Real estate wholesalers in Texas often face a common situation. You’ve found a great investment property, negotiated a deal, and have a buyer waiting, but you lack the capital resource to close the initial purchase. This is where transactional funding Texas becomes a valuable tool.
It solves a short time frame cash-flow issue. Think of transactional funding in Texas as a bridge, allowing you to quickly purchase and then sell property, usually within the same day.
Table of Contents:
- What Exactly is Transactional Funding?
- Reasons to Use Transactional Funding in Texas
- Costs and Fees in Transactional Funding
- Double Closings: A Deeper Look
- Seller Carry Transactions
- Finding the Right Lender for Transactional Funding Texas
- FAQs about transactional funding texas
- Conclusion
What Exactly is Transactional Funding?
Transactional funding is a short-term hard money loan. It is used by real estate investors, and specifically targets wholesalers. This transactional loan enables the wholesaler (Party B) to buy a property from the seller (Party A) and then swiftly resell it to an end buyer (Party C).
The speed of these transactions is a major advantage. These deals often close the A-B transaction and B-C transaction in rapid succession, often employing transactional funding for the double closing.
How Transactional Funding Works in Texas
Multiple parties are involved in the transactional funding process. As the wholesaler, you are the intermediary between the original property seller and the final buyer.
The money lender provides the cash, and the seller gets paid. Finally, the end buyer acquires the property, and the hard money loan is repaid, frequently within one business day, with same-day funding options readily accessible in the market.
Reasons to Use Transactional Funding in Texas
Why choose this particular method? Many Texas wholesalers find it essential due to circumstances beyond their immediate control.
Firstly, contracts are often non-assignable. This means the property seller, frequently a government agency or bank, prohibits you from simply assigning your purchase rights to your end buyer, as noted by sources like Tidal Loans.
Enhancing Transaction Credibility
Utilizing transactional funding alters your position as the wholesaler. You present yourself as a cash buyer at the closing, which adds significance to your deal.
This eliminates the perception of you being merely a middleman. Instead of coordinating with multiple investors, arranging property viewings, and dealing with timing issues, you maintain full control.
Protecting Your Profit Margin
Let’s be realistic, some deals offer substantial profits, but they also carry risks. Occasionally, a high profit might raise concerns among other stakeholders involved in the wholesale deal.
Transactional funding, however, shields your profits from being disclosed to anyone on the closing statement. This is because of the structure of a double close or “double escrow”.
Costs and Fees in Transactional Funding
The pricing for transactional funding varies among lenders. Loan amounts, closing timelines, and daily costs are all influenced by the specific provider offering the transactional funding program.
Below is an overview of typical costs, reflecting rates from various firms like Texas Investor Financing and Loan Ranger Capital. It’s always best to directly contact your money lender for the most current pricing details, as this market is subject to constant change, and you’ll want specifics on all fees applicable to your project.
Cost variables are often influenced by loan size. Many real estate deals require quick turnaround times.
| Loan Amount | Interest Rate | Funding Timeline |
|---|---|---|
| Up to $1,000,000 | 1% (minimum fee may apply) | Same day or next day |
| $1,000,001 to $2,000,000 | 2% | Multiple business days |
| $2,000,001 to $5,000,000 | 3% | Multiple weeks |
| Additional Days | .25% per day (common added rate per day in the marketplace, but varies with lender and transaction complexity) | Added as Required per Additional Day. |
The table above presents typical rates in the field; however, pricing can vary significantly between providers. This is only a small sample, and individual lenders may have vastly different pricing structures. Be certain to confirm details regarding specific deal costs, timelines, and any potential junk fees.
Understanding Additional Costs in These Transactions
Additional fees are inevitable. It’s important to be aware of documentation costs or extra expenses if your transaction involves two different title companies.
Loans exceeding certain amounts may also require attorney involvement. So, factor in potential costs for attorneys, document preparation (doc fee), and wire transfers.
Double Closings: A Deeper Look
Double closings are closely linked with transactional lending. A double closing consists of two separate real estate deals occurring in rapid succession.
The seller (Party A) sells to you (Party B), and you immediately sell property to your end buyer (Party C). Transactional funding facilitates this by providing the upfront capital resource for your part of the sale when buying from seller A.
Requirements and Coordination
Certain key requirements enable these transactions to proceed swiftly and efficiently. An executed purchase contract demonstrating an end buyer is crucial, as Loan Ranger Capital emphasizes, and all providers offering transactional funding have similar stipulations.
A lender title insurance policy assists the money lender in safeguarding their interests. While you will have this, many end buyers will need to get a buyer waiting lender title insurance, too.
Many companies offering this service also avoid conducting background checks. Additionally, they might not need items such as income verification, tax returns, or even credit checks, as indicated by Texas Investor Finance, too. Verify the specific policies, terms, and fees associated with your deal, as lenders’ requirements can differ, and this helps with being able to resell investment property easier.
Seller Carry Transactions
Transactional funding isn’t limited to transactions with external buyers. In Seller Carry situations, the seller participates in financing the transaction.
In this scenario, the seller functions as a money lender, providing financing for a portion of the purchase to the buyer. The associated costs would fluctuate significantly based on the seller.
Finding the Right Lender for Transactional Funding Texas
Locating a suitable hard money lender is essential. Providers like Tidal Loans, Loan Ranger Capital, and others are experienced in collaborating with estate investors for transactional funding.
Conduct thorough research specific to your circumstances. Remember that rates and the funding work timeline can vary depending on your specific scenario.
FAQs about transactional funding texas
What is a transactional funding?
Transactional funding is a short-term hard money loan product. These loans enable a real estate wholesaler to quickly purchase a property and then immediately flip it to a buyer waiting.
How much does transactional funding cost?
Expenses can fluctuate depending on the provider and specifics of the loan programs, but fees typically correlate with the loan size. As a general guideline, larger amounts tend to incur higher costs, but contact a direct lender for quotes.
The previously mentioned pricing is subject to market conditions, so actual rates will be determined by the chosen lender. There could be various junk fees or other costs, too.
What does it mean when a real estate transaction is funded?
A funded transaction indicates that the funds have been properly disbursed. This might involve cash for a transaction provided by lenders, the completion of wiring, or funds secured in accounts with closing entities.
You will also want a title insurance policy in place to protect you, too.
Conclusion
For Texas real estate wholesalers, transactional funding presents a valuable alternative. Transactional funding Texas offers methods to bypass traditional financing and close deals in a short time.
The key is having everything clearly defined with terms, costs, and closing dates before committing. And finally, don’t hesitate to get advice from seasoned professionals, such as an experienced real estate broker or a hard money lender like King James Lending, to evaluate your deal and get custom quotes.
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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