Real Estate Investor · Salem, OR · Member since 2013 · 19 posts · 0 votes
I was doing some research about current funding options for new investors in Real Estate. I came across the option of Transactional Funding, but I'm not understanding what the funding is for.
I know that in order for this to happen you need to have a buyer lined up and ready to close. However, in order to do this you need to own this property for this to happen yes? For example, you have a $100,000 purchase and a buyer lined up for a $120,000 sale. I don't get where this funding is going to if you already have the property under your name. I figure in order to get the $100,000 purchase in the first place you would need some sort of other funding to even get the purchase, so what's the purpose of Transactional Funding?
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
12y
Transactional funding is used by wholesalers doing double closes. You have a contract with seller A to buy a house. And you have a second contract with buyer C to buy the house from you (B). You use the transactional loan to fund your purchase of the house from A. Then you turn around and sell the house to C and pay off the loan.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
The whole point of transactional funding is so that the original buyer doesn't have to get funding and buy the property. For example: Seller signs contract with Buyer A for $100K and opens Escrow A. Buyer A markets property and finds Buyer B who will pay $120K. Buyer A (as seller) signs contract with Buyer B and opens Escrow B. Transactional Lender agrees to fund only when Buyer B's funding is in place and both escrows are set up and ready to close at the same time. Transactional Lender takes no risk because Buyer A is only the deeded owner as part of a double close transaction. Does that make sense?