Wholetailing is the next big thing in the real estate investment world. When I first started talking about wholetailing real estate, people looked at me like I was crazy. Now, everyone in my network is buzzing about this short-term, low-risk, high-ROI real estate investment strategy. Even the new investor I’m mentoring, John, has been asking questions about getting started in wholetailing.
In my experience, I’ve found that wholetailing can be an excellent strategy for newbies like John to get started in real estate investing, because it can carry less risk than fix-and-flips. However, it’s essential to understand what wholetailing is, and what kind of funding you can get to finance this type of investment. In this blog, I’ll cover the basics of wholetailing and how to get transactional funding for wholetailing real estate.
What Is Transactional Funding for Wholetailing Real Estate?
First, let me define both transactional funding and wholetailing so you can understand how they work together.
What is Wholetailing Real Estate?
Wholetaling real estate—it’s a hybrid between wholesaling and house flipping, combining the benefits of both while avoiding the pitfalls. When you wholesale real estate, you’re not technically purchasing a property. Instead, you’re making a contract with the homeowner promising to find investors for their property at a specific price.
You typically pay a small deposit, which you’ll lose if you fail to find a buyer—also referred to as “assigning the contract”. However, you can benefit a lot when finding an investor to purchase the property for more than you contracted with the seller. The whole process usually takes place in a very short time frame—30 days is common—and there’s little risk since the house is never in your name.
As a house flipper, you’re purchasing a property, and then renovating it so you can sell it for a higher price. You assume much more risk than a wholesaler, but your potential financial gain is much greater. Usually, the property is in poor condition and will require a significant time and money investment to renovate it and sell it. Though the goal is to flip the property as fast as possible, the process can take much longer than wholesaling, and you’re responsible for all the holding costs (loan payments, utility bills, taxes, etc.) until you sell.
Wholetailing real estate combines the speed of wholesaling with the potential returns margin of house flipping. As a wholetailer, you purchase distressed properties just like a house flipper does. However, instead of performing full-scale renovations in an attempt to bring the property up to its full potential, you pick a few high-impact repairs to make the home safe, habitable, and sellable again. Then, you sell the home at a higher price than you paid for it, but still discounted compared to a fully-renovated flip. This lower price point means your property will appeal to both regular home buyers and other real estate investors, increasing the chances that you’ll find a seller quickly.
As a real estate wholetailer, you’re spending less money on repairs and holding costs, so the risk is lower than house flipping. And, since you own the property, you get to keep all the financial gain from the sale, giving you a higher potential ROI than wholesaling.
What Is Transactional Funding?
In general, you won’t use traditional bank mortgages to fund a short-term real estate investment like a wholetail. That’s why many successful real estate investors use short-term or transactional funding to purchase properties.
Transactional funding is a short-term loan that’s meant to fund quick real estate transactions. You get the money much faster than a traditional mortgage, and you’re also expected to pay it back in-full much quicker. The loan terms for transactional funding can range from a few hours to a few months. This makes transactional funding ideal for wholetailing real estate, where the goal is to buy and resell the property as quickly as possible.
Get Transactional Funding for Wholetailing Real Estate With These Top Resources
You may be tempted to wait until you find the perfect wholetailing property before you look for transactional funding, but that would be a mistake. If you want to beat out the competition, you need to be ready to strike on a deal as soon as you find it. That’s why I advise you to search for potential lenders now, so you have time to compare different options and select the most trustworthy resource. Then, when you find the right property, you’ll know who to turn to for transactional funding.
The Best Lenders for Transactional Funding
In my opinion, it’s best to work with a network of 3-5 preferred lenders, to keep up the momentum of your investments. While you’re winding down one wholetailing deal, you can get funding for the following property without needing to take additional time to shop around for a second lender. Plus, if you have multiple transactional funding lenders, you can compare them against each other to ensure you’re getting the best interest rates and terms on every deal.
To help you get started, here are my trusted resources of transactional funding for wholetailing real estate.
- Residential Capital Partners offers 100% financing on single-family rehab and rental investments in several key markets across the U.S.
- Finance of America is a nationwide lender with some of the best interest rates in the industry. They particularly cater to veteran investors with the financing of up to ten million dollars for fix-and-flips.
- RCN Capital is a flexible lender with simple, easy-to-understand loan products and loads of helpful advice for newbie investors.
- Flatiron Realty Capital provides holistic financing solutions with a hands-on, service-oriented approach to their customers.
- Kiavi (formerly known as LendingHome) is a technology-focused lender with various short-term and custom loan products for real estate investors.
An Easier Way to Get Transactional Funding for Wholetailing Real Estate
The key to finding transactional funding for wholetailing real estate is to do your homework. Just because a lender gives you a great sales pitch doesn’t mean they’re offering the best terms. You need to carefully read the terms of any transactional loan and compare them to competing for offers to ensure you’re getting the best deal. However, getting access to competing loan terms can be challenging, and I know nobody has time to read all the fine print in every loan contract.
Luckily, there’s an easier way. As an independently owned and operated HomeVestors® franchisee, I have access to the UGVille® lending portal, a proprietary software platform that connects me with the top transactional funding lenders in my area. I can easily compare loan terms in one location without reading any fine print, which means I always get the best deal. Plus, since I’m part of the nationally known and recognized HomeVestors® investor network, my credibility and approval odds are through the roof. I have transactional funding resources competing for my business, rather than the other way around, giving me the power to expand my wholetailing operation.
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