When the clock is ticking, and you need cash to seal a deal sooner rather than later, transactional lenders will be there for you with exactly what you need. This is especially true when you want to do a real estate deal without dipping into your own pockets.
In this guide, we’ll go over the basics of transactional lending, focusing on how it can work for you!
What Is Transactional Lending?
Same-day transactional funding, flash funds—both terms refer to a specific kind of financing that real estate wholesalers use. Its main benefit is speed. That is, you can close quicker if you have access to this kind of funding.
Here’s how it works: You take out a short-term loan that must be paid back pronto, i.e. on the same day or within a week.
Wholesalers love these loans because they’re perfect for double closings. Essentially, they can make a deal happen without putting their own money on the line. Talk about a win-win!
How Transactional Lending Works
Flash-cash loans are typically written by private lenders, and they’re short-term loans. The wholesaler gets the loan so they can purchase the property from the seller. Then they sell it to the end buyer for a profit. The funds from the end buyer’s purchase are used to repay the transactional funding loan.
This form of funding is versatile, and it can be used to secure residential, commercial, industrial, and land transactions.
As long as the closing agent is willing to manage both transactions, and the lender can verify crucial details before releasing funds, the deal should go off without a hitch.
Here’s a snapshot of how flash cash is used in a deal:
A real estate investor negotiates with a motivated seller, and they agree on a below-market purchase price (the A-to-B transaction).
Next, the investor must find an end buyer. When they do, they sell it to this person (B-to-C transaction) at a higher price. But both transactions have to happen on the same day.
Again, to acquire the property from the seller, the investor needs money. They can get the money needed in the form of a flash-cash loan.
Obviously, some finesse is needed to make things a success, but this can be a pretty lucrative way of operating—if you know what you’re doing.
Transactional Lending & Double Closings
If you can’t assign a contract, but you need to profit from the deal you’ve got cooking, going with a double closing is a great option.
A double closing involves two real estate transactions occurring simultaneously. The wholesaler buys from the party that’s looking to sell, and then they sell it to another party that’s looking to buy. They profit after the second transaction.
Also, operating this way ensures you don’t use your end-buyer’s funds to facilitate the transaction, which is against the law in many jurisdictions.
Final Thoughts
Want to speed up your real estate deals? If you’re wholesaling in states where contract assignment isn’t allowed, consider using transactional funding. As long as you’ve got a solid deal, getting this kind of loan should be a breeze. In short, transactional lending can be a game-changer for wholesalers and flippers, as it helps with closing more deals.
Looking for funds for your next deal? Check out DoubleClose.com to get quick and fee-free transactional funding. We understand that this kind of deal can be hard to secure, and that’s why we don’t charge fees up front. Get in touch with us to get the best transactional funding.