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  • Writer's pictureDan Caradonna

The Mechanics of Transactional Funding: A Comprehensive Guide

In the complex landscape of real estate investing, transactional funding emerges as a beacon for investors looking for swift, short-term financing solutions. This unique financing model caters specifically to wholesale real estate transactions, enabling investors to execute quick flips without utilizing their own capital. But how does transactional funding work? This guide will demystify the process, providing you with a clear understanding of how transactional funding can become a pivotal tool in your real estate investment arsenal.


What is Transactional Funding?


Transactional funding, often referred to as "flash funding," is a short-term loan provided to real estate investors to fund the purchase of a property before selling it, usually on the same day or within a short period. This financing method is particularly popular among wholesalers who contract to buy a property and then assign or sell the contract to an end buyer, needing a temporary funding source to complete the transaction.


The Core Process


The process of transactional funding is relatively straightforward and can be broken down into a few key steps:


  1. Securing the Property: The investor signs a contract with the seller to purchase a property.

  2. Finding an End Buyer: Simultaneously, the investor finds an end buyer willing to purchase the property at a higher price.

  3. Applying for Transactional Funding: With both a willing seller and buyer in place, the investor applies for transactional funding, providing details of the deal, including the purchase and sale agreements.

  4. Funding the Purchase: Once approved, the transactional lender provides the funds necessary for the investor to purchase the property from the seller.

  5. Closing the Sale: Shortly thereafter, the investor sells the property to the end buyer in a second closing, using the proceeds from this sale to repay the transactional loan, along with any associated fees.


Key Features of Transactional Funding


  • Short Duration: Loans are typically for 1 to 3 days, aligning with the quick turnaround nature of wholesale transactions.

  • 100% Financing: Lenders usually cover the entire purchase price, allowing investors to execute deals without personal capital.

  • No Credit or Income Verification: Approval is based on the strength of the deal, not the borrower's creditworthiness or income, making it accessible to a wider range of investors.

  • Double Closing: The investor legally purchases and then sells the property, using the transactional funding to facilitate the first transaction.


Advantages of Using Transactional Funding


  • Risk Mitigation: Investors do not need to use their own funds, reducing personal financial risk.

  • Deal Volume: With access to immediate funding, investors can handle multiple deals simultaneously, scaling their business more rapidly.

  • Flexibility: This funding can be used for various types of properties, including residential, commercial, distressed, and properties bought at auction.

  • Speed: Fast funding allows investors to capitalize on opportunities quickly without the delays often associated with traditional financing.


Conclusion


Transactional funding is a powerful tool for real estate investors, offering a blend of speed, flexibility, and accessibility that traditional financing methods cannot match. By understanding how transactional funding works, investors can unlock new opportunities, expand their portfolios, and accelerate their business growth with minimal risk. Whether you're a seasoned investor or just starting, incorporating transactional funding into your investment strategy can be a game-changer.


At Elite 360 RES, we specialize in providing fast, reliable transactional funding solutions tailored to the unique needs of real estate investors. Our streamlined process ensures you have the capital you need when you need it, allowing you to close deals with confidence and efficiency. Contact us today to learn more about how our transactional funding services can support your investment goals.

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