5 Smart Exit Strategies for Buy & Hold Investors Looking to Get Out of the Game

5 Smart Exit Strategies for Buy & Hold Investors Looking to Get Out of the Game

4 min read
Chris Clothier

Chris Clothier began building his rental portfolio in 2003 as a successful entrepreneur looking to diversify his investments. He quickly gravitated toward passive investing, establishing a portfolio of over 50 single family homes in Memphis, Tenn. As an original client of his family’s firm Memphis Invest (now REI Nation), Chris experienced firsthand what a passive investor endures when purchasing out of state. In 2007, Chris moved his company and family back to Tennessee, wound down his brokering company, and joined REI Nation as a partner and director of sales and marketing.

Experience
Since joining REI Nation, the business has grown into the premier turnkey investment company in the country and a standard bearer for best practices in the industry, managing over 6,000 investment properties for 2,000 passive clients. In addition to managing the development and implementation of sales and marketing processes, Chris serves as an ambassador for the company, working with the team to help potential investors define their purpose for investing in real estate and educating peer companies on best practices.

REI Nation clients’ portfolios hold a value of close to $800 million in single family assets in seven cities. The company has been featured as a six-straight year honoree in Inc. magazine’s list of the 500/5,000 “Fastest Growing Companies in America.”

In 2019, Chris’ team assisted 600 investors with purchasing just under 1,000 fully-renovated and occupied turnkey homes. Chris led the re-brand of his family’s company on January 1, 2020, from Memphis Invest to REI Nation.

Chris is also an experienced real estate speaker and addresses small and large audiences of real estate investors and business professionals nationwide several times each year, including IMN single family conferences, the PM Grow property management conference, and the Ignite conference in Las Vegas each December.

Chris continues to hold a sizable single-family rental portfolio in both Tennessee and Texas. Along with his family, he owns several commercial buildings in the greater Memphis area.

When not working with the team at REI Nation, Chris is busy raising five kids, operating a racing company in Memphis, and serving as CEO for The Cancer Kickers Soccer Club, a Memphis-based 501c3 providing comfort and care for kids battling childhood cancers.

Founded in 2017 by Chris and Michelle Clothier, the non-profit organization focuses on providing a team environment for kids to find encouragement and strength in their battle. The company worked with over 500 children from six countries in 2019.

Press
Chris has been featured in stories published in Money Magazine, The New York Times, The Wall Street Journal, and DN News, as well as the Memphis Business Journal. In 2018, McGraw-Hill Publishing purchased Chris’ manuscript, The Turnkey Revolution, and worked with Chris to publish his first book in May 2018.

Chris also publishes two weekly blogs at ChrisClothier.com and REINation.com. Chris has also published articles on the BiggerPockets Blog since 2009.

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Many buy and hold real estate investors don’t really think too much about getting out until retirement rolls around. And even then, many of us keep generating passive income through real estate investments for as long possible.

That said, there are situations in which a real estate investor simply might need to get out of the investment game altogether. It’s probably not ideal, but it might be necessary. And so are exit strategies.

Why in the World Would Anyone Want to Get Out?

Some of us may think getting out of real estate investing is unfathomable. Even on your most difficult days, you still think it’s worth it. Why would you want to leave when you’re earning passive income? As long as you’re making money, why would you want to quit?

Emergencies Happen

Sometimes life just gets in the way, and we have to step back and remove distractions — even when those distractions are making money — because they cause complications. Divorce, illness, and family troubles can all brings on the deeply personal need and decision to make the drastic decision to get out of real estate investment. It’s a personal choice — and sometimes not the one anyone wants to have to make.

Bad Experiences

Not everyone goes into real estate investing and comes out on top. Not everyone ends up with positive cash flow, and plenty of people get discouraged by seeing red every month. An investor could experience negative cash flow, bad tenants, incompetent property management, the grind of landlording, too many bad deals, being burned by partners, disasters, or just old fashioned bad luck. Bad experiences can give someone plenty of reasons to want out.

funding-real-estate

Related: What’s Your Exit Strategy? A Case for Converting Your Real Estate to Paper Assets

You Decide It’s Just Not for You

People try out investing in real estate and discover over time that it’s not something they enjoy — and that’s OK! It’s something that takes a lot of time and dedication. Not everyone has the drive, desire, or capacity to give the 100 percent they need to. If it’s not for you, it’s just not. An exit strategy is important to have if you ever have that epiphany.

Your Strategy Changes

Maybe you don’t realize investing in real estate isn’t your thing, but you realize a different kind of investment is. That means you’ll likely have to change your entire portfolio, especially if you’re going to be switching to commercial investments, land development, multifamily properties, or something else entirely!

The Top 5 Exit Strategies for Buy and Hold Real Estate Investors

As a buy and hold investor, you basically have one primary way to get out of investing in real estate: Sell your properties. How you do that, however, is where the variations in exit strategy come in.

1. Seller Financing/Owner Financing

This is the most creative exit strategy on the list — and actually another way to invest! Seller financing is a method of note investing in which you essentially act as a bank. The buyer and seller execute a promissory note including an interest rate and repayment schedule that includes a clause outlining the consequences of buyer’s default.

For you, you benefit from monthly income and the ROI of interest, plus the spreading out of your tax liability over a few years. These financing terms also tend to be on the short side, so you don’t have to worry about it being too drawn out a process.

2. Sell Through a Real Estate Agent, Market to the General Public

And now for the perfectly run-of-the-mill strategy, there’s going to a real estate agent to sell your investment properties to the public. This can get tricky if your property isn’t move-in ready, shows more like a rental property (lacking some updates and curb appeal, in other words), or is in a rougher area. These things can deter regular homebuyers who don’t want to tackle any improvement projects.

3. Sell Through a Real Estate Agent, Market to Other Investors

Marketing to other investors is a great idea. Finding a real estate agent who specializes in marketing to real estate investors and investment properties, however, is a little trickier. Possible, but not as common. Still, an agent can be a valuable asset in the selling process to ensure you get the best deal possible. When you target other investors, you also know that they have an eye for what works as an investment property. They’re not looking for something move-in ready.

hot-real-estate-season

4. Sell Yourself, Market to the General Public

Obviously, you can sell your properties yourself without the help of a real estate agent. Here, selling to the general public would be the most difficult. You could put up real estate listings online, but here it’s crucial your home shows well and that you have clear, professional photography to display your property. Marketing is key, and having some experience in that area would be a big bonus.

Related: Why the Perfect Time to Plan Your Exit Strategy is Right NOW

5. Sell Yourself, Market to Other Investors

You’d likely fare better selling solo if you’re targeting other real estate investors. After all, you know exactly what they’re looking for, and you know how your properties perform. You can back it up with numbers. You can also consider selling your entire portfolio to an investor, rather than as individual properties! It’s likely, too, that you have networking connections that will help you in your search for a buyer.

No matter what exit strategy you choose, it’s important to decide from the onset how you plan to leave real estate investing, even if it’s never your intention to do so. Buy and hold investors, more than any other kind of investor, don’t tend to think about getting out.

It’s still something we have to give proper due diligence.

Buy and hold investors: What’s your preferred exit strategy? Why?

Leave your thoughts below!