Tag: "Private Money"

90-Day Funding For Short Sale and REO Flips – Review

As you may know, I am actively using and recommend transactional funding sources for short sale flips and REO flips. For the past 3 weeks or so I’ve been inundated with questions about the new “90-Day Funding for Short sale and REO Flips”.  Should you use it?  More in this blog post.

Register now for our private webinar Saturday:

“How to Wholesale a Short Sale“

Not all wholesale deals need transactional funding. If you can, structure your
deal in a way that will allow you to use your end buyer’s funds to fully fund
the deal and get you paid off on your fee.

Most title companies require you to bring in separate funds when you structure
two closings back-to-back. If you buy the property from the seller (A – B) and resell it
to your buyer (B – C) on the same day, then the funds needed for the A-B closing cannot
come from the B-C closing.

In this case you will need transactional funding. A great source is at
Short Sale Transaction Funding

This source is best if you know what you are doing and don’t need any
additional education or help putting the deal together.

If you do need some help beyond just getting the funds, consider joining
Home Seller Assist This program provides comprehensive education
and training as well as access to the funding source.

2. How Does Transactional Funding Work?

Transactional funding is typically available for 24 to 48 hours. One huge
advantage is that you don’t have to qualify for the loan with these programs.

Not even the property or the deal have to be scrutinized by the lender
(like with a hard money loan).

The only requirement for getting these funds is that the B-C transaction
must be completely ready to close. And that’s not just “we will get docs
any day now”.

3. What If You Need the Funds Longer?

Of course, if you have ever tried to juggle two transactions and make
them close at the same time, you will have noticed that that can be quite
challenging.

Wouldn’t it be a lot easier if you could just hold on to these transactional funds
for a little bit longer? Say, 3 to 120 days longer?

That’s were “90-Day Funding for Short sale and REO flips” comes in. You can take
up to 120 days to resell the property.

But before you jump into that, make sure you understand how this
funding source works!

The program that I have looked at i not a loan program, but rather
an equity sharing partner.

It can work well if you need it for a short period of time, and you are
certain that your buyer will close (but who can be that???)

The main problems of the equity partnering program are:

1. Investor will have to qualify your deal, equity position, LTV etc.

2. Investor takes a large share of the profits, the longer you need the funds,
the more equity you loose to the investor.

3. You can loose the entire profit if it takes more than 120 days
to flip the property.

The share that they charge you can range from about 2 points of the funds,
if you flip within a few days, to about 18 points of the funds, and even
100% of the profits if you go too long.

Summary: While it may be a good theory to make a little less money
if you can save the deal, I would rather focus on deals that you can flip
immediately.

Especially in this market, your risk in any deal that you
need to hold is exponentially larger, and chances are that you are wrong
about the numbers if you can’t flip it, particularly if you are a beginner.

As an alternative, you might also look into finding your own
private lenders. Often, these funds are available at a lower rate
than hard money, and you don’t have to give up your equity

Register now for our private webinar Saturday:

“How to Wholesale a Short Sale“