What is Transactional Funding?

Transactional funding is a short-term financing solution for real estate investors. It allows investors to close on a property purchase without using their own cash or credit. In a real estate transaction, the earnest money deposit (EMD) is typically paid by the buyer to the seller as a show of good faith and to secure the property. Transactional funding can be used to cover the EMD, as well as any other closing costs associated with the purchase.

Transactional funding can also be used in a process called a double close. A double close is a type of real estate transaction in which the investor purchases a property from one seller and then immediately sells it to a second buyer, without taking ownership of the property. Transactional funding is used to provide the funds necessary to close both transactions, as the investor does not have the necessary funds available.

How does Transactional Funding work?

The process of transactional funding begins when an investor finds a property they want to purchase. The investor then secures a purchase contract with the seller and seeks out a transactional funding provider.

The transactional funding provider acts as a third party, holding the funds for the purchase in escrow until the deal is completed. The investor then uses these funds to close on the property, including paying the EMD and any other closing costs. Once the deal is complete, the investor will either flip the property or assign the contract to another buyer.

In the case of a double close, the transactional funding provider holds the funds necessary to close both transactions, allowing the investor to complete both purchases without having to use their own cash or credit.

The transactional funding provider is paid a fee for their services, which is typically a percentage of the purchase price. The fee is paid at the time of closing and is generally non-refundable.

Why use Transactional Funding?

There are several reasons why real estate investors choose to use transactional funding:

• It allows investors to close on a property quickly, as they don’t have to wait for their own funds to become available.
• It allows investors to purchase a property without using their own cash or credit.
• It allows investors to take advantage of time-sensitive opportunities, such as a property being sold at a discounted price.
• It allows investors to avoid the hassle of obtaining traditional financing, such as a mortgage.
• It allows investors to cover the EMD and any other closing costs associated with the purchase.
• In the case of a double close, it allows investors to complete two separate transactions without using their own cash or credit.

Who can use Transactional Funding?

Transactional funding is available to any real estate investor who is looking to purchase a property without using their own cash or credit. It is a useful tool for both novice and experienced investors who want to take advantage of time-sensitive opportunities or who want to close on a property quickly. In the case of a double close, transactional funding can be used by investors who want to complete two separate transactions without using their own cash or credit.

Is Transactional Funding right for you?

Transactional funding can be a useful tool for real estate investors, but it is not right for everyone. Investors should carefully consider their options and weigh the pros and cons before deciding if transactional funding is the right choice for them. Some potential drawbacks to transactional funding include the need to pay a fee and the risk of not being able to flip the property or assign the contract as planned.