You’re a real estate wholesaler in Houston, and you’ve found the perfect property. You know it will sell fast, but maybe the contract isn’t assignable. This is where transactional funding in Houston comes in to save the day.
It’s frustrating dealing with non-assignable contracts. The good news is you’re going to discover how to get around this with transactional funding.
Table of Contents:
- What Exactly is Transactional Funding?
- Why Houston Wholesalers Need Transactional Funding
- Transactional Funding Rates in Houston
- How to Get Transactional Funding in Houston
- Earnest Money Deposit (EMD) Loans in Houston
- Seller Carry Transactions
- FAQs about transactional funding houston
- Conclusion
What Exactly is Transactional Funding?
Transactional funding is a short-term loan. It is used specifically for real estate wholesalers to quickly purchase and resell a property, often on the same day.
Think of it as a bridge loan, helping to get your deal completed quickly. Party A is the Seller of the property to Party B, who is you, the Wholesaler.
How Transactional Funding Works
The process starts with identifying a property and negotiating a purchase price with the seller (Party A). Then you find an end buyer (Party C) who is willing to purchase the property at a higher price.
This funding is a solution. It gets around issues with government properties that you typically cannot assign over to your cash buyer.
Why Houston Wholesalers Need Transactional Funding
There are times as a wholesaler that you’re going to find great deals on wholesale deals. When that happens though, end buyers do not want to buy the deals, because they can see your assignment fee.
Here are some of the benefits of why you as a wholesaler may need transactional funding. When you are ready, you can apply here.
Non-Assignable Contracts
Many properties, especially those owned by government agencies or banks (REOs), have non-assignable contracts. Transactional funding lets you purchase the property directly, avoiding the need for assignment.
This can create real headaches for real estate investors.
Keeping Your Profits Private
Sometimes, end buyers get cold feet when they see a large assignment fee. They just will not budge; it’s like pulling teeth.
Transactional funding lets you keep your profit margin confidential. The end buyer only sees the final sale price from you to them.
Show You Are a Serious Buyer
Using transactional funding shows the seller that you’re a cash buyer. You aren’t some person acting like you’re in-between the seller and a buyer.
It is important to be credible. It also avoids the headache of coordinating showings with potential end buyers.
Transactional Funding Rates in Houston
Cost is obviously a factor. As real estate investors and wholesalers, we understand the desire to find better deals.
Here’s a breakdown of what you can expect: 1% for loans up to $1,000,000. Anything above this is 2%.
Understand Transactional Funding Rates
Let us break all this information down in the table below:
| Loan Amount | Interest Rate | Funding Time Frame |
| $1 million or less | 1% of loan amount | Same day, sometimes within a matter of a few short hours. |
| Between $1 million and $2 million. | 2% of loan amount | This would normally get done in a few business days. |
| $2,000,000 and $5,000,000. | 3% of loan amount | Generally expect this to take multiple weeks to process. |
These rates come from personal experience of the market. These will get you on the right track for funding in Houston.
Additional Fees to be Aware Of
For larger transactions requiring funding for over multiple days, there are other expenses. Keep in mind of these expense items.
There is generally an additional charge for holding funds past a specific close date of 0.25% per day. Larger funding, usually with more complicated deals requiring funding over one million, have other expenses with attorneys that are added to this also.
How to Get Transactional Funding in Houston
The first part of this is a purchase contract. To be sure there are no problems, look at any non-assignable clauses.
You’ll then share details. With that, a team will analyze potential deals, often as soon as one day.
Find a Transactional Funding Lender
Find one of the transactional money lenders who works with Texas investors. There are some groups who are known to recover a deal just before closing.
Do some homework and try and choose who is credible in Texas. Working with an experienced team is really key in your wholesale deal.
Share Your Real Estate Deals
You need both the purchase agreement with the seller (Party A) and the sales contract. Once the seller finds you are dealing with people they trust, you’ll generally get properties moving more efficiently for your business.
Hard money lenders, need a purchase contract showing the price, address and end buyer, so make sure you’re providing all of that and don’t assume all information needed. Remember though, they will look at all parties involved.
How You Close The Deals
Once the deal is looked at, you, Party B the funds and other buyers can coordinate closings. Closings need to happen very near in time to other deals in your chain.
Timing is key. Once things are good, money is sent.
Earnest Money Deposit (EMD) Loans in Houston
Earnest Money Deposit loans are another tool to get. These help cover the upfront deposit in securing a real estate investment property.
Having these set-aside for later deals is pretty crucial, as this demonstrates real intention in securing properties.
EMD Loan Fees in Houston
Fees vary on the size of the EMD, like this:
| EMD Amount | Fee |
|---|---|
| Up to $5,000 | $1,500 |
| $5,001 – $15,000 | $2,500 |
| $15,001 – $25,000 | $5,000 |
| $25,001-$50,000 | $12,500 |
| $50,001 – $75,000 | $20,000 |
| $75,001 – $100,000 | $27,500 |
This does depend though, there are fees associated with it. For larger EMD amounts it requires substantial up-front costs.
Seller Carry Transactions
Seller carry transactions are another avenue in funding. You get a different means of purchasing a property without banks and lending.
In many situations, this helps overcome traditional funding for fast closings, but the challenge often involves dealing with trust in the lending.
Rates for Seller Carry Transactions
Rates for seller carry mirror transactional ones.
For loans below a million, you’ll get funding typically within the same day at a 1% interest rate, but over two million goes up. It also depends if money is held in escrow or needing loans beyond one million requires a closing, generally you’ll want an attorney for review in case of extra documentation that may occur at closings.
FAQs about transactional funding houston
How much does transactional funding cost?
Transactional funding costs vary based on the loan amount. It typically ranges from 1% to 3% of the loan.
Keep in mind, there can be additional fees for funds that are over several days.
How do I get transactional funding?
You generally just give information on sellers and buyers involved to share for reviewing deals. Timing is really key on any funding like this, so once there is a review, money will then be provided once that’s clear.
A direct lender like King James Lending can facilitate double closings for your convenience.
What is an example of transactional funding?
Imagine buying a property from a seller for $200,000 (Transaction A-B). Next, you quickly then sell the property to your buyer for $250,000 (Transaction B-C).
The transactional loan would cover the initial $200,000 purchase, allowing you to complete both transactions almost simultaneously.
What is the rate of transactional funding?
Transactional funding rate goes by the funding size. Loans up to $1,000,000 would get you 1%.
Larger ones typically end up at 3%. Remember, loans larger than a million may require more to cover fees, including potential background checks or employment verification.
Conclusion
For real estate wholesalers operating here, transactional funding in Houston is helpful and helps them to close deals, even if they are facing a non-assignable contract or want to keep their assignment fee private. When you are doing a wholesale deal, there is some key paperwork that needs to get put together for funding.
The more details you give the smoother your wholesale deal gets done, having more options and better processes. Rates also do matter on any wholesale deal that you’re doing, smaller ones go between one to two, depending on funding size. By understanding the transactional funding process and working with a reliable lender like King James Lending, Houston investors can confidently navigate the complexities of real estate transactions and achieve their investment goals.
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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