Double Close Real Estate Deals When to Use Them and How to Fund Them
When double closing makes sense, how to fund it, and how to stay legal.
Austin Beverigde
Tennessee
, Goliath Teammate
Are you looking to maximize your profits in real estate without putting your own money at risk? Double closing might be the solution you need. This strategy allows you to buy and sell a property almost simultaneously, but knowing when and how to use it can be tricky.
Quick Answer: A double close in real estate involves two separate transactions: one where you purchase a property and another where you sell it to an end buyer, often on the same day. This method is useful when you want to secure a property without using your own funds. To fund a double close, you can use transactional funding, which is a short-term loan that covers the purchase price until you sell the property.
What is a Double Close?
A double close, also known as a simultaneous close, is a real estate strategy where an investor buys a property and then sells it to another buyer in two distinct transactions. This is often done within a very short timeframe, sometimes on the same day. The goal is to profit from the difference between the purchase price and the selling price.
When to Use a Double Close
Double closing can be a powerful tool in various scenarios:
Flipping Properties: If you find a great deal but lack the funds to purchase it outright, a double close allows you to secure the property and sell it quickly.
Wholesale Deals: As a wholesaler, you can lock in a property under contract and sell it to an end buyer without ever owning it.
Market Conditions: In a competitive market, a double close can help you act quickly and secure properties that might otherwise slip away.
How to Fund a Double Close
Funding a double close typically involves transactional funding, which is a short-term loan designed specifically for this purpose. Here’s how it works:
Transactional Funding Explained
Transactional funding is a quick loan that allows you to purchase a property for a very short period, usually just a few hours. Here’s what you need to know:
Quick Approval: These loans are often approved quickly, allowing you to act fast.
High Fees: Be aware that transactional funding can come with high fees, so factor this into your profit calculations.
Short-Term Use: You’ll need to sell the property quickly to repay the loan.
Steps to Execute a Double Close
Here’s a step-by-step guide to successfully executing a double close:
Identify a Property: Find a property that you can purchase below market value.
Get it Under Contract: Secure the property with a purchase agreement.
Find a Buyer: Locate an end buyer who is willing to pay more than your purchase price.
Arrange Funding: Secure transactional funding for the purchase.
Close Both Transactions: Execute the purchase and sale on the same day.
Realistic Example
Let’s consider a scenario:
You find a distressed property listed at $100,000. You negotiate and get it under contract for $90,000. Meanwhile, you find a buyer willing to pay $110,000. You arrange for transactional funding to cover the $90,000 purchase. On closing day, you buy the property and immediately sell it to your buyer. After paying back the transactional loan and fees, you pocket the difference, which is $20,000.
Checklist for Double Closing
Identify a profitable property.
Secure a purchase agreement.
Find a willing end buyer.
Arrange transactional funding.
Schedule both closings on the same day.
Understand the costs involved.
Have a clear exit strategy.
Common Mistakes to Avoid
When executing a double close, avoid these pitfalls:
Underestimating Costs: Failing to account for closing costs and fees can eat into your profits.
Not Securing a Buyer First: If you can’t find an end buyer, you may be stuck with the property.
Timing Issues: Delays in closing can lead to complications, so ensure both transactions are tightly scheduled.
FAQs
What is the difference between a double close and a wholesale deal?
A double close involves two transactions where the investor buys and then sells a property, while a wholesale deal typically involves assigning a contract to another buyer without actually closing on the property.
Can I use my own funds for a double close?
Yes, you can use your own funds, but many investors prefer transactional funding to minimize their risk and keep their capital free for other investments.
How long does a double close take?
A double close can be completed in a single day, but it depends on the efficiency of the title company and the readiness of all parties involved.
Are there legal implications with double closing?
Double closing is legal, but it’s crucial to disclose all transactions to avoid any legal issues. Always consult with a real estate attorney if you have concerns.
What happens if the end buyer backs out?
If the end buyer backs out, you may be stuck with the property unless you can quickly find another buyer or negotiate a solution with the seller.
