Transactional Funding for Wholesalers: Fast-Track Your Deals

Many real estate wholesalers face a common issue: they find a motivated seller and a great deal, but lack immediate funds. This is where transactional funding for wholesalers offers a crucial lifeline. It provides a short-term solution for securing and quickly flipping properties.

Transactional funding for wholesalers is a specialized, short-term transactional funding loan. It enables you to purchase a property and resell it rapidly, often within the same day. These are situations where assigning the purchase agreement isn’t feasible.

Table of Contents:

• What is Transactional Funding?
  • Understanding the “ABCs” of Transactional Funding
  • Double Closings and How Transactional Funding Works
• Why Use Transactional Funding for Real Estate?
  • Fast Funding and No Credit Checks
• Proof of Funds with Transactional Funding
  • Marketing Your Wholesale Deal
• Transactional Funding Costs and Fees
• Requirements for Transactional Funding Loan
  • Alternatives to Transactional Funding
• Transactional Funding: Best Practices
• Finding the Right Transactional Funding Lender
• FAQs about transactional funding for wholesalers
  • What is an example of transactional funding?
  • What services offered by wholesalers transactional funding?
  • What are the requirements for transactional funding?
  • What is transactional funding for wholesaling real estate?
• Conclusion

What is Transactional Funding?

Transactional funding is a short-term money loan designed for real estate wholesalers. This type of funding is perfect for facilitating double closings where time is of the essence. It helps real estate wholesalers get deals done.

The lender provides funds for the wholesaler (Party B) to purchase from the seller (Party A). Subsequently, the wholesaler immediately sells the property to an end buyer (Party C). Both of these transactions often occur on the same day.

Understanding the “ABCs” of Transactional Funding

The process involves three parties: the seller, the wholesaler, and the end buyer. It’s a streamlined approach moving from A to B, and then to C.

Here’s a breakdown:

1. Motivated Seller (A): This individual or entity wants to sell a property, frequently seeking a quick exit.
2. Wholesaler (B): The real estate wholesaler who identifies a buyer for the property (the end buyer). The wholesaler acts as a middleman.
3. End Buyer/Investor (C): The individual who ultimately acquires the property from the real estate wholesaler.

Double Closings and How Transactional Funding Works

In a double closing, there are two distinct, yet simultaneous, real estate transactions. “A” sells to “B,” and immediately, “B” sells to “C.” The same title company or attorney must handle the closing.

Why can’t wholesalers always assign the contract? Some contracts, particularly those with bank-owned properties or government entities, aren’t assignable, as noted by Coastal Capital Funding.

Why Use Transactional Funding for Real Estate?

Beyond non-assignable contracts, wholesalers use transaction funding for other strategic reasons. A primary motivation is to keep their wholesale markup confidential.

If the assignment fee is substantial, it might deter the end buyer. By using transactional funding to purchase the property first, the wholesaler can conceal their profit from Party C. This keeps the focus on the final sale price.

Fast Funding and No Credit Checks

Traditional hard money loans can take weeks or even months to process, whereas transactional funding can be completed very quickly. Funding can sometimes be completed in as little as one day.

Many transactional lenders don’t require extensive credit checks or deep underwriting, as pointed out by Jet Lending. This streamlined process expedites funding. Many hard money lenders skip the credit pull, speeding things up considerably.

Proof of Funds with Transactional Funding

A significant advantage of transactional funding is the ability to obtain a Proof of Funds (POF) letter. The POF is essential for securing deals, particularly with motivated sellers. The POF letter confirms the funds are available, according to Washington Capital Partners.

A POF letter provides official backing, verifying the real estate investor has the capacity to purchase the property. This strengthens the wholesaler’s credibility when negotiating with sellers. It shows sellers they are ready to provide proof with an official pof letter.

Marketing Your Wholesale Deal

Certain lenders provide assistance in locating an end buyer. This added support can streamline the process, facilitating a faster closing. It’s a valuable service for wholesalers looking to expedite their deals.

Transactional Funding Costs and Fees

Transactional funding costs vary, and can be reasonable if it’s a one-day transaction. Below is an example fee schedule:

Loan Amount	Fee	Funding Timeframe
Up to $1,000,000	1% (minimum fee of $1,000)	Same day funding possible
$1,000,000 – $2,000,000	2%	Multiple business days
$2,000,000 – $5,000,000	3%	Multiple weeks
Additional Days	0.25% per day	If funds are in an escrow account

Some lenders may impose processing or application fees, although these are not universal. Real estate wholesalers, such as those in Texas, often find transactional funding real estate useful.

Requirements for Transactional Funding Loan

The requirements for a transactional funding are generally minimal for real estate wholesalers. This accessibility makes it an attractive option for quick deals.

Wholesalers usually need the following to qualify, according to LoanRanger:

• A signed contract from an end buyer.
• A Lender Title Insurance Policy.

Alternatives to Transactional Funding

If transactional funding doesn’t suit your needs, alternative financing options are available. Hard money loans, private money loans, and lines of credit from traditional lenders might be suitable, depending on the circumstances.

However, these methods typically entail more extensive underwriting processes and longer timelines. You will need to decide on the closing costs of each. This might be challenging for those who need to close quickly.

Transactional Funding: Best Practices

Adhering to best practices is crucial for success when using transactional funding. You must focus on efficiency.

Here are essential practices to follow:

• Clear Communication: Maintain open and constant communication with all parties involved through phone calls, video conferences, or in-person meetings. Discuss next steps, confirm funding approval, and address any concerns promptly.
• Proper Documentation: Make sure all contracts and agreements with sellers and end buyers are complete, accurate, and legally sound. Double-check all details to avoid misunderstandings or delays.
• Due Diligence: Conduct thorough due diligence on the property, the seller, and the end buyer to avoid potential issues. Verify all information and confirm that all parties are committed to the transaction.

Finding the Right Transactional Funding Lender

The ideal lender must align with your closing timeframe and possess excellent communication skills. Find a lender with whom you connect on a personal level. Evaluate their rates.

Consider the added benefits they offer. Explore additional perks and support services to see if they provide value beyond just the loan. This comprehensive approach will help you select the best partner for your needs and make your wholesale deal a win.

FAQs about transactional funding for wholesalers

What is an example of transactional funding?

Let’s say a wholesaler, Bob, identifies a property being sold for $200,000 by a motivated seller (A). Bob then locates an end buyer (C) willing to buy the property for $230,000.

Instead of assigning the contract, Bob uses a transactional funding to buy the property from A. Then, he immediately resells it to C on the same day.

Bob uses funds from buyer C to cover the initial purchase, and pockets the $30,000 difference. This highlights how transactional funding allows for quick, profitable transactions without substantial upfront capital.

What services offered by wholesalers transactional funding?

Transactional funding providers offer a key service. They facilitate quick closings for wholesalers.

They do this by providing the necessary funds for the wholesaler to purchase the property. The loan is then repaid when the end buyer (C) completes their purchase, typically on the same day.

This rapid turnaround is essential for wholesalers aiming to capitalize on opportunities without delay. The dedicated loan specialist facilitates double closings.

What are the requirements for transactional funding?

The primary requirements include a fully executed contract between all parties. Also crucial is having an established business entity, such as an LLC or INC.

Effective communication is vital. The funding program has a team that ensures all funds are received by the closing agent. Your closing agent is typically an escrow agent or an attorney at the closing office.

Meeting these conditions ensures a smooth, efficient transactional funding process. It allows for the real estate investor to do more deals.

What is transactional funding for wholesaling real estate?

Transactional funding for wholesaling real estate provides short-term loans. The purpose of these money loans is to help wholesalers buy and sell properties rapidly.

It enables real estate investors to seize opportunities without needing large sums of capital upfront. By providing quick financial support, it bridges the gap, making the deal successful.

It facilitates double closings to keep everything above board. You want excellent customer service from a loan officer. A great hard money lender will have excellent customer reviews.

Conclusion

Transactional funding for wholesalers addresses a critical need in the real estate market. This financial tool requires careful planning and an understanding of its intricacies, yet it can be beneficial.

By mastering how to secure and utilize these loans, wholesalers can confidently negotiate and expand. This strategy, used effectively, opens up opportunities for real estate investing.