Transactional Funding: What is it and how it can help an investor to buy a property with no money down

What is Transactional Funding?

Transactional funding is a very short term loan, 1 to 3 days, designed to help real estate investors buy a property with 100% Financing and no downpayment. 

For this loan to work, an investor has to have a property under contract and an end buyer for the property.

  1. Example of Transactional Funding
  2. When is Transactional Funding Used?
  3. Do you have to qualify for Transactional Funding?
  4. Transactional Funding Cost
  5. How to get Proof of Funds
  6. Can you extend the time to close to more than a couple of days?
  7. The Process of Closing with Transactional Funding
  8. What kind of properties can you buy?
  9. How to get started?

Example of Transactional funding

Sally finds a property, recently listed in probates, she talks to the heirs and they accept an offer of $60,000 for the home and everything inside it, including an old but rarely used Honda. The home is worth $90,000 in AS-IS condition.

Sally unfortunately has a great deal but no money, except $500 for earnest money deposit and a Proof of Funds letter from her Transactional Funding lender.

Sally knows that any cash buyer will want to buy at 25-30% off ARV, so she determines that the market value of the home in great condition is $140,000, the needed repairs are $10,000, and closing costs and lender fees will be $4000.

$140,000 – $42,000 -$10,000 – $4000= $84,000

Her profit: $24,000 from the house and $6,000 for the old car and furniture she sold, $30,000 in 30 days.

Sally has a list with investors who may be interested in this property so after signing a contract with the heirs of the property, she contacts Joe, an investor she met at the local REI meeting. 

Joe says that he is interested, they both look at the property, and Joe signs a contract to buy the property from Sally. Sally doesn’t want problems so she asks Joe for a $2,500 deposit to make sure he is not going to walk away. 

Sally emails both contracts to her investor-friendly title company and her transactional funding lender. 

At the closing, Sally signs the closing documents with the heirs of the property, her purchase, including closing costs entirely financed by the transaction funding lender.

The same day, Sally closes on her transaction with Joe, the transaction broker is paid and Sally walks away with a $24,000 check.

So this is how Transactional Funding works. The lenders fund 100% of the loan because the end buyer has already sent a wire to fund the transaction. They have very little to lose, that’s why they fund the full amount.

When is Transactional Funding Used?

Transactional Funding makes the no-money-down purchase of real estate possible. Many investors use the proceeds to invest in rentals, which speeds up the wealth-building process.

In the past wholesalers and investors would simply assign their contracts to another buyer and collect assignment fees.

However, some states are making it illegal to assign contracts without a real estate license, for example, Illinois and Tennessee. Transactional Funding eliminates this problem because the wholesaler is buying the property for themselves.

Another reason to use transactional funding is to be able to negotiate as a buyer, not simply a middleman. This allows the investor to make a larger profit without being afraid that the seller will walk away or that they will make a deal directly with the end buyer.

Finally, another reason to use Transactional Funding lender is when you buy some properties where assignments are not allowed, for example, short-sales and most REOs.

Do you have to qualify for Transactional Funding?

The investor doesn’t need to qualify for this loan, no credit is pulled, and nothing beyond the Buying Contract and Selling Contracts is required.
The lender typically monitors both transactions to make sure that the second transaction is solid and it will close on time.

Transactional Funding Rates

Double closings are stressful, paying a bit more for a reliable lender is worth it. Rates for Transactional Funding varies from 1% to 2% of the funded amount plus extra fees. I have seen less than 1% and up to 4% in some cases.

Transactional Funding Proof of Funds

You can get Proof of Funds from the transactional lender you are going to use. Here is a POF letter you can download for free from

Extended Transactional Funding

Most transactional funding lenders are not offering

The Process of Closing with Transactional Funding

Most of the time the closing of both transactions happen on the same days. 

First, the investor closes on the property he is buying from the motivated seller and finances it 100% with a transactional funding loan. 

Next, he sells the property to the end buyer and pays off the loan.

Sometimes the transaction can be delayed 1-3 days but most of the time it happens the same day.

It’s important to use Title Companies that process these transactions and know what they are doing. You can find a list in our directory.

What kind of properties can you buy?

Because the investor has funds to close, any property can be purchased with Transactional Funding, this includes raw land and short sales.

How to get started?

Attorney and real estate investor, Jeff Watson gives some advice.

Watch our first Livestream and Q&A with Duane Ortega from

Related: Investor friendly title companies (Rentce’s Directory)

Related: Transactional Funding Lenders (Rentce’s Directory)

Related: Seven Unique Ways to Find Motivated Sellers

Related: How to Bid on and Win: The Strategy Used for Successful Auctions

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