The Cost of Transactional funding

Wholesaling
10yFollow

The Cost of Transactional funding

Isaac Blocher
Property Manager · Orlando, FL · Member since 2015 · 257 posts · 58 votes

Calling all wholesalers out there on BiggerPockets. I am just curious about how much you'll are paying for the transactional funding your getting when you do a deal. I have talked to some wholesalers who pay 12% for the money they use when closing a deal in one day. And I have talked to some wholesalers who are paying just 2% for the money they use when doing a one day deal. 

I would love to learn from everyone how much they pay for transactional funding and from what state they are located in. This information will help me understand this business better. Thank you

1Reply
750 views

Most Popular Reply

Tim G.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
10y

The largest wholesale fee I've assigned was $48,000. I've got one in escrow currently for $30,000, buyers won't mind if they are making their desired profit and if they do care they are replaceable. If they weren't okay with this, couldn't you just perform a double close? That runs a couple grand, well unless this costs less than that.

Due to deed restrictions on most shortsales can someone even transfer title for 90 days on most after the initial close? I've not been able to in years, we just line up buyers and go the full length with them on the contract rather than play games. 

Another option is to be paid outside of escrow, this requires a second agreement and if you really don't trust the buyer a second escrow. This runs around $600 in California but we've done that twice. Once for a retail end buyer (worst idea ever trying to wholesale to them) and an MLS deal. In both cases this option worked well to guarantee us our payday without having to jump through hoops on transactional funding.

If anyone wants more info on how I've avoided the need to use funding just PM me, its insanely straightforward and keeps a much larger amount of the wholesale fee in your pockets.

Anyhow, thanks for clearing it up. I'm a full time wholesaler, mastermind with many other FT guys and gals and none of us have ever ran into these issues but we're mostly working with off market stuff. I've done two shortsales, never an REO but in my four years in the business I'd not ran into these issues.

3Reply
See this reply in the discussion

70 Replies

Jump to latestLatest
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Tim G.  other states are FLA and CA  . 

    and the reason I say CA is that ( and I think we had this discussion on another thread) is that when I was re upping my CA BRE license there was a pop up that said if us agents suspect anyone of selling RE without a license to file complaints and their was a link..

    So that in my mind tells me CA is starting to put this on their radar.. .But who knows that's a freaking big state will lots of peeps just like FLA... but I know FLA has hammered people for sure..

    And its the most egregious violators those with websites and bunch's of craigslist adds etc.. advertising homes they don't own... I think those that do it under the radar are immune unless you piss of a seller or buyer and they file complaints.

    I know in the lending world our competitors will turn non licensed HML in all day long.

    So I can see a day were realtors start doing this...

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    10y

    If a wholesaler is unlicensed, and not under the jurisdiction of the CA BRE is there any recourse? 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Tim G.  ya that's the issue when you bring a buyer and seller together for the expectation of compensation  IE you don't actually own what your selling,, and you make a fee that requires a RE license .. if you look at the bigger wholesalers in FLA you will see they are all licensed.

    I suspect this will start to happen in Ca as the BRE starts to tag those who are out there acting like Brokers when in fact they have no license to market properties they don't own.

    as we know you can market a contract and assign it.. its when wholesalers start marketing on the internet just like a RE borker that it cross's the line.

    other wise think about it .. Why even have a RE division or license requirement if you can just take fee's for selling others properties.. no need to have that industry at all .. just a free for all which is what wholesaling is.. anyone can do it .  Just like China there is NO real estate industry there and anyone can say take fee's for marketing properties.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Wendell De Guzman
    Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
    10y

    I would say 2 points for one day funding is reasonable ($1500-$2000 as "minimum") specially when you're dealing with the direct lender not a broker.

    @Ted Akers, I only wire my funds if the end-buyer's fund is wired to the title company. I do not proceed with it unless the money is there. NO RISK.

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Tim G. I had a client in MS.. that got fined for this.. as well. he had big website selling turn key and taking fees on the HUD... I was the HML he never came into title. but got paid on the hud.

    State put him out of business. when he got in a fight with a client who filed a complaint.. he actually ended up getting arrested because he did it again.

    So for him to continue I would charge him a transaction fee to put him into title then 2 or 3 days later the LA turnkey buyer would buy from him. and he got paid as the seller ... that worked perfect we did probably 50 to 75 of those.. until he fell back into his pattern of taking fee's on properties he did not own.. this was as stated Mississippi so that's two states.  And one clear cut example I was privy to.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Tim G.   here are the rules from the state of CA BRE pretty clear cut really..

    http://www.dre.ca.gov/files/pdf/Within_this_State_Advisory.pdf

    give it a read and let me know what you think... it really comes down to enforcement. and not getting anyone pissed at you ... LOL...

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Tim G.   here are the rules from the state of CA BRE pretty clear cut really..

    http://www.dre.ca.gov/files/pdf/Within_this_State_Advisory.pdf

    give it a read and let me know what you think... it really comes down to enforcement. and not getting anyone pissed at you ... LOL..

    Sounds like I've got that covered already here. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Tim G.  unless a broker gets made because you took his listing LOL..

    if you see on BP Aaron M.. he is a big wholesaler down your way and when you check on him you will see he is licensed..  you probably don't want to read what the state has to say.. :) as its not what you guys ever want to hear... but any way onward and upward.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Tim G.  I looked at your website.. and as long as you actually come into title then resell your fine I would suspect.. if you are never in title then your clearly doing what the state says is an activity that requires a license you are marketing for clients on the internet plain and simple.. LOL... good luck with it.

    We just did a big condo deal in Oceanside.. another BP member is the sponsor I was just an investor.. but pretty exciting deal we hope to do very well on it.. and of course we closed on it and own it.. 20 some condos and about 7k sq ft of commercial..

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Tim G.
    Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Tim G.  unless a broker gets made because you took his listing LOL..

    if you see on BP Aaron M.. he is a big wholesaler down your way and when you check on him you will see he is licensed..  you probably don't want to read what the state has to say.. :) as its not what you guys ever want to hear... but any way onward and upward.

     I'm now becoming aware of why he no longer posts here. This intense focus on me and my business is off putting. 

    I'd rather not post and help folks than get scrutinized and feel threatened. 

    Best Wishes, 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Tim G.  I doubt that's it he had a baby and likes to fish... LOL... nothing off putting just talking shop that's all.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y
    Ouch. hoops really hurt sometimes.
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Manolo D.  there is another thread on WI wholesaling and it appears you cannot even own and sell more than 5 homes a year without being licensed or use a broker.. and that's when you own them.

    writing is on the wall.. I suspect NAR and other orgs will start to go head hunting for these folks.

    Crap I made one post on BP about doing a mortgage in NV and promptly got turned in by someone on BP and subsequent cease and desist from the state of NV>. even though I never ever did a loan there.

    or States are trolling BP.. so in this instance the OP talk about how he does deals he would have no defense if in fact his activities are subject to licensure.. that's the funny part of BP folks getting on here talking about what they do and a lot of it simply is not within the RE rules.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y
    Jay Hinrichs True. Information is out there, you just have to read it, on my side, consumer relations in CA is an open book, all they need to do is read and follow. Unfortunately, consumers don't want to spend the extra 10-30 mins reading on how to protect themselves (including newbie investors and homeowners) at a minimum level by simply reading through brochures from a website. I believe the OP is simply asking how transactional funding costs in the hopes that he can lend to someone. I have never got a complaint, but then again I have not been in business as long as you, lol. There are some wholesalers out there that do a killing, eventually, they spend the extra time and hundreds to get a license in exchange for time in the slammer. I had a good read on transactional funding though, a new education on my belt, I probably will not use it in this lifetime but if it comes to it, then at least i know how it will go down.
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Manolo D.  agreed I do a lot of business with some top wholesalers in many states and in states where its required they are licensed.. no big deal.... they have too much to lose.

    who wants to build a business up then get a cease and desist.. or band from the industry.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y
    Jay Hinrichs Some people just wants to go around saying to themselves they could and only believe what they want to believe, I guess a hobby can qualify for that. I have always been a fan of doing it the right way, guess i wanted to build a business from the start and not a hobby. :)
    0Reply
  • Mark Grigsby
    Real Estate Professional · Saint James, NY · Member since 2016 · 16 posts · 3 votes
    10y

    I am a little new at real estate investing but have alot of experience in finance, lending and insurance....so is 2-5 points on these deals the standard norm?

    0Reply
  • Isaac Blocher
    OP
    Property Manager · Orlando, FL · Member since 2015 · 257 posts · 58 votes
    10y

    @Mark Grigsby Thank you for bringing the thread back to where it should be. I do believe that 2 points is the standard Norm. If someone is ok with 5 then great. 

    1Reply
  • Mark Grigsby
    Real Estate Professional · Saint James, NY · Member since 2016 · 16 posts · 3 votes
    10y

    thank you for that clarification. We need to establish some kind of benchmark and that clarity is what ineed. Thank you!

    1Reply
  • Brian Hugaboom
    Member since 2024 · 1 post · 0 votes
    2y

    Can you enlighten me about the structure of the deal any type of JV agreements title/deed in escrow and the triggers you use to protect the lender's money? Really I'm asking because I want to do transactional lending but I don't have a license and don't want to take a lot of risk.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free