What are the Benefits From Transactional Funding Loans:
- Ask for proof of funds letters. This should be in hours
- Cloe quickly. Experts advise you close in days and not weeks
- financing of not more than $10 million
- A committed expert for all of your needsdddd
- Free and without obligations loan underwritings
What is a loan for transactional funding?
The idea around transactional funding provides funding for two simultaneous closings. With this money, a wholesaler may quickly and easily acquire a property from a seller and transfer the contract to an end customer; often between 1–5 business days. Many consumers utilize private lenders because major institutions typically cannot finish the deal quickly enough and everything is time-sensitive.
Transaction funding Fort Lauderdale is a quick, easy, and smart way for wholesalers to earn a significant profit on a same-day, simultaneous
Who are the Parties Involved?
Three people are involved in this: A motivated seller, B a wholesaler, and C a final consumer or investor.
What do they do?
Once the wholesaler “B” has a motivated seller (“A”) and a potential customer (“C”), “B” has two options: (1) utilize cash to buy the property from (“A”), (2) delegate the purchase to (“C”), or (3) look for transactional finance from (“A”) a hard money lender.
A-B Closing: “A” will sell a property to “B,” and “B” will then sell it to “C.” (B-C Closing).
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What do I need to do to qualify?
Three requirements must be met in order to qualify:
- an eager seller
- an organization, such as an LLC or Inc.
- a final purchaser who must be prepared to close right away. Written proof that the money is in the escrow account must be provided by the title business.
Your specialized loan specialist will be able to expedite an underwriting and improve your chances of having your loan financed quickly if all 3 of these materials are prepared when you contact us.
Does the lender offer a POF (Proof of Funds) letter?
Yes. To demonstrate that you have the money to buy the home, your lender will give your seller a POF letter. This paper serves as an official financial institution’s endorsement of you.
Exist any upfront costs?
The origination fee for the loan is paid by the borrower and is calculated as a percentage of the loan amount. Being a wholesaler doesn’t demand a down payment, unlike a fix-and-flip loan, which asks you to make a sizable down payment together with the origination fee. This is why starting with wholesale is a terrific method to invest in real estate while spending the least amount of money possible.
Exists a processing charge?
Yes. A processing fee of $1,000 will be added to your final balance. Separate from the Origination Fee is this. The expense of having a lawyer analyze all of the paperwork and certify that the property and title satisfy all closing-related legal requirements is covered by this charge.
Note: Many Government Agencies have to be approved by a Screening company in order to work with various patients.
A Transactional Funding Example
Typical examples of properties that are flipped using transactional funding can include:
- Single family homes
- Multi-family apartment buildings
- Commercial properties such as strip malls and mobile home parks
- Undeveloped land
For example, if an investor is working with a buyer who wants to move to Texas from out of state, the investor will look for properties. The investor finds a house in Texas that needs a quick face lift and negotiates a price of $200,000.
After two closings, the investor’s profit starts at $50,000 — minus lender and any contractor fees. Fees from hard money lenders vary, but assuming a 15% for closing costs and another 2% loan fees, our investor walks away with over $40,000 and didn’t have to invest any of their own money.
Benefits Of Transactional Funding
There are a lot of benefits for the investor who knows how to organize transactional funding:
- Low fees and costs, compared to some other hard money loans, means more profit. Additionally, transactional lenders typically don’t require full title reports, insurance, or appraisals, which cuts down on transactional costs as well.
- No personal qualifying makes this option available to more investors. Credit and income verification is not required. Borrowers don’t need to list assets or demonstrate their debt-to-income ratio.
- Fast financing is made possible because there is far less paperwork than most other loan options. The whole process can usually be completed within a week.
- 100% financing means the investor doesn’t have to put any of his or her personal resources on the line, and the margin negotiated (minus fees) is all profit.
Difficulties Of Transactional Funding
There aren’t really “cons” or “disadvantages” to transactional loans. There are, however, some aspects of transactional funding designed to protect the other parties involved, which can be difficulties for investors.
- You need an end buyer lined up in order to get transactional funding, and you need to be able to prove it.
- You need to inform the end buyer’s lenders (if applicable) that they are funding the B-C contract of a flip, because of possible seasoning issues. (This means cash buyers are generally preferred.)
- You may only have 24 to 48 hours to complete both closings. Timing is critical and all issues must be resolved within that window.
How To Qualify For A Transactional Loan
Qualifying for a transactional loan is much easier than qualifying for a traditional loan. It’s generally even easier than qualifying for other types of hard money loans. Credit checks, appraisals, proof of employment, etc., are not required.
What you do need:
- A signed and executed B-C contract, proving there is an end buyer waiting
- Lender Title Insurance Policy
If you’re investing in Texas real estate, Loan Ranger makes it extremely simple to qualify for a transactional loan. Our doc fee is only $595 and our loan fee is only 1-2 points.
Alternatives To Transactional Funding
If you can’t meet the tight time frame for a double closing, or if you’re interested in flipping real estate but don’t have an end buyer lined up, there are other short term, hard money, fix and flip financing opportunities available.
A Brief History Of Transactional Funding
Transactional funding is a relatively new addition to the financing options available to investors. It didn’t really surface until the real estate housing crisis around 2008.
Up until about 2008, real estate investors would flip properties by doing a simultaneous or double-blind closing. That means this type of funding was generally only available to well-connected real estate investors who knew private lenders and individuals with lots of cash to loan.
However, title insurance and financing industry regulations have tightened since those days. Now, real estate deals need to be fully funded and cash transferred before they can be re-sold.
As hard money lenders began to invest in a wider pool of smaller investors and flippers, transactional funding has also become more available. Now, transactional loans are no longer limited to large investors.
Transactional Funding For Texas Real Estate
Transactional funding enables investors to conduct back-to-back closings legally, while protecting the privacy of the deal with the original seller. It can prevent either the seller or end buyer from attempting to cut out the investor.
If you’re investing in real estate in Austin, Houston, Dallas, or anywhere else in the State of Texas, Fort Lauderdale may be able to help with a transactional loan. We’d love to discuss your next deal and put together the best financing package for you.
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