You’re a real estate wholesaler, and you’ve found the perfect investment property. You’ve lined up a motivated seller and an eager prospective buyer. But how do you actually close the deal fast when you don’t have the funds for purchasing it yourself?
This is where transactional funding lenders come in, often proving crucial. These specialized money lenders provide short-term loans specifically for real estate wholesalers.
These professionals understand this is a useful service for real estate investors and aim to build relationships. We also recognize that transactional funding lenders play an important role for estate investors who might not have the resources themselves.
Table of Contents:
- Understanding Transactional Funding
- Benefits of Using Transactional Funding Lenders
- Choosing the Right Transactional Funding Lender
- Transactional Funding for Wholesaling
- Alternatives to Transactional Funding Lenders
- FAQs about transactional funding lenders
- Conclusion
Understanding Transactional Funding
Transactional funding is a short-term money loan. It’s used to facilitate double escrow, where a property is bought and quickly resold.
This all happens very quickly, often on the same day. This type of funding is particularly useful for wholesale real estate investors.
It’s also beneficial for estate investors who need to act quickly to secure a deal.
How Transactional Funding Works
The process involves three parties: the original seller (Party A), the wholesaler/investor (Party B), and the end buyer (Party C). Party B secures a contract with Party A to buy the property, then finds Party C, who is ready to purchase the property.
Party B then obtains a transactional funding loan to purchase the property from Party A. Immediately after, Party B sells the property to Party C.
The proceeds from the B-C transaction repay the transactional loan, with Party B (the wholesaler) keeping the difference as profit.
Benefits of Using Transactional Funding Lenders
Why might a seasoned wholesaler choose this route instead of using their own capital or other financing options? It can help avoid other challenges.
One significant advantage is speed. Companies like Equity Max offer a rapid funding program and 100% financing, often underwriting in one day.
No Credit Checks or Background Checks
Many transactional lenders don’t require credit checks, background checks, or extensive financial documentation. The focus isn’t on the borrower’s personal finances.
The underlying value of the deal, along with a confirmed end buyer, matters most. This can be a great advantage for those not wanting credit checks, especially for new wholesalers.
100% Financing
Some lenders, such as FundMyDoubleClose.com, fully cover the costs, including closing costs. This means you don’t need to tie up any of your own capital.
For investors looking to deal fast, not tying up cash is crucial. Knowing your money is separate can help scale your business.
Being smart about protecting your capital can shield you from bad investments.
Choosing the Right Transactional Funding Lender
Not all lenders are created equal; they offer different services. Choosing the right partner is essential for successful deal closures.
Here are some key considerations. Thinking these factors through simplifies selection.
Don’t overlook critical components during the research phase.
Fees and Rates
Rates often depend on loan size and duration. FundMyDoubleClose.com’s rates, for instance, range from 1% to 3% of the loan amount, plus a 0.25% daily fee for funds held in escrow.
Fully analyze the fee structure. Some lenders might have hidden costs, so always clarify everything upfront.
Speed and Reliability
Time is of the essence in real estate deals. Choosing a reliable lender is critical.
A fast-moving lender allows you to seize time-sensitive opportunities. Seek lenders known for quick approvals, like Jet Lending, which emphasizes rapid processing.
Washington Capital Partners is also recognized as a top transactional funding lender.
Additional Services
Some lenders offer added benefits, such as assistance in finding an end buyer. This simplifies the wholesale process.
Having a built-in system to find that end buyer is valuable. Washington Capital Partners helps locate buyers through marketing, via their partner company, Off-Market Deals HQ.
Transactional Funding for Wholesaling
Transactional funding provides a way to acquire properties. However, wholesalers must first understand real estate laws.
Consider a scenario: a wholesaler finds a distressed property and quickly lines up an end buyer willing to pay more. Using transactional funding, they secure the purchase, then immediately resell to the end buyer, profiting without using their own funds.
This efficiency enables faster deal closures.
Potential Pitfalls
The main challenge is securing a solid, verifiable end buyer. Without a buyer contract, obtaining transactional funding is difficult, if not impossible.
Lenders cannot rely solely on someone’s word. Verifying your buyer’s financials provides a clear picture.
This protects your investment and saves time. Make sure you request a proof of funds letter.
Working With Title Companies
Coordination with the title company is also crucial. The transactional funding in a double close needs precise handling.
Some funding companies may prefer or require specific title companies. A lenders title policy required might also need to be considered, potentially limiting choices.
| Lender | Key Features | Potential Benefits |
|---|---|---|
| FundMyDoubleClose.com |
|
|
| Equity Max |
| No capital needed from the borrower. |
| Washington Capital Partners |
| Added services. |
Alternatives to Transactional Funding Lenders
Are there alternative paths besides taking on partners, which might mean sacrificing a portion of the profit? Several options exist, each with its own pros and cons.
Carefully assess each method’s benefits before proceeding. One common strategy is assigning the contract.
Another strategy is “wholetailing,” combining wholesaling and traditional flipping for higher margins.
Joint Ventures
Another approach involves collaboration, such as bringing in a money partner. This allows an investor to use funds and pay a portion of the final profit as compensation.
Partnerships and collaborations offer flexibility. Make sure to put any and all agreeements into writing.
Not having water tight contracts could impact all future investing.
FAQs about transactional funding lenders
What is a transactional lender?
A transactional lender provides funding for real estate deals. This is useful for wholesalers looking to buy and sell properties quickly, helping you achieve rapid returns.
What is an example of transactional funding?
An example involves a wholesaler (Party B) contracting with a seller (Party A). A transactional lender provides cash to Party B, who then sells to an end buyer (Party C).
B’s lender wires funds directly to closing.
How do I get transactional funding?
To obtain transactional funding, find a reputable lender specializing in these deals. A credible lender speeds up processing, helping you secure funding if the deal makes financial sense.
Many lenders provide excellent customer service. Reach out by phone number or their website.
Conclusion
Transactional funding lenders offer a valuable option for real estate wholesalers and investors involved in fast-paced deals. They provide the necessary capital to quickly flip properties without significant upfront costs.
Choosing an experienced lender with robust systems is essential. Thorough financial analysis and selecting a reliable partner in advance streamlines the process.
Finding expert partners makes an investment beneficial for everyone involved. Many of these principles carry over to hard money loans.
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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