Transactional Funding and Double Closes
Real estate wholesaling can be incredibly profitable, but sometimes you need more than just an assignment contract to get the deal done. That's where transactional funding and double closes come into play. These powerful tools allow savvy investors to control properties, protect their profits, and close deals that might otherwise slip through their fingers.
If you've been wholesaling for a while, you've probably encountered situations where assignment fees raised eyebrows or where sellers balked at the idea of their property being flipped. Double closes solve these problems while transactional funding makes them possible without tying up your own capital.
What Is Transactional Funding?
Transactional funding is a short-term loan specifically designed for real estate investors who need quick capital to complete time-sensitive deals. Think of it as "flash funding" - money that's available the same day you need it and typically repaid within 24-48 hours.
Unlike traditional mortgages that take weeks or months to process, transactional lenders move fast. They're not concerned with your credit score, income verification, or debt-to-income ratios. Instead, they focus on one thing: the viability of your transaction and proof that you have a qualified end buyer ready to purchase.
These loans are typically provided by private hard money lenders rather than banks. The interest rates are higher than conventional loans, but since you're only borrowing the money for a day or two, the actual cost is relatively minimal compared to your potential profit.
Here's what makes transactional funding unique:
Same-day approval and funding
No credit checks or income verification
Short repayment terms (usually 1-3 days)
Higher interest rates but minimal total cost
Requires proof of end buyer and contract
Understanding Double Closes
A double close involves two separate transactions happening on the same day. You're essentially buying a property and immediately selling it to your end buyer, with both closings occurring simultaneously.
Here's how the structure works:
Transaction A-B: You (the wholesaler) purchase the property from the original seller
Transaction B-C: You immediately sell that same property to your end buyer
The beauty of this approach is that your end buyer never sees what you're paying the original seller. Your wholesale fee is built into the price difference between these two transactions, keeping your profit margins private.
The Double Close Process Step by Step
Let's walk through exactly how a double close works with transactional funding:
Step 1: Find Your Deal
You locate a motivated seller willing to sell below market value for a quick closing. You also have an end buyer ready to purchase at a higher price.
Step 2: Secure Contracts
You get the property under contract with the seller (A-B transaction) and have a purchase agreement with your end buyer (B-C transaction).
Step 3: Apply for Transactional Funding
Submit both contracts to your transactional lender. They'll verify that your numbers work and that your end buyer is qualified.
Step 4: Get Approval
Most transactional lenders can approve and fund your deal the same day, giving you the proof of funds needed for closing.
Step 5: Execute Both Closings
Both transactions close on the same day. You use the transactional funding to buy from the seller, then immediately sell to your end buyer. The proceeds from the second closing pay back the lender, and you keep the difference as your profit.
Why Choose Double Closes Over Assignments?
While assignment contracts are simpler, double closes offer several key advantages:
Privacy Protection: Your wholesale fee remains completely confidential. The end buyer never knows what you paid for the property, eliminating potential negotiation issues.
Professional Appearance: Double closes look more professional to both sellers and buyers. There's no mention of assignments or wholesale fees in the paperwork.
Higher Profit Potential: Without the transparency of assignment fees, you can often command higher margins without raising red flags.
Seller Comfort: Some sellers are uncomfortable with assignments, feeling like they're being taken advantage of. A double close appears as a straightforward purchase and sale.
End Buyer Satisfaction: Buyers prefer dealing directly with someone who owns the property rather than someone who's just assigning a contract.
When Transactional Funding Makes Sense
Transactional funding isn't right for every deal, but it's perfect in these scenarios:
Tight Profit Margins: When your assignment fee would eat significantly into the end buyer's profit expectations, a double close can make the deal more palatable.
Sensitive Sellers: Elderly homeowners or distressed sellers often prefer dealing with someone who's actually buying their home, not just controlling it through a contract.
Competitive Markets: In hot markets where multiple investors are competing for deals, being able to close quickly with proof of funds gives you a significant advantage.
Large Wholesale Fees: When you're making $20,000+ on a deal, keeping that profit private through a double close often makes more business sense than showing it as an assignment fee.
Legal Requirements: Some states have specific laws around wholesaling that make double closes preferable to assignments.
The Numbers Game
Let's look at a practical example:
You find a property worth $150,000 that a motivated seller will take $100,000 for
Your end buyer is willing to pay $135,000
Your potential profit: $35,000
With an assignment, both parties see this $35,000 fee, which might cause problems. The seller might think they're being lowballed, and the buyer might think you're making too much profit.
With a double close using transactional funding:
You buy for $100,000 (A-B transaction)
You sell for $135,000 (B-C transaction)
Transactional funding cost: ~$500-1,000
Your net profit: ~$34,000-34,500
The slight cost for transactional funding often pays for itself in reduced negotiation friction and deal completion certainty.
Finding the Right Transactional Lender
Not all transactional lenders are created equal. Look for these characteristics:
Speed: Can they fund the same day you submit your application?
Reliability: Do they have a track record of closing deals on time?
Reasonable Rates: While rates are higher than traditional financing, they should still be competitive within the transactional funding space.
Experience: Do they understand real estate transactions and work well with title companies?
Flexibility: Can they handle various property types and transaction structures?
Making It Work in Your Market
The key to successfully using transactional funding and double closes is building relationships. Develop connections with:
Reliable transactional lenders
Title companies experienced with double closes
Real estate agents who understand wholesale transactions
Other investors who can refer deals
At JWL Group Endeavors LLC, we've seen firsthand how transactional funding and double closes can transform a wholesaling business. These tools allow investors to take on bigger deals, maintain professional relationships, and maximize profits while minimizing complications.
The real estate market moves fast, and having the right tools in your toolkit can mean the difference between landing a great deal and watching it slip away to a competitor. Transactional funding and double closes give you the speed, flexibility, and professionalism needed to compete at the highest level.
Whether you're just getting started in wholesaling or looking to scale your existing operation, understanding these strategies will open doors to opportunities you might otherwise miss. The small cost of transactional funding is often more than offset by the increased deal flow and higher profits that come from being able to move quickly and professionally in any market condition.
JWL Group Endeavors LLC
805 Wellman Ave NE, Suite 3004
Huntsville, AL 35801
Phone: 256.480.9594
