The Power of Transactional Funding in Real Estate Deals
Transactional funding is a game-changer for real estate investors who need short-term capital to close deals quickly. Whether you're wholesaling properties or leveraging double closings, this funding method can help you secure more opportunities without using your own money.
But how exactly does it work? And more importantly, how can you use it to scale your real estate business?
In this comprehensive guide, we’ll cover:
What transactional funding is and how it works
The benefits of using it in real estate investing
How to qualify and find reliable lenders
Common mistakes to avoid when using transactional funding
Advanced strategies to maximize your deals
Real-world case studies and success stories
Market trends and best practices for transactional funding
By the end, you'll have a clear understanding of how to leverage this funding tool effectively and profitably.
What is Transactional Funding?
Transactional funding is a short-term loan that allows investors to purchase a property without using their own capital. It is primarily used in double closings, where an investor buys a property and immediately resells it to an end buyer. The key feature of this funding type is that it’s repaid within a very short period, often within 24-48 hours.
Unlike traditional financing, transactional funding doesn’t require credit checks, income verification, or long approval processes. Instead, the loan is based on the transaction itself—ensuring that the end buyer is ready to purchase the property immediately after the investor acquires it.
Why Investors Use Transactional Funding
1. No Need for Personal Capital
One of the biggest advantages of transactional funding is that investors don’t have to use their own cash. This makes it easier to take on multiple deals at once and scale their real estate business.
2. Fast and Flexible
Speed is crucial in real estate investing. Unlike traditional loans, which can take weeks or months to process, transactional funding is typically approved and disbursed within hours. This allows investors to move quickly and secure deals that might otherwise be lost to competitors.
3. No Credit or Income Requirements
Since the lender is funding the deal based on the resale transaction, they do not require credit checks, proof of income, or extensive financial documentation. This makes it an ideal solution for new investors or those with less-than-perfect credit.
4. Perfect for Wholesaling
Wholesalers often struggle with assignment contracts because some sellers or buyers are hesitant about them. Transactional funding eliminates this issue by allowing wholesalers to complete a double closing without needing to assign the contract, making their deals smoother and more appealing.
How the Transactional Funding Process Works
Using transactional funding involves a few key steps. Here’s how the process unfolds:
Step 1: Find a Profitable Deal
Identify a motivated seller willing to sell at a price below market value.
Secure the property under contract with favorable terms.
Step 2: Line Up an End Buyer
Find a buyer who is ready and able to close quickly.
Ensure they have financing in place (cash buyers are ideal).
Get a signed purchase agreement from the end buyer.
Step 3: Choose a Title Company Experienced in Double Closings
Not all title companies handle double closings. Work with one that specializes in investor transactions.
Ensure they can coordinate both closings back-to-back on the same day.
Step 4: Secure Transactional Funding
Find a reputable transactional funding lender, such as Microlend Services.
Submit both contracts (A → B and B → C) for approval.
Receive the funds to purchase the property from the seller.
Step 5: Close Both Transactions
The first closing (A → B) occurs, where the investor buys the property using transactional funding.
The second closing (B → C) follows, where the investor sells the property to the end buyer.
The lender is repaid from the proceeds of the second closing, and the investor keeps the profit.
How to Qualify for Transactional Funding
Getting transactional funding is easier than traditional financing, but there are a few key requirements:
A Signed Purchase Contract with the Seller – You need a legally binding agreement that allows you to buy the property.
A Signed Resale Contract with the End Buyer – Lenders require proof that you have a committed buyer who will complete the transaction.
A Reliable Title Company or Attorney – The closing process must be handled by professionals experienced in double closings.
A Reputable Transactional Funding Lender – Not all lenders are the same. Choose one with experience in real estate investing, like Microlend Services.
Common Mistakes to Avoid
While transactional funding is a powerful tool, making mistakes can cost you money and deals. Here are some pitfalls to watch out for:
1. Not Having a Solid End Buyer
If your end buyer backs out at the last minute, you may be left without a way to complete the second transaction. Always verify their financial readiness before proceeding.
2. Choosing the Wrong Title Company
Not all title companies handle double closings properly. Working with the wrong one can cause unnecessary delays and complications.
3. Ignoring Transactional Funding Fees
Lenders charge fees for providing short-term funding, typically ranging from 1% to 3% of the loan amount. Make sure to account for these costs when calculating your profits.
4. Mismanaging Closing Timelines
If the timing of your double closing is off, the transaction could fall apart. Ensure all parties are ready to close on the same day.
Advanced Strategies for Using Transactional Funding
1. Build a Strong Buyer Network
The faster you can find end buyers, the smoother your deals will be. Network with real estate investors, cash buyers, and rehabbers to build a list of reliable buyers.
2. Leverage Multiple Transactions
By using transactional funding effectively, you can work on multiple deals simultaneously without using your own money, exponentially increasing your profits.
3. Use Marketing to Attract More End Buyers
A well-marketed deal attracts serious buyers. Utilize social media, email marketing, and real estate investment groups to find potential buyers quickly.
4. Stay Updated on Legal Changes
Real estate laws and lending regulations can change. Work with an attorney or transaction coordinator to stay compliant and avoid legal pitfalls.
Real-World Case Studies and Success Stories
Case Study: How an Investor Used Transactional Funding to Scale Their Business
How One Investor Used Transactional Funding to Make $30K Without His Own Money
Real estate investors like Than Merrill and many others have used transactional funding to buy and sell properties quickly—without tying up their own cash.
Here’s how it worked for John:
He found a property for $150,000 and already had a buyer willing to pay $180,000.
Since he didn’t have the money to buy it, he borrowed the full amount from a short-term lender for just one day.
He closed the purchase, then immediately sold it to his buyer, paying back the lender.
When the dust settled, John walked away with a $30,000 profit—without using any of his own money.
Why It Works:
This strategy allows investors to flip properties fast and keep cash free for more deals.
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Case Study: Overcoming Challenges in Double Closing
Mike had a solid wholesale deal lined up: buy a property for $200,000 using transactional funding and sell it the same day for $230,000. Easy, right?
Not quite. At the last minute, his buyer’s financing was delayed, putting the entire deal—and his funding—at risk.
How He Turned It Around:
Had a Backup Buyer Ready – He didn’t rely on just one buyer, ensuring he had another option if things went sideways.
Worked with a Lender That Allowed Extensions – His transactional funding provider gave him 48 extra hours to close.
Pre-Screened Buyers Carefully – He made sure all potential buyers had solid financing to avoid more delays.
The Lesson?
Deals don’t always go as planned, but preparation and the right lender can keep them from falling apart. Because of his strategy, Mike closed two days later and still made $30,000.
Thinking about using transactional funding? Make sure you have a backup plan.
Final Thoughts
Transactional funding is an excellent tool for real estate investors looking to close more deals without using their own money. By understanding the process, working with the right title company, and choosing a reliable lender, you can leverage this strategy to grow your investing business.
Secure Your Transactional Funding Today!
Don’t let funding be the obstacle that holds you back from closing deals. Microlend Services provides fast, flexible, and reliable Earnest Money Deposits and Double Closing Funds to real estate investors like you.
No credit checks
No income verification
Quick approvals
Take the next step toward scaling your real estate business with confidence. Apply now at www.MicrolendServices.com and close your next deal with ease!