Transactional funding

Hard money for transactional funding

Transactional funding is an extremely short-term loan to facilitate the quick flip of a property, usually from a real estate wholesaler to a real estate fix and flip investor. The loan duration may be anywhere from 2 hours to 5 days.

Real estate wholesalers often find pre-foreclosure properties at a deep discount, line up an end buyer quickly and schedule the closing for the first transaction and the second transaction on the same day, or perhaps the following day.

How does transactional funding work?

Hard money for transactional funding is required to facilitate purchase transaction #1. The full amount of the transactional loan is then returned to the hard money lender following the close of the second real estate transaction with interest. This interest could be anywhere between $2,000-$5,000, or more.

While this may seem like a lot for such a short-term loan, it can be well worth it to the wholesaler if they have found an excellent deal and can easily pass it along to an end buyer for a good markup.

For the wholesaler and the hard money transactional funding lender, this is a way to make quick money with little risk. For the end buyer who will plan to rehab and either resell or rent the property, there is likely still a good amount of money to be made following the work.

What do hard money lenders look for when funding transactional real estate deals?

In the case of transactional funding, hard money lenders are mostly interested in the current value of the home as it is when purchased by the wholesaler. They will make sure that the amount loaned for the transaction is still below market value for the property in its current state, in case the end buyer backs out and the hard money lender is stuck with the property.

Real estate wholesalers seeking transactional funding from hard money lenders can quickly find the funding they need at the interest rates they’re comfortable with by creating a LendVent profile. Wholesalers will be connected to hard money lenders who are willing to do transactional funding quickly to grab the best deals fast.