Every loan application we get asks one question before anything else: how will you pay us off? That is your exit. On a short term land loan, the exit matters more than the rate. A borrower with a clear exit pays a few months of interest and moves on. A borrower without one pays interest while the land sits. This page walks through the exits our borrowers actually use, what each one costs, and how to pick one before you buy.
What is an exit strategy on a land loan?
Your plan to pay off the loan: sell the land for cash, sell it on terms and sell the note, sell lots, or refinance.
Our loans are short term and interest only, with a 2 year term. You are not meant to pay them down over 30 years. You buy the land, add value or find the right buyer, and pay us off from that sale. We underwrite the land and the exit together, so we ask about it on the quote page and the application.
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Get a Free QuoteApply NowWhat exits do your borrowers use?
Four: a cash resale, a resale on terms with the note sold to us, a subdivide sold lot by lot, or a refinance.
| Exit | How the loan gets paid off | Real deal we funded |
|---|---|---|
| 1. Cash resale | The buyer's cash pays us off at the resale closing | Florida, 5 acres: resold in 6 months. Ohio, 15 acres: resold to a cash buyer in 9 months |
| 2. Resale on terms, sell the note | We buy your buyer's note at closing, and the proceeds pay off our loan | North Carolina, 8 acres: resold on terms in 7 months, note sold to us |
| 3. Subdivide and sell lots | Each lot sale pays a partial release, the last lot pays off the rest | Tennessee, 18 acres: three lots sold on terms over 11 months |
| 4. Refinance or extend | A new loan pays us off, or we extend after the 2 year term | See balloon refinance and cash out loans |
Every loan case study on our site was a land flip. You can read all of them on the case studies page.
How does a cash resale pay off the loan?
The title company or closing attorney pays us from the sale proceeds, and you keep the rest.
This is the simplest exit. You buy below market, list the land at retail, and sell to a buyer paying cash or bringing their own loan. At closing, our payoff comes out first: the principal, any interest owed, and the 2% exit fee. Request a payoff figure on the payoff request page a week or two before closing.
Takeaway: a cash resale works best on land priced for the local market, where buyers can pay cash or get their own loan. Read how to sell land fast if the listing is slow.
How does selling on terms and selling the note pay off the loan?
You sell the land with owner financing, we buy your buyer's note at the same closing, and that cash pays off our loan.
Most rural land buyers cannot get a bank loan, so offering terms brings more buyers and often a higher price. The problem is that terms leave your cash tied up in a note for years. We solve that by buying the note at closing for 80% to 90% of the balance. With 20% down from your buyer, sellers usually collect 84% to 92% of the sale price at closing, and our loan is paid off out of that cash.
We walk through every dollar of one example deal in finance the land and sell the note at closing. Before you list, check the note terms we buy on our note buying criteria page.
Takeaway: set your note terms before you list, so the note you create is one we can buy at closing.
How does a subdivide exit work?
You sell lots one at a time, pay a release price as each lot closes, and pay off the balance with the last lots.
On a subdivide, the loan has a partial release clause. Each lot you sell releases from our lien when you pay its release price. You can sell each lot for cash or on terms, and sell those notes to us as they close. We explain how releases are priced in how partial release clauses work, and the loan itself on subdivide financing.
Takeaway: a subdivide takes longer than a single flip, so plan your hold time around the plat, not around the listing. See how long plat approval takes.
Can I refinance instead of selling?
Yes. If you decide to keep the land, you can refinance with another lender, or ask us about an extension after the 2 year term.
Some borrowers change plans and want to hold. We also offer extensions after the 24 month term. If you already own the land free and clear and want cash out of it, see land cash out loans. If a balloon is coming due on another lender's loan, see balloon refinance.
What if my plan is to build?
We fund land purchases only, so a construction loan or your own cash would need to pay us off before you build.
We do not fund construction, site work, entitlements, or soft costs. If you plan to build, line up the construction lender first and ask them whether they will pay off our loan at their closing. Our loans are business purpose only, so land for your own home does not qualify. See business purpose vs owner occupied land loans.
Does the 14% to 16% rate still make sense on a short hold?
On a short hold, the rate matters less than it looks. Speed and a sure close usually matter more.
Our rate is 14% interest only at $100K and up, and 16% under $100K. On a $100,000 loan held 6 months, total cost is about $9,750: $7,000 of interest, a $2,000 exit fee, the $600 closing fee, and $150 of servicing. Each 1% of rate on that same loan and hold is $500. A bank loan at a lower rate can take weeks longer and needs an appraisal, and many banks do not lend on raw land at all. If the slower loan costs you the deal, the lower rate saves nothing. We make that case in interest rates don't matter if you lose the deal.
What the rate costs on a short hold ($100,000 loan, 14%)
Takeaway: the shorter and clearer your exit, the less the rate matters. Run your own numbers on the land loan calculator.
What happens if my exit takes longer than planned?
Interest keeps running monthly, and you have up to the 2 year term, with extensions offered after that.
Plans slip. A listing sits, a buyer falls through, or a plat takes longer. You keep paying monthly interest while you work the exit. Minimum interest is 5 months: interest is paid monthly starting 30 days after closing, and any unpaid months through month 5 are collected at payoff. If your first exit stalls, the other exits on this page are your backup. A cash listing that is not moving can often sell faster on terms. Read why is my land not selling for the usual fixes.
What about outdoor storage loans?
Storage loans run 1 year, so plan the exit before you buy: a sale or a refinance.
Truck parking, RV, and boat storage lots are valued on income. See outdoor storage financing and what lenders want in a truck yard rent roll.
Frequently Asked Questions
What is an exit strategy on a land loan?
It is how you plan to pay off the loan. Damen Capital borrowers usually exit by reselling for cash, reselling with owner financing and selling the note to us at closing, selling subdivided lots, or refinancing.
Can I pay off my land loan by selling the note?
Yes. If you resell with owner financing, Damen Capital can buy your buyer's note at closing for 80% to 90% of the balance, and the proceeds pay off the land loan in the same closing.
Is there a prepayment penalty on Damen Capital land loans?
There is a 5 month minimum interest and a 2% exit fee at payoff. After month 5 you can pay off any time with no added charge beyond the exit fee.
What if I cannot sell the land within 2 years?
Damen Capital offers extensions after the 24 month term. You can also refinance with another lender.
Do you fund construction as an exit?
No. Damen Capital funds land purchases only. If you plan to build, a construction lender or your own cash needs to pay off the land loan first.