Not Using Transactional Funding? You’re Losing Money.
Wholesalers who don’t know about Transactional Funding are likely missing out on some extra cash. So what is it? Transactional Funding is a short-term loan that usually only lasts for a few hours or days. Ideally you’d be able to wholesale a property by assigning a contract to a buyer and collect your fee. But unfortunately it’s not always that simple. Sometimes buyers can give wholesalers some push-back because of the assignment fee.
Why Wholesalers Need Transactional Funding
Let’s say you find an amazing deal. A property with an ARV of 130k that you got under contract for 50k and needs 20k in repairs. You add an assignment fee of 10k for a total purchase price of 60k for the buyer. Great deal for all parties involved right? Unfortunately, that’s where the problem begins.
Even though it’s a great deal for the buyer who’s going to make about 40k+, they’ll only agree to a 5k assignment fee. Why? Well, you could say jealousy. When buyers see that a wholesaler is going to make 10k or more on a deal, all of a sudden the numbers become a little hazy. Even though it may be an ideal investment property, they’re still hesitant to make the purchase. They see you’re going to make 10k without investing any money or too much time and their brains start going haywire.
How Transactional Funding Works
Transactional Funding provides the funds for a transaction between the seller and the buyer (wholesaler) for a very short period of time. This means that for a few hours or days you’ll actually own the property until you sell it to another buyer. What’s the point? When you use Transactional Funding you get to keep the purchase price anonymous. This prevents the jealousy problem. Without the real estate investor knowing how much of a fee you’re collecting, they can only use the numbers that matter. The purchase price and the cost of repairs.
This solves a few problems. Your ability to collect a more than fair assignment fee. And the real estate investor purchasing a more than fair investment property. All without animosity towards one another. Believe it or not wholesaling deals have fallen through because neither party can agree to a fair assignment fee even though the purchase price was more than fair. In an ideal world this wouldn’t be an issue. But we are human beings after all.
How Much Does Transactional Funding Cost?
Glad you asked, at Best REI Funding we charge a flat fee of only 2 Points! If you find an amazing wholesale deal but know you’re going to collect a sizable assignment fee, you might want to consider using Transactional Funding to prevent push-back from buyers. Back to the previous example. The wholesaler is asking for a 10k fee, but the buyer will only agree to a 5k fee. If the wholesaler used Transactional Funding they would only pay a 1k fee while collecting a 9k fee, and the buyer wouldn’t even know.
We wish more wholesalers knew about Transactional Funding. It would surely take a lot of stress off of their backs when they’re sitting at the closing table.
If you’re in need of Transactional Funding you can Apply Here. Or give us a call at (888) 341-2282.