How Long Can You Use Transactional Funding?

Is there a time limit when using transactional funding?

 

Transactional funding or transactional financing is defined by the length of time the investor needs money for the “transaction” to be completed. In some states the closing agents escrow both sides of the closing until all the documents and money are in place and then and only then will they complete the transfer of the deed to the property. If the closing requires court orders or city inspections, these closings can be delayed for days or even months.

 

The transactional funder should not have his money sitting in escrow all this time but rather wire in the money only on the day of the final closing. Transactional funding is often referred to as Flash Funding or One-day Funding because the actual time period of this private real estate financing should be only minutes or hours.

 

The transactional funding is used between the time the original property seller signs all the documents he is required to sign (HUD-1 Closing Statement, Deed, Bill of Sale (optional) and any additional documents required by the closing agent) and the time the end-buyer signs his required documents (HUD-1, Hold Harmless Agreement, or other documents as

Real Estate Transactional Funding

required by the closing agent).

 

There are transactional funding lenders who advertise 30, 60 and even 90 day transactional funding. In actuality, these extended time periods are actually not transactional funding because the lender charges points and interest for the “extended” time period. Transactional funding only has points and ancillary fees attached to borrowing it.

 

A “point” is actually one percentage point of interest. For example, if the transactional funder lends $100,000 for the transaction and charges two points, he will receive, $100,000 x 2% = $2,000 as his cost for lending the money. This expense is a cost of doing business and is tax deductible as such to the investor and ordinary income to the transactional lender. Remember, without the transactional funding, the investor would not be able to do this deal and would have made no profit what-so-ever!

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