What Type of Entity Should an Investor Use for  Transactional Funding?




The investor involved in borrowing transactional funding can use any entity to purchase and sell the property that he is closing.

While an accountant or CPA should help you make the final decision, generally speaking investors use an LLC (Limited Liability Corp) for properties that they intend to hold and where they will be collecting rents.


Conversely, investors tend to use a corporation (Sub-S election) for wholesaling and rehabbing properties.

Again, make this decision with an accounting professional who understands real estate investing to keep you out of trouble later.

Many investors also use land trusts with the Beneficiary being an LLC that has the accounting done as if it were a Sub-S corporation.


However, this question relates to the transactional funding lender – what type of entity should he be using?

Besides the traditional choices of an LLC or corporation, if the transactional funder is a private lender he will be inclined to use his personal name.


On the issue of using one’s own name, attorneys and accountants will tell clients not to expose themselves to potential liability and that an entity (LLC or corp) will “insulate” them from.

This choice is a very personal matter that needs to be determined with the lender’s professionals to weigh the cost versus benefits of starting and maintaining an entity versus occasionally making a loan to a local investor.


If you start going across state borders, you may get into additional laws and regulations that do not apply in your state.

Get legal advice in the additional state you are intending to loan in or stay in your local area.

The temptation to loan transactional money for a few hours and make money is very tempting, but it does entail various risks so always “be prepared’ before you begin any type of transactional funding.


I am not dodging the answer to the question but rather saying that it is a personal choice.

Having an entity will not keep you from being sued and if you are sued the real cost will be attorneys’ fees.

A good option is to make sure you are doing everything legally to begin with and have your documents drafted by attorneys in your state and these documents are then state-specific.


About Dave Dinkel 27 Articles
Dave Dinkel graduated from the University of Florida in 1968 with a BS in Chemical Engineering. He initially worked for a petrochemical research and development company in Illinois. Later he entered the financial arena as a stock and commodity broker with Merrill Lynch.While a stock broker he became a Certified Financial Planner and later started his own brokerage firms and stayed in the financial services industry for 22 years before retiring to pursue his love of real estate investing. After retirement, and because of his interest in business start-ups, he worked with a small company for a few years while driving their sales from under $12,000,000 to over $150,000,000 annually before going back to full-time real estate investing.Dave Dinkel has been a national platform speaker, contributor to local real estate clubs, mentor and consultant to numerous real estate investors and all the while running his own real estate business. Mr. Dinkel received the following degrees or designations: BSChE, FINOP, CFP, MSRP, RSP, RR, ROP, SROP, MGA, GA, Certified Estate Planner, Licensed Mortgage Broker, and Licensed Insurance Agent. He is often referred to as the “Teacher of Teachers” and his Mentoring continues to produce Students who go on to be national real estate "Gurus". .He has been a real estate investor since 1975 and recently received the first-ever Lifetime Achievement Award for Contribution to the Real Estate Investing Community. While being active in real estate investing for over 40 years, he and his wife Nancy have been married for over 52 years. He is most well known for the development of his Mentoring Program that has been called, "The Best Mentoring Program in the Country" which he continues today.In addition to his Mentoring Program, he started a full-service transactional funding Program so that new investors had the ability to do deals with no money of their own. He challenged the funding industry by making borrowing money very simple with his "One Point Funding Program" which has revolutionized the transactional funding industry and made millions of dollars available to investors who otherwise could not have afforded it. Currently his transactional funding is only available in Florida.Get more information about his real estate investing mentor program at http://www.DaveDinkel.com