How to Secure Short-Term Capital With Double Closing Funding
How to source short-term funding partners for your next back-to-back deal.
Austin Beverigde
Tennessee
, Goliath Teammate
Finding short-term capital can be challenging, especially in real estate transactions where timing is crucial. If you’re looking to close on a property quickly but lack the necessary funds, double closing funding might be the solution you need. This method allows you to purchase a property and sell it almost immediately, providing a way to secure the capital you need without traditional financing hurdles.
Quick Answer
To secure short-term capital through double closing funding, you typically need to find a motivated seller, negotiate a purchase price, and arrange for a simultaneous sale to another buyer. This involves having a solid buyer lined up before you close on the initial purchase. You may also need to work with a title company familiar with double closings to ensure a smooth transaction.
Understanding Double Closing Funding
Double closing funding involves two transactions: the first where you purchase a property and the second where you sell it to another buyer. This method is often used by real estate investors to quickly flip properties without using their own capital.
How It Works
In a double closing, you buy a property and then sell it to another buyer shortly after. The key is that the two transactions occur on the same day or within a short timeframe. This allows you to use the funds from the second sale to pay for the first purchase, effectively minimizing your out-of-pocket expenses.
Steps to Secure Short-Term Capital
1. Identify a Property
Start by identifying a property that you can purchase at a price below market value. Look for motivated sellers who are eager to make a deal.
2. Negotiate the Purchase
Once you find a property, negotiate the purchase price. Ensure that the terms allow you to sell the property quickly after buying it.
3. Find a Buyer
Before closing on the initial purchase, find a buyer who is willing to purchase the property from you. Having a buyer lined up is crucial to ensure that you can fund the first purchase.
4. Work with a Title Company
Engage a title company experienced in double closings. They will help facilitate both transactions and ensure that all legal requirements are met.
5. Close Both Transactions
On closing day, complete the purchase of the property and immediately close the sale to your buyer. The funds from the second sale will cover your initial purchase.
Costs Involved in Double Closing
While double closing can be a great way to secure short-term capital, it’s important to be aware of the costs involved:
Closing costs for both transactions, which may include title insurance, attorney fees, and recording fees.
Potential financing costs if you need to borrow money for the initial purchase.
Real estate agent commissions if you use an agent to find a buyer.
Tools and Resources
To streamline the double closing process, consider using the following tools:
Real estate listing websites to find properties.
CRM software to manage leads and buyers.
Financial calculators to estimate closing costs and potential profits.
Timelines for Double Closing
The timeline for a double closing can vary, but here’s a general outline:
Property identification: 1-2 weeks.
Negotiation and contract: 1 week.
Finding a buyer: 1-3 weeks.
Closing process: 1-2 weeks.
Alternatives to Double Closing
If double closing isn’t the right fit for you, consider these alternatives:
Transactional funding, which provides short-term loans specifically for real estate transactions.
Hard money loans, which are backed by real estate and can be secured quickly.
Partnering with investors who can provide capital for a share of the profits.
Checklist for Double Closing Success
Identify a motivated seller.
Negotiate favorable purchase terms.
Secure a buyer before closing.
Engage a knowledgeable title company.
Understand all associated costs.
Common Mistakes to Avoid
Here are some pitfalls to watch out for when pursuing double closing funding:
Not having a buyer lined up before closing, which can lead to financial loss.
Underestimating closing costs, resulting in unexpected expenses.
Failing to work with an experienced title company, which can complicate the process.
FAQs
What is double closing funding?
Double closing funding is a real estate strategy where an investor buys a property and then sells it to another buyer on the same day or within a short timeframe. This method allows investors to leverage the funds from the second sale to cover the initial purchase.
How do I find a buyer for a double closing?
To find a buyer, network within real estate investment groups, use online real estate platforms, or market the property through social media. Having a solid marketing strategy can help attract potential buyers quickly.
What are the risks of double closing?
The main risks include not being able to find a buyer in time, which could lead to financial loss, and underestimating closing costs. It’s crucial to have a solid plan and backup options.
How long does a double closing take?
A double closing can typically be completed within a few weeks, depending on how quickly you can negotiate the purchase and find a buyer. The actual closing process can often be done in a day if everything is in place.
Can I use financing for a double closing?
Yes, you can use financing for the initial purchase in a double closing. However, it’s important to ensure that the terms of the financing allow for quick repayment, as the goal is to sell the property shortly after purchasing it.
