Interest Rates Don't Matter If You Lose the Deal: Why Speed Beats Rate for Land Investors

By Eric Scharaga | Updated November 2024 | 9 min read

I recently watched an investor spend three weeks negotiating a 1% lower interest rate on a $80,000 land loan. While he was haggling over terms, another investor swooped in and bought the property cash.

The first investor saved exactly $0 by getting a better rate—because he lost the deal.

This happens every single day in land investing. Investors obsess over interest rates while competitors who focus on execution close deals and make money.

Here's the truth most investors learn too late: Access to capital is more important than the cost of capital.

Let me show you the math, the psychology, and the strategy behind why speed beats rate almost every time.

The Hidden Cost of "Saving" on Interest Rates

Let's start with a real scenario I see constantly:

The Deal:

• 10 acres of vacant land

• Purchase price: $100,000

• After-marketing value: $150,000 (quick sale within 6 months)

• Profit potential: $50,000

Investor A (The Rate Shopper):

• Applies to 5 different lenders

• Compares rates obsessively

• Finally gets 10% rate from a bank after 45 days

• Returns to seller... who already accepted another offer

• Profit: $0

Investor B (The Execution Focused):

• Calls private lender, gets approved in 48 hours

• Rate: 14%

• Closes in 7 days

• Markets and sells in 4 months

• Gross profit: $50,000

• Interest cost on $80K loan for 4 months: $3,733

• Net profit: $46,267

Investor B "overpaid" by 4% in interest rate but made $46,267.

Investor A got a "better" rate but made $0.

Which investor won?

The Real Math: Opportunity Cost vs. Interest Cost

Most investors dramatically overestimate how much interest rates actually matter on short-term land deals.

Let's break down the actual cost difference:

Scenario: $100,000 Land Purchase, $80,000 Loan

12% Interest Rate (Private Lender):

• Monthly payment (interest-only): $800

• 6-month hold: $4,800 total interest

• 12-month hold: $9,600 total interest

8% Interest Rate (Bank - If You Can Get It):

• Monthly payment (interest-only): $533

• 6-month hold: $3,200 total interest

• 12-month hold: $6,400 total interest

The "Savings" with Lower Rate:

• 6 months: $1,600 saved

• 12 months: $3,200 saved

Now factor in opportunity cost:

If the bank takes 60 days to approve (and they often decline vacant land loans anyway), you've lost:

• 2 months of potential profit

• The deal itself (seller moves on)

• Your time analyzing and applying

• Your credibility with the seller

What's the opportunity worth?

If you could have bought, marketed, and sold the property in 6 months with private financing, you made $45,000+ net profit.

You "saved" $1,600 on interest but gave up $45,000 in profit.

That's not savings. That's expensive.

Why Banks Don't Work for Vacant Land (Usually)

Let me be direct: Most banks will not lend on vacant land. Here's why:

Bank Land Lending Reality:

• 70-80% of banks don't offer vacant land loans at all

• Those that do require 35-50% down payment

• Approval takes 45-90 days minimum

• Require perfect credit (720+)

• Want 2 years tax returns, W2s, bank statements

• Often decline at the last minute

• May require survey, environmental reports, appraisal ($3,000-5,000 in costs)

Meanwhile, the Deal is Dying:

• Seller gets other offers

• Property goes under contract

• Another investor closes faster

• You're back to square one

Time kills all deals. Banks take time. Therefore, banks kill deals.

When Interest Rates Actually DO Matter

I'm not saying rates never matter. They do—in specific situations:

✓ Rates Matter When:

1. Long-Term Hold (3+ Years) If you're buying land to hold for 5 years, a 2-3% rate difference adds up significantly:

• $100K loan at 8% for 5 years: $40,000 interest

• $100K loan at 14% for 5 years: $70,000 interest

• Difference: $30,000

For long holds, take time to get the best rate.

2. Large Portfolio Loans If you're refinancing 10 properties worth $2M, a 1% difference equals $20,000/year. Worth negotiating.

3. Tight Margin Deals If your profit is only $10,000 and high interest costs eat $6,000, maybe the deal doesn't work. But most land deals have much wider margins.

4. No Time Pressure If the property isn't competitive and you have 90 days to close, shop around. But this is rare in land investing.

5. Permanent Financing If you're getting a 15-30 year mortgage, yes, get the best rate. But most land deals are short-term bridge loans.

❌ Rates DON'T Matter When:

1. Quick Flip (Under 12 Months) The difference between 10% and 14% over 6 months is negligible compared to your profit potential.

2. Competitive Market If other investors are bidding, speed wins. Period.

3. Wholesale Deals Wholesaling to another investor in 30-60 days? Your interest cost is maybe $1,000-2,000. Who cares about rate?

4. Time-Sensitive Opportunities Foreclosure auction? Tax sale? Motivated seller? Close fast or lose.

5. Scaling Your Business Every closed deal teaches you more and generates capital for the next one. Velocity matters more than perfection.

The Psychology of Rate Shopping

Why do investors obsess over rates when they should focus on execution?

Reason #1: Tangible vs. Intangible

• Interest rate is tangible (10% vs 14%)

• Opportunity cost is intangible (the deal you didn't get)

• Our brains prefer tangible metrics, even when intangible costs are higher

Reason #2: Control Illusion

• You can control which lender you choose

• You can't control whether the seller waits for you

• So investors focus on what they can control (rate shopping) and ignore what matters (deal execution)

Reason #3: Scarcity Mindset

• "This might be my only deal this year, so I need the perfect terms"

• Reality: There are always more deals if you move fast and build momentum

Reason #4: Misunderstanding the Math

• Most investors don't calculate the actual dollar difference

• 4% rate difference sounds huge

• $2,000 actual cost difference on a 6-month deal sounds reasonable

How to Calculate If Speed or Rate Matters More

Use this simple framework:

The Speed vs. Rate Decision Tree:

Step 1: What's your hold period?

• Under 12 months → Speed matters more

• 1-3 years → Speed matters somewhat more

• 3+ years → Rate matters more

Step 2: How competitive is the deal?

• Multiple buyers → Speed wins

• You're the only buyer → You have time for rate shopping

Step 3: What's the actual dollar difference?

• Calculate interest cost at Rate A vs. Rate B

• If difference is under 5% of profit → Speed wins

• If difference is over 20% of profit → Maybe wait for better rate

Step 4: What's the opportunity cost?

• Could you deploy that capital elsewhere?

• What's your monthly deal flow?

• How much profit per month are you making?

Example Calculation:

Deal: $80,000 land purchase, 6-month flip, $30,000 profit target

Option A: Private Lender

• Rate: 14%

• Close in 7 days

• Interest cost (6 months): $3,360

• Net profit: $26,640

• Certainty: 95% approval

Option B: Bank

• Rate: 9%

• Close in 60 days (if approved)

• Interest cost (6 months): $2,160

• "Savings": $1,200

• Certainty: 30% approval for vacant land

• Risk: Lose deal while waiting

Expected Value Calculation:

• Option A: $26,640 × 95% = $25,308 expected profit

• Option B: $28,440 × 30% = $8,532 expected profit

Option A is worth $16,776 more in expected value despite the "higher" rate.

Real Stories: Speed Wins

Story #1: The $200,000 Mistake

Mark found 40 acres for $150,000 that he could subdivide into 8 lots worth $50,000 each ($400,000 total).

He applied to his local bank for an 8% loan. After 6 weeks, they declined (too much risk on vacant land).

He applied to another bank. Same story—45 days, then declined.

By month 3, the seller accepted another offer from an investor who closed in 10 days with private financing at 13%.

Mark "saved" on interest but lost a $200,000+ profit opportunity.

Story #2: The Repeat Buyer

Jennifer uses private financing at 13-14% for all her land deals. She flips 2-3 properties per month.

Over 12 months:

• Acquired 28 properties

• Average hold time: 4 months

• Average profit per deal: $22,000

• Total profit: $616,000

• Total interest paid: ~$65,000

• Net profit: $551,000

Her competitor shops for 9-10% rates and closes 6 deals per year:

• Total profit: $132,000

• Total interest paid: ~$15,000

• Net profit: $117,000

Jennifer paid $50,000 MORE in interest but made $434,000 MORE in profit.

Story #3: The Auction Win

Tom found a property at a county tax sale for $60,000 (worth $120,000). Sale was in 5 days. He needed cash or proof of funds.

He called his bank: "We can review your loan request in 30-45 days."

He called us: "We can close in 3 days. What's the property address?"

He bought the property, resold in 2 months for $115,000.

• Profit: $55,000

• Interest paid (2 months at 14%): $1,400

• Net: $53,600

If he'd waited for his bank's 9% rate, he wouldn't have bought the property at all.

What Actually Drives ROI in Land Investing

Let's look at what determines your annual return:

Factors That Matter Most (In Order):

1. Deal Flow (50% of Success)

• How many deals you analyze monthly

• Your marketing effectiveness

• Your reputation in the market

2. Execution Speed (30% of Success)

• How fast you can close

• Your credibility with sellers

• Your financing pre-approval

3. Deal Selection (15% of Success)

• Buying at the right price

• Understanding the market

• Exit strategy clarity

4. Interest Rate (5% of Success)

• Yes, it matters

• No, it's not the main driver

Most investors focus 80% of their energy on the thing that matters 5%.

Smart investors focus 80% of their energy on the things that matter 95%.

The Velocity of Capital Concept

Here's a concept that changed how I think about financing:

Investor A:

• Gets 8% financing

• Closes 4 deals per year

• $20,000 profit per deal

• Total annual profit: $80,000

• Interest paid: $6,000

• Net: $74,000

Investor B:

• Gets 14% financing

• Closes 12 deals per year (speed advantage)

• $18,000 profit per deal (after higher interest)

• Total annual profit: $216,000

• Interest paid: $28,000

• Net: $188,000

Investor B paid $22,000 MORE in interest but made $114,000 MORE in profit.

The velocity of capital deployment matters more than the cost of capital.

Would you rather have $100,000 earning 8% annually, or $100,000 turning over 3 times per year at 14%?

The second option makes you more money despite the higher rate.

How to Get Fast Financing Without Overpaying

You don't have to choose between speed and reasonable rates. Here's how:

Strategy #1: Build Lender Relationships Before You Need Them

• Don't wait until you have a deal to find financing

• Get pre-approved with 2-3 private lenders

• Know your borrowing capacity

• Understand their criteria and timelines

Strategy #2: Understand What "Competitive" Rates Look Like

Current Market Rates (November 2024):

• Banks (if they lend on land): 8-11%

• Portfolio lenders: 9-12%

• Private land lenders: 12-16%

• Hard money: 14-18%

A private lender at 13-14% with fast closing isn't "expensive"—it's market rate for speed and certainty.

Strategy #3: Negotiate on What Actually Matters Instead of haggling over 1% rate difference, negotiate:

• No points at closing (saves 2-4% upfront)

• Longer terms (24 months vs 12 months)

• No prepayment penalties

• Extension options

• Higher LTV (less cash down)

Strategy #4: Calculate Total Cost, Not Just Rate

Lender A:

• Rate: 12%

• Points: 0

• Fees: $500

• Total cost on $80K for 6 months: $4,300

Lender B:

• Rate: 10%

• Points: 3 ($2,400)

• Fees: $1,500

• Total cost on $80K for 6 months: $7,900

Lender A is cheaper despite the "higher" rate.

Strategy #5: Use the Right Financing for the Right Deal

For Quick Flips (Under 6 Months): Use fast private financing at 13-15%. The speed and certainty are worth the cost.

For Long-Term Holds (2+ Years): Take time to secure lower-rate portfolio financing or bank loans. The wait is worth it.

For Portfolio Scaling: Use private financing to acquire, then refinance into lower-rate permanent financing after 12-18 months.

When Banks Actually Make Sense for Land

Banks can work in these specific situations:

✓ Use Banks When:

• You have an existing relationship and they know you

• The property is improved or ready to build

• You have 90+ days to close

• You're financing 10+ properties at once

• You need long-term financing (10+ years)

• The deal isn't competitive

Even then, have backup private financing ready.

The Cost of Delay: A Timeline Analysis

Let's see what waiting costs you:

Month 1: Found great deal, applied to bank Month 2: Bank requests more documentation Month 3: Bank orders appraisal, reviewing file Month 4: Bank declines (vacant land too risky) Month 5: Apply to second bank Month 6: Second bank also declines

Total time wasted: 6 months Deals lost: 1 Opportunity cost: $30,000-50,000 profit

Alternative timeline with private financing: Day 1-2: Apply, submit property info Day 3-4: Approval Day 5-7: Close Month 2-6: Market and sell, make profit

Common Objections (And The Truth)

Objection #1: "14% is too expensive!"

Truth: Compared to what? Compared to making $0 because you lost the deal?

On a $80K loan for 6 months, 14% costs $5,600. If the deal makes $40,000, that's a 614% annualized return on your invested capital. Is that "too expensive"?

Objection #2: "I'll just save up cash so I don't need loans."

Truth: Great! But while you're saving for 2 years, other investors are doing 20-30 deals with financing. Leverage accelerates wealth.

Objection #3: "My bank gives me 6% on houses."

Truth: Houses aren't vacant land. Banks view land as far riskier. Apples and oranges.

Objection #4: "I'll just make cash offers."

Truth: Unless you have unlimited cash, this limits your deal volume to 1-2 per year. Financing lets you do 10-20.

Objection #5: "I'll wait for rates to drop."

Truth: Even if rates drop 2-3%, you've lost 6-12 months of profits waiting. The opportunity cost is higher than the rate savings.

The Bottom Line: Play the Long Game

Successful land investors think in years and decades, not in individual transactions.

Short-term thinking: "I'll save $1,500 on this deal by getting a lower rate."

Long-term thinking: "I'll make $500,000 more over the next 5 years by closing 30 deals instead of 10."

The investors who build serious wealth:

• Move fast on good deals

• Use financing as a tool, not an obstacle

• Focus on deal flow and execution

• Optimize for velocity, not perfection

The investors who struggle:

• Wait for perfect terms

• Miss deals while rate shopping

• Do 2-3 deals per year

• Wonder why they're not scaling

Which investor will you be?

Why Damen Capital Fund Exists

I started Damen Capital because I watched talented land investors lose deals while waiting for bank approvals that never came.

Our Philosophy: Speed + Reasonable Rates + No Games = More Deals Closed

What We Offer:

• 48-hour approvals

• 7-day closings

• 13-15% rates (market competitive)

• No points at closing

• Up to 100% LTV with cross-collateralization

• Simple, transparent process

We're not the cheapest financing (banks are—if they approve). We're the fastest financing with reasonable terms that helps you actually close deals.

Key Takeaways:

• Interest rates matter less than you think on short-term deals

• Speed and certainty matter more than saving 2-3% on rate

• Calculate opportunity cost, not just interest cost

• Build lender relationships before you need them

• Focus on deal volume, not deal perfection

Ready to stop losing deals?

Get approved in 48 hours. Close in 7 days.

Call/Text: 302-526-0200 Email: eric@damencapital.com