Sorry I didn't get back sooner.
Transactional funding is simply 1. filing the gap for funds created by new lending restrictions and 2.to fund deals for investors who don't have the money to do back to back flips.
You simply lend money to a buyer/investor that has a deal on the table that will pay you off the same day or within a very short period of time.
The velocity of money is more important than the rate of interest charged when you have funding fees. Okay, I mentions three per cent, and 1.75 was mentioned, let's lower that to one point!
I loan out 100,000 for an hour, that's 1,000 in my pocket.
The greatest limitation to lending your money is not the market for your money, it's the ability to do the due diligence to ensure you're being paid off, and that can be covered pretty easily with your closing instructions with any closing agent.
If you only do three deals a month, taht's 36% annualized for very little risk, from rolling those same dollars over and over quickly.
Being on the financing side of deals beats buying property any day with X dollars, IMO.
I have acquired properties in most all of the startegies available to the average investor, and while you can obtain much higher yields from a great flip or buying a property that is identified the next week as being need to put a development together causing the value to skyrocket (think Branson Mo., if anyone is familiar with a 15 degree sloping propety wull of rock is needed for the next music theater parking lot or hotel) there is considerable risk involved in accepting title to properties.
If there are funds at the table of a second buyer, title is good/insured, all documents are properly executed, etc. there is ZERO risk of my money being shoved twice across the table.
I would not suggest funding deals for just anyone, as there are compliance issues that must be addressed and more than a common knowledge of legal issues, but if you have the capacity of playing the stock market and not losing your tail, RE financing can be a slam dunk!
At the rate mentioned, this means you have the potential of doubling your business in three years, 3X in 6 years and so on. I don't think rents or appreciation will get anywhere near that kind of growth. It gets to be more fun when you use borrowed funds, but again, compliance and legal issues arise, but after getting past the legal issues, you can take off.
A close second is buying notes at a discount and then refinancing the note purchased. But doing this will require knowing conventional financing inside out, IMO. Knowing a very good mortgage broker might work, but you're risking your investment on their knowledge.
Next would come the financing in a JV relationship, and expanding to ownership positions.
After you have a system set up for your lending efforts, it takes less than two hours to approve a deal if you have the ducks in a row.
But to do financing, you must understand RE transactions, appraisal issues and the market for the types of deals considered.
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