Transactional Funding Loans
These loans finance a back-to-back or simultaneous closing. A wholesaler can purchase a property from a seller and assign the contract to an end buyer; typically within 1-5 business days, making the process fast and easy. Private lenders are extremely popular for these types of loans since large institutions cannot normally close the deal fast enough.
How many parties are typically involved?
Usually three individuals:
- End Buyer/Investor
How are transactional funding loans used?
Once the wholesaler has a motivated seller and a prospective buyer, the wholesaler can use the loan to purchase the property from the seller and then sell the property to the end buyer/investor.
To be eligible you need to have 3 things:
- A motivated seller
- A business entity, such as an LLC/Inc.
- An end-buyer who must be ready to close immediately. The title company must send written confirmation that the cash is in their escrow account.
Is a proof of funds (POF) letter provided by the lender?
Yes. The lender will provide a POF letter to the seller to prove that the funds to purchase the property are available.
Are there any upfront fees?
Borrowers pay an origination fee, which are percentage points of the loan amount. Unlike a fix and flip loan that requires an origination fee with a large down payment, no down payment is needed to be a wholesaler, which is why wholesaling is great way to get started in real estate investing.
Is there a processing fee?
Yes, there is typically a processing fee, which is separate from the origination fee. The fee covers the cost for a lawyer to review all documents and certify that the property and title meet all legal criteria needed to close.