value and underwrite the underlying land asset. You will likely save some closing costs as well, as it would be up to you as the whether you get an appraisal, survey, etc. I generally skip those things and the associated costs unless I’ve got specific concerns. All of my recent land buys have been quick close cash deals with no contingencies other than standard title work.
If you go the above route, don’t underestimate the value of that. You should get a better price since you are removing all of the risk from the seller. Unlike developed property, getting traditional financing on raw land is less straightforward and means that you don’t have as many buyers able to complete the transaction. I’d guess that a substantially higher % of land deals fall through due to financing roadblocks than traditional single family home purchases. Use that to your advantage.
As for traditional financing, it will depend a lot of the actual land you are purchasing as to financing options. A lot in a platted, maintained subdivision with utilities and active HOA will be easier to finance than a 20 acre parcel in the middle of nowhere with no maintained roads. As a general rule, the more broadly and easily marketable the property is, the easier time you’ll have getting financing.
And don’t rule out owner financing if the property is not broadly marketable. Owners of these properties understand the difficulty of potential buyers getting financing, so often they are forced to finance it themselves. Which is why coming in with cash (or cash from your HELOC) is often a big advantage. I usually try to tease out the current owner’s financial situation to determine how important immediate cash is to them. For example, one property I bought last year had a tax lien on it, was tied up in a divorce settlement and the dad also had child support judgement against him. I was also able to ascertain that dad likely also had a gambling problem. All of this was discovered through public records research and social media research on the internet. And the property had some issues that made it difficult to finance. Know all of this allowed me to buy it at 30% less than the asking price. I got a good deal, he got some cash, and hopefully his kids got some Christmas presents.
Finally, don’t neglect the issue of water. Out west, you generally do not have a legal right to the water on you property. That right is sold separately. If the development where you buy your lot has a community or municipal water system, then you’re golden. If not, you need to make sure there are water rights that are included in the deal so that you can drill a well. In addition, if you are going to drill a well you should do research on neighboring properties to find out how deep they are having to go to find water. This is especially important if you land is up in in the mountains. I know people who got a “great deal” on a 5-20 acre lot for $50-100k only to find out after the bought it that it was going to cost another $50k to drill a 500ft well. Septic is similar. Make sure there are lots close by that have been able to get their septics permitted. There’s a decent amount of consistency in an area as to whether the soils will perk or not. But if the lot you are looking at seems exceptionally rocky or otherwise causes you concern as to whether it will perk, you might want to have someone look at it or do your own perk test.
