📝 Step-By-Step: How to Structure a Deal Using Transactional Funding

What Is Transactional Funding?

Transactional funding (also known as “flash funding” or “same-day funding”) is a short-term loan used primarily by real estate wholesalers to fund the first closing in a double-closing transaction. This type of funding typically only lasts for a few hours or days, bridging the gap between your purchase from the seller and your sale to the end buyer.

Why Wholesalers Need Transactional Funding

As a wholesaler, you’ve probably encountered this scenario: you find a great off-market deal, but you don’t have enough cash to close. You have an end buyer lined up, but they can only wire funds after you own the property. This is precisely where transactional funding comes in — it’s the financial bridge that makes your wholesale deal possible.

The Step-By-Step Process

Step 1: Find and Lock Up a Deal

Before considering transactional funding, you need a deal under contract. This means:

• Finding a motivated seller
• Negotiating a below-market purchase price
• Getting a signed purchase agreement with contingencies that protect you
• Setting a closing date that gives you enough time to line up your end buyer

Pro Tip: Include a clause in your contract that allows for an assignment or the ability to bring in a partner. This gives you flexibility in how you structure the deal.

Step 2: Find Your End Buyer

With your deal under contract, now you need to find someone to buy it from you:

• Market the property to your buyers list
• Post in relevant Facebook investor groups
• Contact local cash buyers and investors
• Work with a real estate agent who specializes in investor transactions

Important: Get proof of funds from your end buyer before proceeding to the next steps. This reduces the risk of your deal falling apart.

Step 3: Contact a Transactional Funding Provider

With both sides of your deal in place, it’s time to secure your funding:

• Research transactional lenders (ask for recommendations in local REI groups)
• Compare rates (typically 1-2.5% of the funded amount)
• Confirm they can fund on your timeline
• Submit your deal for approval

Required Documentation:

• Both purchase contracts (A-B and B-C)
• Proof of funds from your end buyer
• Title company information
• Property details and photos
• Estimated closing statement

Step 4: Coordinate with Your Title Company

This step is crucial for a smooth double-closing:

• Select a title company experienced with double-closings (not all are!)
• Inform them you’re using transactional funding
• Ensure they’re comfortable with the “sell-fund-buy” sequence
• Confirm they can schedule back-to-back closings
• Request they prepare estimated settlement statements for both transactions

Important Note: Some title companies require the A-B transaction to fund before the B-C transaction can close. Others will allow the B-C funds to be used to fund the A-B transaction. Know which approach your title company uses.

Step 5: Review and Sign Funding Documents

The transactional funder will send you paperwork to complete:

• Funding agreement
• Promissory note
• Wire instructions
• Authorization to release information to the funder

Key Terms to Verify:

• Funding amount
• Fee structure
• Repayment terms
• Default penalties
• Wire deadlines

Step 6: Prepare for Closing Day

As closing day approaches:

• Confirm all parties are clear on the timeline
• Verify your end buyer has sent proof of funds to the title company
• Check that the transactional funder has wiring instructions for both transactions
• Prepare any documents you need to sign
• Address any last-minute issues or questions

Step 7: Execute the Closings

On closing day:

1. First Closing (A-B): You purchase from the original seller using the transactional funds
2. Document Transfer: Title company prepares the deed transferring ownership to you
3. Second Closing (B-C): Your end buyer purchases from you
4. Repayment: The transactional funding is repaid from the proceeds of the B-C transaction
5. Profit: You receive your wholesale fee after funding is repaid

Timing is Everything: These closings typically happen within hours of each other, sometimes back-to-back in the same day.

Example of a Transactional Funding Deal

Let’s look at a real-world example:

• A-B Contract: You have a property under contract for $150,000
• B-C Contract: Your end buyer will purchase for $175,000
• Wholesale Fee: $25,000 (before closing costs and funding fees)
• Transactional Funding Fee: 2% of funded amount = $3,000
• Closing Costs: Approximately $2,000 total for both transactions
• Net Profit: $20,000

Common Pitfalls to Avoid

1. Insufficient Due Diligence: Always verify the property’s condition and value
2. Unreliable End Buyers: Vet your buyers thoroughly and get proof of funds
3. Title Issues: Run a preliminary title search early in the process
4. Timing Problems: Allow buffer time for unexpected delays
5. Communication Breakdowns: Keep all parties informed throughout the process

Alternatives to Consider

Transactional funding isn’t the only way to close a wholesale deal:

• Assignment of Contract: Simply sell your contract rights (simpler but less profit potential)
• Seller Financing: If the seller is willing to carry a short-term note
• Private Money: Friends and family who understand your business model
• Hard Money: More expensive but can work if deals take longer to close

Final Thoughts

Transactional funding is a powerful tool that allows wholesalers to complete double-closings without using their own capital. While it comes with costs, it often enables deals that wouldn’t be possible otherwise, especially when assignments aren’t feasible or when you want to protect your profit margin.

By following this step-by-step process and working with experienced professionals, you can leverage transactional funding to scale your wholesaling business and tackle larger, more profitable deals.

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If you’re looking to sell your investment properties quickly and for top dollar, check out our Property Disposition Services. We specialize in helping investors like you sell their properties to our nationwide network of qualified buyers.

Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Always consult with qualified professionals before entering into real estate transactions.

Have questions about transactional funding or need help structuring your next deal? Leave a comment below or contact us directly.