Selling lots on owner financing with a loan on the land? Most lenders make you pay a release on every lot you sell, even when your buyer puts 5% down. This calculator shows what that costs you in cash, next to what happens when your lender lets you wrap the loan instead.
Wrap vs release calculator
Pay a release on every lot
Wrap our loan
Principal and interest only, no taxes, insurance, or servicing. Assumes every lot sells on terms with the same price, down payment, and note. Example only, not an offer. Lots under 10 acres need a perc test showing a conventional septic system. Your price, rate, and terms will be different.
Watch: Wrap Financing in 4 Minutes
In this video I explain wrap financing for land and why most land lenders refuse it. A wrap lets you sell on owner financing while your own loan stays in place: your buyer pays you, and you keep paying your lender. Most lenders block that with a due on sale clause and make you pay a release on every lot instead. On a 40 acre tract split into eight lots sold with 5% down, that means putting over $106,000 of your own cash into releases while your buyers pay you over 10 years. With our program, our loan stays in place and becomes a long term loan at the same rate. You keep every down payment, your buyers pay you about $6,500 a month, and you pay us about $1,517. See the full program on our wrap financing page.
What is a release price on a land loan?
It is what your lender charges to take its lien off one lot so you can sell it.
When a loan covers a whole tract, you cannot give a buyer clear title to one lot until the lender releases it. The release price is usually at least that lot's share of the loan, and some lenders add a premium on top. Check your loan documents for the real number. More in wrap financing vs paying releases.
Why do releases drain your cash when you sell on terms?
Because the release is due today, but your buyer pays you over years.
A cash buyer's money pays the release at closing. An owner financing buyer brings only the down payment, so you cover the rest of the release yourself. On eight lots that adds up fast: in the default numbers above, you put over $106,000 into releases while your buyers pay you back over 10 years. Land investors call this the liquidity crunch, and the usual fix is selling the notes at a discount just to get the cash back.
How does a wrap change the math?
Nothing is due to us when a lot sells, so the down payments and the monthly spread are yours.
With a wrap, our loan stays in place and we modify it into a long term loan at the same rate as your purchase loan. Your buyers pay you, and you make one payment to us. Your buyers' notes can carry a lower rate than our loan and it still works, because together they are much bigger than our loan. In the default numbers they are more than three times its size.
When should I pay releases instead of wrapping?
Pay releases on lots that sell for cash. Wrap the lots you sell on terms.
A cash sale covers the release at closing, so there is no crunch. A terms sale is where releases hurt. Many investors do both on the same tract, and you can still sell some notes later when you want cash. When a note sells or a buyer pays off early, you can pay down our loan.
Which land lenders allow wraps?
Damen Capital does. Most land lenders will not, because their loans are short term and carry a due on sale clause. We fund your land flip or subdivide purchase, keep our loan in place when you sell on owner financing, and turn it into a long term loan. Loans run $30K to $1M for investors borrowing in an entity for a business purpose, on 2 acres or more with legal access. See wrap financing for land.
How is our loan different from most land lenders?
We let you wrap our loan. Most land lenders do not. If you sell on owner financing, a typical land lender calls the loan or makes you pay a release on every lot, even when your buyer only put 5% down. We keep our loan in place and turn it into a long term loan, so your buyers pay you and you pay us.
| Most land lenders | Damen Capital | |
|---|---|---|
| You sell on owner financing | Due on sale clause: the loan can be called | Wraps allowed. Our loan stays in place |
| Each lot you sell on terms | You pay a release, often out of your own pocket | Nothing is due to us |
| After you sell on terms | Short term loan, expected to be paid off | Modified into a long term loan at the same rate |
| Your buyers' down payments | Go toward the release | Stay with you |
| A lot sells for cash | You pay the release | You pay the release, same as anyone |
Rule of thumb: if you sell for cash, pay releases. If you sell on terms, wrap. Run your own deal in the wrap vs release calculator.
Frequently Asked Questions
How do I figure the cash I need for releases?
Subtract each buyer's down payment from the release price on that lot. A $16,250 release minus a $2,995 down payment is $13,255 out of your pocket per lot, or $106,040 across eight lots.
Do you allow wraps on land loans?
Yes. We fund your land flip or subdivide purchase and keep our loan in place when you sell on owner financing. Your buyers pay you and you keep paying us.
What rate is the long term loan after I sell on terms?
The same rate as your purchase loan: 14% on loans of $100,000 and up, 16% under $100,000.
When should I pay releases instead of wrapping?
When the lot sells for cash. The buyer's money pays the release at closing, so nothing comes out of your pocket. Wraps are for lots you sell on terms.