Transactional Funding - Wholesaling A Way Into Real Estate Investing and Cash Flow

Did you ever want to become a real estate mogul but squashed the idea because you didn’t have the capital or the resources to get started. There is a path for you to get started, and make money without any cash investment just time and fortitude to accomplish your goals.

If this is what you want I am going to talk to you like a doting grandmother or like a high school coach. You must want it and there will be times that you must dig deep but if you stay focused you will be successful. This is not something that you can do on a whim wherever you feel like it. This must be a real second job (I am presuming that you are working a regular job to support your family or even just yourself) and time must be dedicated every day. You can’t be afraid to work the extra hours to find the properties that can turn a quick profit,

When you’re a wholesaler there are two ways for you to make money. First, you must find a property in which you can negotiate with the seller for the right price and then turn around and sell the contract to a buyer for a profit. Finding the properties is the first task you must take on, and finding these properties is the most difficult part of the business. Remember that you have all types of rehabbers, and other wholesalers working hard to accomplish the same thing that yo9u are. Finding the right property to make a buck with!

If you are starting with no investment you must focus your search on properties just entering into foreclosure, distressed properties, and estates. You can do plenty of research on the web but you can also drive neighborhoods. Being the first or even being the most persuasive can help you have the edge against others who are competing. Get to know your neighborhoods and use scouts to help you. You can offer commissions to people (mailmen for example) to let you know if someone is in trouble. And the spiff is paid only if you complete the transaction.

Preparation on the property should be done beforehand, at least knowing where the evaluation range is. You must be able to estimate the repairs needed to sell it for top market price. Repair estimation comes with experience but there are places on the internet where you can learn and have a good idea of the costs when you are out at the property. If You are unsure, and the owner seems motivated to do something you can go home and review the list of repairs and develop a more accurate estimate, or you can have a contractor estimate it for you (which will probably cost you money).

You must have all your numbers to calculate a price where you and whomever you ate wholesaling the property to van make money.. You must know exactly what the property owner’s payoff is with penalties and closing costs especially if it is someone who is delinquent on their payments. The fees added on can be a substantial amount, but like anything, the banks can be negotiated with and a firm payoff number can be arrived at for a closing 30 days out. 

The offer you present to the owner will depend on what you plan to do with the property. Remember I said there are two ways to earn money and each way is dependent on your contacts and what you can make on the property. The first way is that after all your analysis of the property you realize that to sell the property will require a lot of repairs and that it must be sold to an investor who is interested in fix-n-flip or fix-n-hold. 

Special note here, as part of your dedication to finding these properties you need to find various investor rehabbers so that you have a list of investors that you can turn the property fast.

To make the deal attractive to any of your investors there must be some meat on the bone, meaning they must realize a profit after they do all the work and market the property. After their real estate fees for the sale and any closing costs they must make a minimum of 15%, also remember that they are financing this so these costs need to be figured in. Typically this type of transaction will earn you a quick 5k – 8k. You can’t be greedy, you are simply selling the contract and you are doing it quickly without the hassle of closing, fixing, and reselling the property. Boom cash in hand!

Before I dive into the other way to earn money, let’s talk about the transaction between you (the wholesaler) and the owner of the property. Building trust with the property owner is paramount. Because the result is that you want the property owner to provide you a contract to purchase the house, and complete the sale within a certain amount of time, usually 30-60 days. This may take some finesse, and may even require you to talk to the bank if the property is in the stages of foreclosure, but nothing worth wild will come easy. Remember that is an open end purchase contract, so at the end of the term (30-60+days) if you haven’t been able to consummate the deal you lose nothing, but the property owner may be mad because of the time elapsed. If you did all your preparation and foundation building you should always have several investors in the wings to easily flip the property. That will also make you more confident when negotiating with the property owner.

Now let’s say that you find a property and you can get a very lucrative contract. You have hit a home run where you can make 35 – 45 – 55 – 65 or even 100k by just selling the contract. But there is a dilemma! If you try to flip it to one of your connections they are gonna have a problem, they don’t like when they see a large profit for a wholesaler they feel they are getting taken advantage of. But you have an angle!

Transactional funding is the answer. With this type of funding, you don’t need credit or any financials. The way it works is that you and the seller of the property close first, which is called transaction 1 from A to B. Then after that you and the new buyer close, which is called transaction 2 from B to C. Completing the transaction this way with 2 closings, hides the amount of money you are making from both parties. No harm no foul!  

This means you must find the right buyer for the property (one of your investor contacts), and they must be qualified and show proof of the ability to close.

Underwriting and Docs Needed

Qualifying for a transactional loan is much easier than qualifying for a traditional loan. It’s generally even easier than qualifying for other types of hard money loans. Credit checks, appraisals, proof of employment, etc., are not required.

What you do need:

  • A signed and executed B-C contract, proving there is an end buyer waiting
  • Lender Title Insurance Policy
  • Loan Commitment for the C Buyer

Once approved the money will be wired to the title company for closing and the money will not be dispersed until the funds have been received from the end buyer’s bank or if they are paying cash, then deposited into escrow.


There are a lot of benefits for the investor who knows how to organize transactional funding:

  • Low fees and costs, compared to some other hard money loans, means more profit. Additionally, transactional lenders typically don’t require full title reports, insurance, or appraisals, which cuts down on transactional costs as well.
  • No personal qualifying makes this option available to more investors. Credit and income verification is not required. Borrowers don’t need to list assets or demonstrate their debt-to-income ratio.
  • Fast financing is made possible because there is far less paperwork than most other loan options. The whole process can usually be completed within a week.
  • 100% financing means the investor doesn’t have to put any of his or her personal resources on the line, and the margin negotiated (minus fees) is all profit.


There aren’t really “cons” or “disadvantages” to transactional loans. There are, however, some aspects of transactional funding designed to protect the other parties involved, which can be difficult for investors.

  • You need an end buyer lined up to get transactional funding, and you need to be able to prove it.
  • You need to inform the end buyer’s lenders (if applicable) that they are funding the B-C contract of a flip, because of possible seasoning issues. (This means cash buyers are generally preferred.)
  • You may only have 24 to 48 hours to complete both closings. Timing is critical and all issues must be resolved within that window.

As you can see if you want to break into investing this would be the route to take to build your bankroll. Let’s face it, today with all the competition in the fix-n-flip market many of these investors are working on lower margins while spending time on the property with repairs and marketing. Transactional funding allows you to come in and quickly turn the property without ever lifting a hammer. It can be a great career that will lead to bigger and better things.

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