Transactional Funding has become the funding strategy of choice in the industry, particularly with short sale and REO investors that flip properties for profit. This is essentially money that is provided by private lenders to fund transactions that only require the cash for a very short time, typically less than 24 hours.
So how does it work? Using a simple example of an Investor network that flips short sales, Investor A will contract to purchase the short sale property from the Seller for $100k. We’ll call this the A to B transaction. After a period of negotiations with the lender and arriving at an “approved price”, Investor A will now market the property to Buyer C for $120k. We’ll call this the B to C transaction. Now when everything lines up as planned, Investor A will purchase the property with cash from the Seller in the A to B transaction for $100k, and then immediately (within 24 hours) sell the property to Buyer C in the B to C transaction for $120k, which yields Investor A a profit.
Of course there are a number of variables that impact the success of the transaction, and we advise following a proven system to ensure the highest probability of success. However, acquiring the money is absolutely the easiest part of the deal. Transactional lenders will provide you with the cash to close the transaction and will take their fee from the back-end when the second transaction closes. And the best aspect about working with these lenders is they don’t care about cash, credit, financial strength of the borrower, etc. As long as Investor A provides valid contracts and there’s profit in the deal, they will fund the transactions all day long. And on very little notice, which can sometimes mean less than 48 hours.
Craig Collins is a full-time Real Estate Investor and Licensed Realtor living in Miami, FL. For nearly ten years Craig has been successfully closing dozens upon dozens of creative real estate deals including lease options, contracts for deed, full rehabs, commercial property, pre-construction, and of course, short sales.
He successfully closed his first short sale transaction six years ago, before anybody even heard the term “short sale”. Since there were no blueprints, gurus, or courses on short sales at the time, Craig stumbled through the process and still managed to make a profit of $40k! Needless to say, he’s been involved in short sale investing since. The only difference now is that he’s successfully flipping short sales by following a simple and proven system that requires far less effort.