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There are two ways of looking at transactional funding in terms of being a loan or not.   First, many closing agents are emphatic that transactional funding is a loan and they actually require a lender’s title policy in addition to the regular owner’s title policy. The cost of this additional policy is usually $25 depending on the price of the property’s buyer’s policy. If a conventional or hard money lender was funding a purchase, they always require a lender’s policy which additionally insures the amount loaned for about 10% over the actual amount loaned. But to [...]

Double Close and a Simultaneous Close - The short and correct answer is they are not the same!   There is more than semantics when you talk about double closings and simultaneous closings. As an investor for over 47 years, there has been a definite change in what words and phrases mean in real estate investing. Some of the changes have come about by necessity, some because of Investor invention, and others were taken out of context by investors. As an example of investor invention, many years ago I needed a description of what seemed like continuous [...]

Transactional funding and hard money differ greatly.   Interestingly, most hard money lenders will not do transactional funding because they consider it too risky, and in some cases, they are correct. Let's compare the main aspects of both types of lending: What we have is a comparative analysis of the items a hard money versus the transactional funding. First of all credit score - for hard money there is a minimum required by every hard money lender; for transactional funding, none. Bankruptcy - hard money likely not okay; transactional funding, it's okay. Funds how much - hard [...]

Don't be outrageous with your end-buyer's earnest money deposit request or you could kill the deal.   I have seen new investors ask for a 20 or 30% earnest money deposit or EMD from their end-buyer and quickly lose the deal. The EMD you get from a buyer not only shows motivation and good faith, it also helps you cover your loss if he doesn't come to the closing. Specifically, here the guidelines for what amount of EMD's to require: Number one – generally, your end-buyer's earnest money deposit should be 2 to 5 times what you [...]

Hedge funds and iBuyers are the “buzz words” in the wholesale industry because of their seemingly unlimited buying power.   They are continuously purchasing thousands of homes, always raising money to buy more properties, and there always cash buyers. This would make them a logical prospect for wholesalers to sell their deals and many are doing exactly that. What these buyers are looking for is a very minimum rehab on the property, and preferably cosmetic only. Most of their transactions come from listed properties that wholesalers can get under contract slightly below the list price, this source [...]

There are two major risks involved with transactional funding. The first risk is when the transactional funder loans the funds for the double closing. The second risk is for the investor if anything goes wrong, and he can't get the funds timely or at all. The transactional funder faces five specific types of investor fraud of which the investor may or may not be a part. The transactional funder's primary risk is having to foreclose and get his funds back if the original seller is paid out at closing and the end-buyer doesn't close. While all these [...]

For most investors having a Proof of Funds (or “POF”) sets up their credibility about as high as it can go with a seller or a listing agent.   The ultimate proof of funds is one where the investor's name and address are on his personal or corporate bank statement. Unfortunately, having a balance in the bank, in the name of the buyer to purchase the property, happens on less than 2% of the offers made to sellers. The rest of the time, the investors have to show someone else's proof of funds or manufacture their own. [...]

While this question is not exactly related to a wholesale flip, it's important to investors doing deals.     When investors think of the term “partnership” the immediate thing that comes to mind is that the profit of the deal will be split with a partner, that's the reason the partner is putting up the money for the rehab or double closing.   Unless the investor makes it very clear to his “partner”, before he becomes a partner, the partner may assume a split of 50% of the profit.   In a wholesale flip or same-day double [...]