Note Investing, Seller Financing, and Building a Land Business

Eric Scharaga, founder of Damen Capital, sat down with Brandon Parker on the Legends of Land Show to talk about how note investing and seller financing fit into a land investor's business. The conversation covers everything from structuring seller-financed deals to acquisition lending, due diligence mistakes, and why notes can be a powerful complement to a land flipping operation.

Here are the key takeaways from the interview.

How Does Damen Capital Serve Land Investors?

Damen Capital serves land investors in two ways. First, through note purchasing — when a land investor sells a property with seller financing, Damen Capital buys the loan at closing so the investor can cash out immediately. The investor receives 84 to 92% of the sale price at closing (we pay 80 to 90% of the note balance, with 20% down) with no waiting for monthly payments.

Second, through acquisition loans — short-term financing designed for land investors who want to purchase properties for flipping. These work like bank loans but with far less paperwork. The property goes in the investor's name, they keep 100% of the profit, and they pay a monthly interest expense until the property sells. Most loans fall between $30,000 and $250,000.

Why Does Seller Financing Sell Land Faster?

One of the biggest themes in the interview is how seller financing accelerates sales. Eric points out that especially on higher-value parcels, buyers don't want to put down $150,000 cash — they'd rather put down $30,000 and finance the rest. Offering terms expands the buyer pool dramatically and lets sellers command premium prices.

The math works out too. A property listed at $100,000 cash will typically get offers around $90,000. That same property offered at $110,000 with financing and 20% down ($22,000), sold through Damen Capital's note program at 80 to 90% of the $88,000 note, nets the seller $92,400 to $101,200 at closing. That matches or beats the cash offer, and it sells faster to a larger pool of buyers.

How Do You Originate Notes That Hold Value?

Eric shared his framework for structuring seller-financed deals that minimize default risk and maximize resale value. The key factors are straightforward: always pull the buyer's credit score, require the largest down payment possible (30-40% is ideal, 20% minimum), keep terms relatively short at 8-10 years, and set interest rates at 10-11%. Follow these guidelines and you'll originate notes that rarely default and command top dollar if you ever want to sell them.

He also recommends not seller-financing anything under $25,000. Below that threshold, deals should be cash only — if a buyer needs terms on a sub-$25,000 property, they likely can't afford it and you'll end up taking it back.

Why Use Deeds of Trust Over Land Contracts?

The interview reinforces a point Eric makes consistently: avoid land contracts. With a land contract, the seller retains ownership — which means liability if someone gets hurt on the property, exposure if illegal activity occurs, and a murky foreclosure process that varies by state. A deed of trust puts the property in the buyer's name while giving the lender a lien and a clear, established foreclosure process if things go wrong.

States are increasingly cracking down on land contracts, and buyers who've made large down payments can file liens that are expensive to litigate. The deed of trust structure is simply more scalable and legally defensible.

How Do Notes Compare to the Stock Market?

Eric sees note investing as complementary to stock market investing, not a replacement. His main issue with stocks is volatility — every market drop costs you the time it takes to recover, effectively robbing long-term returns. Notes, done correctly, deliver predictable double-digit returns that arrive monthly, similar to bonds but with higher yields. For land investors, note income smooths out the volatility of a flip-based business while preserving the option to sell notes later if cash is needed for a bigger deal.

What Due Diligence Mistakes Should You Avoid?

For anyone considering note investing, Eric warns against jumping in too quickly — especially with land notes. Unlike residential properties where comparable sales data is abundant, land has unique issues that can seriously affect value: incorrect property lines, lack of road access, missing easements, slope problems, flood zones, and use restrictions. He recommends getting mentorship before making your first purchase, and never buying a note secured by a property you wouldn't want to own if the borrower defaults.

How Do You Get Started?

Whether you're a land investor looking to integrate seller financing into your disposition strategy or you want to explore acquisition financing for your next deal, Eric welcomes the conversation. Reach out through the quote request form or call 302-526-0200.