Transactional Funding 101: Everything You Need To Know

The wholesaling business is a great way to make money in real estate. However, it requires capital when double closing, and that’s where transactional funding comes in. We understand that this process can be complicated to understand. So, we’ve put together this guide that covers everything you need to know about transactional funding and how it can help your business.

FAQS ABOUT TRANSACTIONAL FUNDING

WHAT IS TRANSACTIONAL FUNDING?

Transactional funding is made for wholesalers who need to double close deals quickly. Essentially, it’s a type of short-term loan that covers the entire purchase of the property including the closing costs for a real estate transaction. This loan typically has to be paid back within a few days, depending on the lender’s terms and conditions.

WHO USES THIS SERVICE?

Wholesalers are the ones who typically use transactional funding. This type of loan helps them close deals without any delays or complications while also keeping your buyer and seller separate.  It’s often times used to hide your profit so neither the buyer or seller knows how much of a profit or spread you’re going to make.

UNDERSTANDING HOW TRANSACTIONAL FUNDING WORKS

Transactional funding is a service provided to wholesalers. They must bring proof that they have already set a contract with the seller and end buyer. Transactional funding companies won’t require credit scores or extensive paperwork. They will offer the wholesalers a loan that covers 100% of the purchase plus your closing costs.

Once the closing company receives the end buyers wire and confirms both AB and BC side of the transaction has signed all the closing docs, the transactional funding company’s funds will be released for the wholesaler to purchase the property. Once they take ownership of it, they must sell it (generally same day) after the first transaction. Double-closing allows wholesalers to profit since they buy a house at a discount from the seller, then sell it at a higher price to an end buyer, which is usually an investor.

WHAT ARE THE BENEFITS OF TRANSACTIONAL FUNDING

Wholesalers already spend a lot of time negotiating with the sellers and end buyers. The last thing they want to worry about is how to get the funds to double close! Worry no longer, with transactional funding they can guarantee a smooth closing with no more stress or negotiations. Other benefits of this financing resource are:

• It funds 100% of the purchase plus closing costs
• It’s an alternative financing method vs tying up your own capital
• Easy Qualification
• Implementation Speed
• Stops your seller or buyer from knowing your profit, 2 separate closings
• Can fund SAME DAY