Tim Bell - Transactional funding

Now, the next strategy and the final strategy we want to talk about here is transactional funding. Now, transactional funding is very similar to a simultaneous close. If we look at these two diagrams, you can see with simultaneous close, we've got the seller and we've got the buyer. And then we've got you, the wholesaler in the middle with the transactional funding we've got, we add one additional box. And you can see that box down at the bottom below you. That is the box where you arrange for the transactional funding. Now, the transactional funding company is a company that loans money temporarily for these types of transactions. That's what the transactional funding company does. So again, let's go on to transactional funding, and here's how it works. Step number one, as always, is to put the property under contract with Sam. In this instance, we've put the property under contract with us as the buyer and Sam as the seller for $70,000. In this particular example, step number two, put the property under contract with Bob. We get a regular real estate purchase contract and Bob signs that contract as the buyer. We sign that contract as a seller. We now have those two contracts. Those two contracts are then sent into the transactional funding company. And I'm going to teach you later on how to find transactional funding companies. They're easy to find and I'm going to show you how to do that. So those two contracts are emailed, they're scanned and emailed or faxed or whatever into the transactional funding company. At the time that you send those, the transactional funding company is going to expect you to pay a non refundable application fee. Now, as this recording is being made, in our current market, that fee is typically about $495. Okay. Depending on what the market's doing, that may go up or down, but $495. So here's the steps. Put the property under contract with Sam. Put the property under contract at a higher price with Bob. Contact the transactional funding company. Send the transactional funding company your fee. Typically, they're going to hit your credit or debit card for that $495 fee. That's their fee. Then you're going to send them a copy of each of those contracts, typically scanned it on the email or faxed. They're going to look over those two contracts. There's going to make sure that all the I's are dotted and all the T's are crossed, everything is signed, all the signatures are there, and they're going to make sure. That there's a differential between what Sam is agreeing to take and, and what Bob is agreeing to pay. Obviously, there has to be a difference between those two numbers. If they see that all those things are in place, then they will send to the title company or the title attorney's office, they will send that $70,000 earmarked for my transaction with Sam. That's what they're going to send to the title company. They typically wire transfer that to the title company. Now here's something important. Along with that $70,000 that they wire transferred to the title company, they're also going to send something called escrow instructions. Now, escrow instructions, they're all in legalese terms, but essentially what the escrow instructions say is if Sam and Tim show up and sign all the appropriate paperwork, and Bob and Tim show up and sign all the appropriate paperwork, and probably most important of all, Bob brings in his money, in this case the $110,000, then and only then, title company do you have the transactional funding company's permission to release the $70,000 into the transaction between Tim and Sam. See, unless all those things happen, they, they don't have permission to release that 70,000 into my deal with Sam. So once all those things happen, Sam signs, I sign, Bob signs, I sign, we have all the appropriate paperwork signed, and Bob brings in his $110,000. In this example, then and only then will the title company have permission from the transactional funding company to release that $70,000 earmarked for my transaction with Sam into that transaction. If you think about it logically, the transactional funding company has no risk. Why? Because Bob's $110,000 easily covers my commitment to Sam and their commitment to me for that $70,000. So as a consequence, it's no risk for them. Okay, now you can see here, if you calculate this in the diagram that I've got here, that the transactional funding fee calculated here is about 3% of that $70,000 or $2,100 in this particular example, $2,100. I've had this slide for a long time, and 3% was a very normalcy in the marketplace, but it has actually improved. It's actually gone down. I'm going to show you a place where you can find it at 1.75%. Now, that's not over a long period of time. It's over just the one or two or three days over which this whole transaction is flushed out. Okay, so it's a one time fee. It's not a per day or per month or per year because you're not, you're not gonna borrow the money for that long. You're just gonna borrow it for a day or two and they're gonna charge you typically anywhere from two to three. Although I do have a company, and I'll show that to you later on in one of the other videos, I do have a company that will do it for 1.75%. And I'll introduce you to those folks so that you can have an idea of how to access that. Now, the nice thing, the, the additional nice thing about transactional funding is there's no credit check. There's no income requirements. They don't ask you for your rent history, your employment history, your income, your shoe size, your iq, your blood type. They don't ask you for any of that stuff like a traditional lender does. Why? Because there's no risk. Why? Because Bob's 110 easily covers the their commitment to you for 70 and your commitment to Sam for 70. So their money is easily covered because if all of those things don't happen, Sam signs, you sign, Bob signs, you sign, and Bob brings in his money. Then the instructions are to send the money back so that thing doesn't get funded until Bob's 110,000 shows up. Well, Bob's 110 easily covers the $70,000 that they've put into this deal. So there's no risk on their part. Let's think about it. If they're only making 2% per year on their money, there are 365 days in a year. 2% times 365 is about 730%. Okay, so let's think about it. You're a transactional funding lender. You have the potential to make 730% interest on your money in a year and you have absolutely no risk. Yeah. Who wants to sign up for that program? Everybody does. It's easy to find transactional funding lenders because it's a great business to be in. But that's a whole nother seminar. Okay? The point is, for wholesaling, I want you to understand that this is available to you. There's no credit check, there's no hitches, there's no investigation, there's no nothing. All you got to do is send them the two contracts, let them hit your credit or debit card for the 495 fee, and they will send that money to the transactional funding company so fast you won't even know what happened. So I'm sorry. I said the transactional funding company. I meant to the title company. They'll send the money so fast to the title company with those escrow instructions that you won't even know what happened. See, in this case, the title company becomes Guido, the enforcer on behalf of the transactional funding company because of the escrow instructions. The escrow instructions make sure that the transactional funding company's loan is completely covered by the title company. That's how it works.