What Is an Exit Strategy?
This is the method by which an investor gets out of a current investment. Short term investments require plans for liquidating assets within a period of several years. Long term investments can extend for decades or more but that does not obviate the necessity for an exit strategy. Always start with the end in mind.
According to NuWire Investor, when it comes to real estate the most obvious strategy is selling a property outright. Once the breakeven point including payment of all outstanding debt, closing costs and commission is calculated – a decision can be made on which strategy is best.
Exit Strategy Advice from Pepperdine University
Predicting your future financial health and market conditions is a tall order. Some questions that will help you plan are:
- Would you like to minimize your capital gains tax liability? – Consider incorporating charitable contributions and annuities.
- How much property management are you willing to do?
- Do you want to minimize your legal costs?
- Have you identified all the important factors in your potential purchase choice such as location and demographics? – Your decision to purchase a given property will affect your earning potential years from now.
Everyone knows that your earnings are very much determined by your purchase price therefore the offer you make is of the utmost importance. It’s obvious that paying too much up front will lead to potential earnings losses in the end. It’s essential to know your exit strategy right from the beginning.
It will have a widespread effect; determining the amount of money you will need, and most likely the type of financing you get. The exit strategy you select will play a part in the improvements you make to the property. Rental homes typically have lower cost finishes than homes renovated for retail buyers.
4 Popular Exit Strategies for Real Estate Investors
- Purchase, renovate and sell (short term)
- Retain property as a rental (long term)
- Sell the property to another investor (short term)
- Use airbnb.com for short term rental to maximize your home or investment property income until you get the offer you’re looking for.
Exit Strategy – Real Estate Offers
Experienced investors want options and may turn their rehab property into a rental rather than selling immediately. It helps to plan on this option from the beginning by securing financing that will work for a rental and leave sufficient income to ensure good monthly cash flow.
When accepting an offer, debt issues must be considered. If the property will be unencumbered after the sale, perhaps simply being free of a mortgage is sufficient compensation. The property owner can start again without having a negative cash flow or underwater property.
Negotiation is always important. An experienced real estate broker such as Bill-Edge, can help you get the best offer on your residential or investment property sale. One option is to offer financing to your buyer. With the tight mortgage market, owner financing can be a bright light for a prospective buyer. Another option is to refinance your property if it makes sense in terms of rent. If you can cover all of your costs and still have good income generation, this may be a good strategy.
Call Bill Edge at 713-240-2949 to see Houston homes in 24 hours or less