I’ve written in the past about what hard money is, so please check out those blog posts for the detailed definition.
Transactional funding is simply funding for a single transaction that is typically quick. For example, if you are buying and selling on the same day or in the same week, you only need to borrow for a very short time. Loaning for less than 30 days is often referred to as transactional funding.
Hard Money Lenders each have different parameters. I am a partner with the hard money lender Residential Capital Partners, so I can speak to what we offer.
Hard money loans can be used for wholesaling and rehabbing as well as for transactional funding. In fact, ResCap will loan for only 1 day if you need the cash to get your deal closed, or we loan up to 9 months giving you time to get your rehab done and your property sold. To borrow for less than 30 days, we only charge 1.5 percent of the borrowed amount.
With most hard money lenders, the application process and requirements are the same for transactional funding as for wholesaling and/or full rehab funding. Once you’re approved for funding, you can borrow for a little as one day and for as long as 1 year. The only difference is how much you spend for the loan.
For full rehabs, ResCap will loan 100% of your deal up to 70 percent of the after repair value. We provide all of your purchase and all of your rehab costs up to 70 percent of the ARV. For example, if you purchase a property that will be worth $100,000 on the retail market, you purchase for $50,000 and spend $20,000 in repairs, you would be spending 70 percent of the after repaired value. If you qualify, we would loan the entire $70,000.
Up to 70 percent of the ARV, we require no money down. If you need to borrow more, 75 percent for example, you would be responsible for the additional 5 percent.