Transactional Funding

There has been much talk lately announcing the return of profitable flipping conditions in LA. California and Los Angeles County has been among the highest in the nation in foreclosures since the real estate bubble burst approximately three years ago, and we have seen our home prices plummet by as much as 50% in some areas. Simultaneously, this wave of foreclosures has created a demand for rental properties as former home owners become home renters. This has resulted in rents that have remained relatively stable as the prices of homes have steadily dropped. This unique set of circumstances has generated bargain investment property prices for investor buyers that haven't existed in LA since the mid 90's Northridge earthquake. It has also created a niche for those looking to flip properties once again. Purchase demand is still very strong in most areas despite a large backlog of inventory held by the banks.

Most of the foreclosures that are being sold at auction and through bank owned REO listings need only minor, cosmetic repairs to bring them up to rental or FHA financing standards. Investors willing to purchase these properties, can put $5K-$10K into them and then turn around and sell them to investors for a reasonable profit. These investors are still able to purchase the property at a price that makes it possible for the property to generate strong positive cash flow at prevailing market rents.

The catch in this process is that, in order to acquire a property at the Trustees' Auction, the prospective buyer has to come with cash. Many flippers lack the personal cash reserves to tie up more than one or two properties at a time. This is where transactional funders enter the picture. My transactional funders loan money on a very short term basis for investors to purchase properties at the auction or through the banks. They require that the end buyer (the person who the investor is selling to), must have loan approval and be under contract on the property. Once that happens the transactional lender will fund the loan to the investor and the investor will enter escrow with the buyer. The investor is coming up with little or none of their own money for the deal and making a hefty profit.

These transactional funds are always protected by a first position lien on the property. Once the properties have been successfully rehabbed or otherwise turned over,(Max 30 days holding time), they are resold and the transactional funders are repaid in full. The transactional funders usually see their money tied up for no more than 30 days and they are paid 3-6% on their investment. This equates to 50%-125% annualized returns on the average transaction for them, which is phenomonal. Everyone wins.

If you are seeking transactional funding, contact me here or call/sms 310-709-8283.