Wrap Financing for Land Investors Keep Our Loan. Sell on Terms.

What is wrap financing on land?

A wrap is when you sell land on owner financing while your own loan stays in place. Your buyer's note wraps around our loan. The buyer pays you, and you keep paying us. You will also hear it called a wraparound mortgage, a wraparound loan, a wraparound deed of trust, a wrap note, or an all inclusive trust deed (AITD). Same idea, different names.

Land investors use wraps to sell on terms without paying off their lender first. The trouble is that most lenders will not allow it. We are a land lender that allows wraps.

Do you allow wraps on your land loans?

Yes. We fund your purchase, keep our loan in place, and let you wrap it. When you start selling on owner financing, we modify our loan into a long term loan at the same rate as your purchase loan. You collect from your buyers and pay us. You run your business the way you want.

No payoff at every lot sale. No selling notes at a discount just to raise cash for a release. Our loan simply stays where it is.

How does wrap financing work with Damen Capital?

We fund the purchase, you sell on terms, and our loan stays in place. That is the whole seller financing wrap. You buy the land with our loan, sell it or split it and sell the lots on owner financing, and keep paying us from what your buyers pay you. When you start selling on terms, we modify our loan into a long term loan at the same rate. Five steps:

1. We fund your land purchase with a land flip or subdivide loan.
2. You subdivide if you want, then sell on owner financing.
3. Our loan stays in place. Nothing is due to us when a lot sells.
4. We modify our loan into a long term loan at the same rate.
5. Your buyers pay you. You pay us.

Rule of thumb: your cash should go into the next deal, not into buying out releases.

Why won't most lenders let you wrap their loan?

Because of the due on sale clause. Most land loans are short term, and the lender wants its money back when you sell. The due on sale clause lets the lender call the whole loan. So investors end up selling notes at a discount, or using their own cash to buy releases, just to close a sale.

In my experience, that cash crunch is what slows most land investors down. You find a good tract, you sell it on terms, and then your cash is stuck in releases instead of the next deal. More on this in can I wrap my land loan?

What does a land wrap look like in numbers?

Your buyers' payments carry our loan, and the spread is yours. In an owner financing wrap, every buyer pays you each month and you make one payment to us. The down payments stay with you. As long as your buyers' notes add up to much more than our loan, the monthly income covers our payment with room to spare. Here is a simple example.

Your buyers' notes pay a lower rate than ours, and it still works. Why? Because together they are more than three times the size of our loan. Compare it with paying a release on every lot in wrap financing vs paying releases.

Example only. Lots under 10 acres need a perc test showing a conventional septic system. Your price, rate, and terms will be different.

Who is wrap financing for?

Land investors who sell on owner financing and want a lender that allows wraps. If you flip land or subdivide it and sell on terms, most lenders make you pay them off or buy a release at every sale. We keep our loan in place instead, so your cash stays free for the next deal. It fits:

• Land flippers who sell on terms
• Investors who subdivide and sell lots with owner financing
• Anyone tired of paying off a lender to close every sale

Loans are for investors borrowing in an entity for a business purpose. The land must be 2 acres or more with legal access. We do not lend in California, Arizona, Nevada, New York, New Jersey, North Dakota, South Dakota, or Vermont.

Can I still sell the notes later?

Yes. It is your business. Keep the notes for the monthly income, or sell some when you want cash. When you sell a note or a buyer pays off early, you can pay down our loan. Learn how wraps work in plain English in our wraparound mortgage guide.