Mortgages & Creative Financing

Writing Your Real Estate Offers with Your Exit Strategy in Mind

Expertise: Real Estate Marketing, Mortgages & Creative Financing, Real Estate Investing Basics, Real Estate News & Commentary, Personal Development, Business Management, Real Estate Wholesaling, Landlording & Rental Properties
145 Articles Written
exit strategies and investing

What do exit strategies have to do with your real estate offers?

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Everything! You always need to begin with the end in mind.

It’s a well-known fact that you make your money on a property the day you buy it. If you pay too much initially, there is a very good chance you will lose money in the end. So it’s vital that you know your exit strategy right from the beginning.

Your exit strategy will have an effect on a lot of things. It will determine the amount of money you will need, and most likely the type of financing you get.  Your particular exit strategy will play a part in the finishes you put in the house; in most cases you will use different materials for a rental then you would for a home that has been beautifully renovated for a retail buyer.

3 Popular Exit Strategies for Real Estate Investors

  • Buy, rehab and sell (short term)
  • Hold the property as a rental (long term)
  • Wholesale the property to another investor (short term)

Should You Have A Plan B?

Most experienced rehabbers in my area are now buying property with two exit strategies in mind. If you ask them, they will tell you that they always have a “plan B” or a “back up plan” in today’s market. Let’s face it, things don’t always work out the way we plan them.

What I mean by that is that they might buy the property with “plan A” being to rehab it and sell it to a retail buyer. But if the house doesn’t sell in a reasonable amount of time, they will rent it until the market improves. Experienced investors want options. For instance they will want to know right from the beginning that this property will cash flow if it ends up being rental.  Deals that might be good for an investor to rehab and sell to a retail buyer might be too expensive to cash flow as a rental. I have had investors pass on what was a great rehab opportunity for that very reason in the past year or so.

What About Financing?

The type of financing will be different for different exit strategies. If the intent is for the property to be a rental right from the beginning, the investor would secure long term financing. If the investor is a rehabber and is using a short term or construction type of loan, this could pose a problem if he is has to hold the property long term. He would be forced to refinance the property.

Smart Investing

The days of buying a property, rehabbing it and being absolutely certain you can sell it quickly have been over for a while now.  But with a little planning, and a solid “plan B” you can still take full advantage of this terrific real estate market.

Photo: Peggy Reimchen

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.

    Replied over 7 years ago
    Great tips Sharon! I always have a plan B if my plan A fails what I will have to do and that’s really gives my strategies to work fine and I think this could be the best strategy of investing in any business and especially real estate business. Thanks for sharing great tips 🙂
    Sharon Vornholt
    Replied over 7 years ago
    Ayaz – I think real estate investors everywhere have just gotten more savvy in this market.
    Sharon Vornholt
    Replied over 7 years ago
    Ayaz – I think real estate investors everywhere have just gotten more savvy in this market.
    Replied over 7 years ago
    Another great article Sharon!
    Sharon Vornholt
    Replied over 7 years ago
    Thanks so much for reading Kevin.
    Frank Jutras
    Replied over 7 years ago
    Two principles I always follow when investing in a property are: you make your money on the buy, and know your exit strategy from the beginning. I do agree that it’s a good thing to have a plan B, because in our economy, anything can happen and fast.
    Sharon Vornholt
    Replied over 7 years ago
    Frank – I agree 100%. You make your money the day you buy the property. And I don’t believe you can make an intelligent offer if you don’t know what your exit strategy is on that same day.