Developer Horizontal Land
Financing land development and site preparation.
Developer Horizontal Land
A horizontal commercial loan is a specialized type of financing used primarily for large-scale land development projects, such as subdividing or preparing land for future commercial or residential construction. It is called “horizontal” because it often funds the infrastructure and groundwork—like roads, utilities, and site improvements—before building actual structures.
Funding Site Preparation
Creating Value
Regarding tax benefits, borrowers loans may enjoy:
- Annual Tax Deductions: Mortgage interest payments on the loan are typically tax-deductible, reducing taxable income.
- Depreciation Benefits: The property can be depreciated over time, leading to annual deductions that improve cash flow and reduce tax liability.
- Operational Expense Deductions: Maintenance, insurance, and management costs associated with the land development are deductible, further lowering taxable income.
For real estate developers, a horizontal commercial loan helps by:
Funding Site Preparation:
Covering costs related to grading, road building, utilities, and other infrastructure needed to ready the land for development.
Facilitating Land Development:
Supporting the initial phases of large-scale projects where construction on buildings hasn’t yet begun.
Reducing Financial Risk:
Allowing developers to develop land cost-effectively before seeking vertical (building) construction financing.
Creating Value:
Improving raw land to increase its market value, making it easier to attract investors or secure further financing for building structures later.
Summary, developers use horizontal commercial loans to prepare and develop land efficiently, laying the groundwork for future buildings and maximizing the land’s potential value.
