Before buying an investment property, experienced investors plan for a specific exit strategy.
Money is often made with investment real estate when it is sold. And even if the property is held in order to build equity, a great deal of the profit is made when exiting the investment. Therefore, an exit strategy is essential to making money with real estate.
So, here are 5 top exit strategies for real estate investors to consider.
One of the most widely used exit strategies is to wholesale the property, usually to another real estate investor.
Real estate wholesalers find and buy deeply discounted investment properties that they resell to other investors for a small profit. In this case, the investment property may, or may not, be rehabbed.
Wholesalers may also place an investment property under contract, and then assign the contract to another real estate investor for a small profit.
Successful real estate wholesalers are highly sought after by property investors because of their ability to save investors time, and for their ability to quickly locate large quantities of profitable investment properties.
Tampa Bay is one of the best markets for flipping homes, according to RealtyTrac, so we often work with investors who quickly produce profits by flipping houses.
Flipping houses involves acquiring a real estate investment that needs repair. The property is purchased below market value, rehabbed, and sold for a profit.
This method of exiting a real estate investment typically produces the fastest and highest short-term profit. But, flippers should be experienced in at least one area of real estate. Therefore, the best flippers are often Realtors, contractors, or designers.
#3 Buy and Hold to Build Equity
A buy-and-hold strategy involves holding rental property for a period of time, during which the property pays for itself through rental income, producing cash to pay all expenses while also producing an annual profit for the owners.
These properties can be sold for a profit as equity builds, or held long-term to generate passive income.
#4 Seller Financing
Seller financing can be an excellent method of exiting an investment property while continuing to produce a profit. This form of financing tends to be shorter in nature, and often includes a balloon payment.
In the case of seller financing, the buyer and seller execute a promissory note including an interest rate and repayment schedule, along with a clause outlining the consequences of the buyer’s default.
Seller financing benefits buyers in several ways, but it also benefits sellers by producing monthly income, increasing their ROI through interest income, and spreading out their tax liability over a number of years.
#5 Lease Option or Rent-to-Own
The last exit strategy we’ll consider in this list is lease option, which is often referred to as the rent-to-own exit strategy.
In this situation, the owner of the investment property leases it to a tenant who has a contractual option to purchase the property. In some cases, a portion of the lease payment may be applied to the purchase price of the home.
Graystone Investment Group
Graystone Investment Group wholesales investment real estate, assisting clients acquire and exit properties in the metro Tampa Bay market.
Unlike other wholesaling groups, we find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years, at no extra charge.