You’ve found a motivated seller, negotiated a killer deal, and have a buyer lined up, ready to close. But, there’s a snag, you are missing the funds to actually purchase property. This is where wholesalers transactional funding comes into play, and knowing how to get access funding fast is key.
Many real estate wholesalers face this problem. Understanding how to use wholesalers transactional funding can open up a bunch of new opportunities to close deal fast and lock deals in.
Table of Contents:
- What is Wholesalers Transactional Funding?
- Understanding the Double Closing Process
- Cost Breakdown of Transactional Funding
- Earnest Money Deposit (EMD) Loans in Wholesale Real Estate
- Leveraging Seller Carry Transactions
- Benefits of Transactional Funding for Wholesalers
- How to Qualify for Wholesalers Transactional Funding
- Maximizing Your Wholesale Profits
- Finding End Buyers with your Transactional Funding Company
- FAQs about wholesalers transactional funding
- Conclusion
What is Wholesalers Transactional Funding?
Transactional funding is a short-term money loan. It lets real estate wholesalers buy a home and quickly resell it, often within the same day or a few days.
This type of funding is specifically for double closings or “A-B, B-C” transactions. Here, “A” is the property seller, “B” is the wholesaler (you), and “C” is the end buyer.
Why Use Transactional Funding?
There are two primary reasons why a real estate investor might choose this method. Maybe you have a contract that isn’t assignable.
This is frequent when dealing with MLS properties, bank-owned properties, or those owned by government entities. Another might be to keep your wholesale profit a secret from the end buyer.
Sometimes a buyer can get frustrated at a high fee. Transaction funding for wholesalers lets you keep those numbers away from “C.”
Understanding the Double Closing Process
The core of many successful wholesale deals is the double closing. This is when the purchase and resale happen back to back in 2 closing appointments that happen one after the other.
Traditional lending can move slower than most want. This means moving quickly with traditional money is tough.
How a Double Close Deal Happens
You first find an amazing deal.
A double closing involves two separate transactions. First, you (Party B) purchase property from the seller (Party A). Then, you immediately sell property to the end buyer (Party C).
The beauty of this approach is you never actually take ownership for an extended period. Because of that, there’s much less risk. Transactional funding covers the initial purchase, and the funds from the end buyer pay off the money loans.
Cost Breakdown of Transactional Funding
Costs vary depending on the private money lender and the specifics of the deal. Some private lenders offer different rates based on loan size.
Typical Fee Structures
Some private lenders have rate structures like those here at FundMyDoubleClose.com.
For property loans up to $1,000,000, a 1% fee is standard. If the loan amount gets into the $1,000,000 to $2,000,000 range, a 2% fee might be applied, requiring a few business days.
Loans ranging between $2,000,000 and $5,000,000 can come with a 3% fee. With this amount, anticipate a longer closing schedule that extends across weeks.
If money needs to stay longer, an added rate per day is put on. Remember, added charges can occur if using different people for escrow and title meet or with documents.
Earnest Money Deposit (EMD) Loans in Wholesale Real Estate
An earnest money deposit is given as assurance. This deposit shows commitment to your intention of acquiring real estate.
It protects the seller. This can also provide challenges to wholesalers who don’t have cash to lock up while finding a cash buyer. Some companies help by providing EMD loans, giving you the financial resources.
EMD Loan Fee Structure
The cost of EMD loans can vary.
There is normally an upfront fee when setting this all up.
Think of this as assurance you’re doing your best and being legit.
Leveraging Seller Carry Transactions
Seller carry transactions offer an alternative method in the wholesale landscape. They occur when the seller directly finances the buyer’s purchase.
This can be useful in getting difficult deals to get through. Think creatively in different situations.
Structuring Seller Carry Deals
Seller carry deals share common fee setups that we covered before with different price ranges. Funding deals that hit 7 figures means picking specific closing partners and sometimes different kinds of forms.
Benefits of Transactional Funding for Wholesalers
Speed is key. Funding is quick with the wholesale deal completing quickly too.
No credit checks mean no big requirements needed. Keep a bulk of profits that would otherwise go to waste.
Working with a Reliable Funding Partner
You have someone helping you step by step, providing guidance on next steps. You have help from those in the trenches with experience.
Having someone by your side that’s been through hundreds if not thousands of scenarios gives huge benefit. It helps give you the knowledge so you close deal with less headaches.
How to Qualify for Wholesalers Transactional Funding
The legal criteria needs are typically straightforward. You’ll normally need a signed contract with a motivated seller (“A”).
Have a signed contract to purchase. A business, like an LLC, must be ready to go.
Have an end buyer (“C”) lined up. The funds must be in escrow account. The title company must have send written confirmation that the end-buyer’s cash is in their account.
Getting a Proof of Funds Letter
A Proof of Funds (POF) letter shows the seller you can do it. This can really help push it all together.
The lender will give a POF. This letter will tell the seller they you’re getting funds.
Maximizing Your Wholesale Profits
Transactional funding allows you to close deals quickly without using personal cash. This quick turnaround allows real estate wholesalers to scale and build their businesses, ultimately doing much larger deals,
By funding deals swiftly, you get a return on a faster scale. By going through the process frequently, you have systems put in place to build something scalable.
Avoiding Common Pitfalls
One frequent challenge is misunderstanding all steps needed. Do your due dilligence.
Finding End Buyers with your Transactional Funding Company
Some transactional funding companies offer more help, than funding alone. You can partner up with someone in the market to get ideas.
Some companies, partner to offer off market deals. An end buyer could already exist without having to look elsewhere.
FAQs about wholesalers transactional funding
What is an example of transactional funding?
Transactional funding happens when a wholesale real estate investors (Party B) gets a short-term loan. The wholesaler uses it to buy a property from a seller (Party A). Shortly after, they sell to an end buyer (Party C).
What services offered by wholesalers transactional funding?
Wholesalers transactional funding provides loans for double closings. It offers Earnest Money Deposit (EMD) loans. And, it even facilitates seller carry transactions to help real estate deals move forward.
What is transactional funding for wholesaling real estate?
Transactional funding real estate is a short-term loan. It lets a real estate wholesaler buy a property without their own money, reselling quickly.
What are the requirements for transactional funding?
Requirements involve a signed agreement, motivated seller and company formed. The most critical is to get an end buyer locked in.
Here’s a table summarizing the typical fee structure for transactional funding:| Loan Amount | Fee | Closing Timeline |
|---|---|---|
| Up to $1,000,000 | 1% | Same day or a few days |
| $1,000,000 – $2,000,000 | 2% | A few business days |
| $2,000,000 – $5,000,000 | 3% | Weeks |
Conclusion
For those just getting into real estate investing, or even more so if you are in a tougher climate with the interest rates, this has become important. Completing deals can present difficult problems that demand good guidance.
Understanding the power of the right strategy is essential. Getting educated, forming your processes, and finding partners is all critical. All of this impacts the speed and number of completed deals with wholesalers transactional funding.
At FundMyDoubleClose.com, we specialize in transactional lending solutions tailored for real estate investors and wholesalers. Whether you're interested in double closings, earnest money deposit (EMD) loans, or seller carry transactions, our team is here to assist you.
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