Transactional funding has become a critical tool for real estate investors, particularly those involved in wholesaling and quick flips. This form of funding provides a buffer that allows investors to make purchases without immediate personal capital and sell to an end buyer with very little lag time. To illustrate the power and versatility of transactional funding, let’s explore a few real-life examples where this financial strategy enabled successful real estate deals.
Case Study 1: The Distressed Property Flip
Situation: A real estate wholesaler identified a distressed property listed at a significantly lower price than its potential market value. The property was in a desirable neighborhood but required quick closing that the wholesaler could not fund personally.
Solution: The wholesaler used transactional funding to purchase the property. The total cost funded was $200,000, which covered the purchase price and associated closing costs.
Outcome: Within 48 hours of the initial purchase, the wholesaler sold the property to a rehab investor for $240,000. This quick flip resulted in a gross profit of $40,000 before fees, demonstrating the effectiveness of transactional funding in facilitating rapid and profitable real estate transactions.
Case Study 2: The Auction Buy and Immediate Resale
Situation: An investor found an opportunity to buy a residential property at an auction. The catch was that the auction required immediate payment, which the investor was not prepared to handle alone.
Solution: Transactional funding was arranged to cover the auction price of $150,000. The funding was set up in advance, allowing the investor to bid confidently at the auction.
Outcome: The investor successfully purchased the property and, within one week, sold it to a long-term buyer for $180,000. The deal highlighted the ability of transactional funding to enable purchases that otherwise wouldn’t be possible, generating a swift profit of $30,000.
Case Study 3: The Double Closing Deal
Situation: A real estate entrepreneur found a high-value property under market value but needed to execute a double closing, as the contract must be sold to an end buyer immediately after purchasing from the seller.
Solution: Using transactional funding, the investor was able to fund the first transaction to buy the property and then immediately resell it in a second closing to the end buyer.
Outcome: The property was initially bought for $300,000 and sold the same day for $350,000. The seamless double transaction, facilitated by transactional funding, resulted in a $50,000 profit minus minimal holding costs and fees.
Case Study 4: Overcoming a Sudden Funding Gap
Situation: During the closing of a multi-family property, a real estate investor discovered a sudden shortfall in funding due to unexpected lender requirements.
Solution: The investor applied for and received transactional funding to cover the gap, allowing the deal to proceed without delay.
Outcome: This quick access to funds ensured the closing wasn’t jeopardized, and the investor was able to manage the property successfully, eventually refinancing with a traditional loan at a lower interest rate.
Conclusion
These case studies demonstrate the diverse applications and benefits of transactional funding in real estate. By providing immediate financial support, transactional funding allows investors to capitalize on opportunities without the burden of traditional financing delays or initial capital outlay.
If you're intrigued by the possibilities of transactional funding for your next real estate deal, contact Elite 360 RES today. Our team is dedicated to helping you understand and navigate the intricacies of this financing option to maximize your investment potential.