An owner who needs capital usually considers two options: refinance, or sell. There is a third that most people never price, and it is the only one that raises money without either new debt or giving up the asset.
| Sell the property | Cash-out refinance | Sell the land | |
|---|---|---|---|
| Proceeds | Full value | Loan proceeds | 20–40% of value |
| Keep the building? | No | Yes | Yes |
| Keep depreciation? | No | Yes | Yes |
| Keep upside? | No | Yes | Yes |
| New debt? | No | Yes | No |
| Resets your rate? | n/a | Yes | Only if an existing fee mortgage must be retired |
| Ongoing obligation | None | Debt service | Ground rent |
The honest reading: a whole-property sale raises the most and costs the most. A refinance raises less, adds debt and resets a rate you may like. A land sale raises the least of the three and is the only one that leaves the owner holding the compounding asset with no new maturity.
If the owner is exiting the market, winding down, or the asset has a structural problem that capital does not fix, sell it. Land capital is not a rescue for a property with a broken business plan — it is sized on stabilized NOI, so a property that will not stabilize will not support meaningful rent.
It also is not the answer where land is a small fraction of value. On a vertical infill building where dirt is 10–12% of cost, the transaction is not worth the documentation.
Where it is right: land-heavy, income-producing, an owner who wants to stay in, and a use for the money that beats leaving basis in the ground.
Typically 20 to 40 percent of total value, depending on land share and coverage. You keep the rest of the asset.
A land sale is a taxable disposition of the land. Land is not subject to depreciation recapture because it was never depreciated. Confirm with your tax advisor.
Frequently yes, and people do. Speak to your qualified intermediary about your specific facts.
Only if there is an existing fee mortgage, which cannot sit ahead of an unsubordinated lease. Check its prepayment language first.
You can. The leasehold is separately transferable, subject to the lease's transfer provisions.
Send stabilized NOI and total value or cost. We will show you what the land alone raises so you can compare it against a sale and a refinance.
Email us the property