Real Estate Marketing

5 Alternative Exit Strategies to Liquidate Properties Fast

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
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If you’re anything like me, you say the words “Time for Plan B!” more than occasionally.

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That’s how life is — sometimes it goes according to plan, but just as often it doesn’t. A fly in the ointment. A wrinkle in your beautifully laid agenda.

The only difference in real estate investing is that the plan involves assets worth hundreds of thousands (or millions!) of dollars. That means that Plan B needs to be acceptable — fast and loss-free.

Here are five alternatives to selling the ol’ fashioned way, five contingency plans, five alternate exit strategies so that you’ll never find yourself trapped owning properties beyond their expiration date.

1. Bundle for Joy

Have more than one property to sell? Why not bundle them together and sell them as a package deal?

Not all bundled properties are blue-light specials. Some are turnkey properties in good condition and may even be rented and cash flowing nicely.

So who buys bundled property portfolios? It’s a mixed bag of international investors, large funds, group buyers, and individuals with deep pockets. While there aren’t nearly as many qualified buyers, there’s a nice scale-ability to selling multiple properties in one package. Instead of scrambling to sell a dozen properties separately, you can focus all your marketing efforts on a single sale.

for-sale-by-owner

Related: How to Exit a Real Estate Deal Gone Bad

2. Auction it Off

If time is more important to you than money and you must sell by a certain date, auctions can be an effective exit.

Make no mistake — most auctioned properties don’t sell for top dollar. Occasionally, buyers will bid the property up above market value, but it’s the exception rather than the rule.

Auctioneers have to build a solid reputation, just as they have to build reliable local marketing channels. That takes time, which is why there are so few auctioneers in any given market. Just look at Sotheby’s, who’s been around since before the United States was a country.

You’ll probably only have a few choices for auctioneers, but choose the most reputable one available.

Talk to the auctioneer about their fees, about their marketing period and sale date, and about their estimated price range for your property. If you really have to settle quickly, auctioning your property may be the way to go.

3. Investor Niche Real Estate Agents

The average real estate agent is pretty, um, average. Part-timers, mommies trying to squeeze in showings in between picking kids up from kindergarten, or fast-talking oil slicks who push-push-push to get your listing and then just… list it. These are the folks we talked about last week, the ones who are ripe for disruption as the real estate industry catches up with the 21st century.

But there are a few real estate agents in each local market who have a special niche; they just work with investors. They know all the most active real estate investors in the area, and have a Rolodex overflowing with their contact information. They’ve even built extensive email lists of all the best local investors.

These real estate agents don’t mess around. When you give them a listing, they start making phone calls and send an email blast, putting your property in front of every investor in a 30-mile radius. If your price is fair, you’ll have a contract on the same day.

That point about pricing bears elaborating. The price has to be attractive to other investors, if that’s who you’re targeting. If you go this route, you’re effectively selling wholesale, not retail — as with auctions, don’t expect lofty prices. But you can expect a relatively quick settlement.

4. Guerilla FSBO

Can't afford to give up those hefty agent commissions? Why not try listing your property for sale on the MLS using a flat-fee listing service? But don't stop there.

Get on Facebook and start posting details about your property on local real estate investing and buyer groups. For that matter, get on BiggerPockets and offer it for sale right here!

Put up flyers wherever the target buyer clientele frequent — local grocery stores, local gyms, local coffee shops. Get old school.

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

This may take longer than auctioning or hiring an investor-specialist real estate agent, but it sure costs less. Consider this strategy if you're tight on cash (or equity) but have plenty of time.

5. The Great Lease Option Agreement

If time is definitely not of the essence, lease-option agreements are another way to sell without paying real estate agent commissions.

You probably know the term, but it’s worth a one-sentence summary: You sign a lease agreement with renters, who have the option to buy the property for a certain price within a certain period of time.

A relatively short period of time, mind you — otherwise, they lose all sense of urgency, and the property may appreciate well above the originally quoted price.

“Lease options and owner finance strategies provide cash flow and well as eventual large profits,” explains Matt Andrews, of REFreedom.com.  “Creating passive income on the way to sizable gains is a beautiful thing!”

And sometimes, for whatever reason, the market just isn’t ripe for selling at this exact moment. Or maybe you’re not ready to sell — maybe you want to wait a year before selling to secure capital gains tax rates over regular income tax rates.

Movin’ on Up

Scaling your real estate investing business means taking on larger portfolios and more expensive properties. Read: bigger assets and higher risk.

The more exit strategies you have at hand, the better you can contain that risk. If you know beyond a shadow of a doubt that you can always liquidate your properties with no losses, then you’re operating in a world of all upside and no risk. Talk to other investors who have used these alternative exit strategies, get comfortable with them. Maybe even try one out on a low-risk property.

You’ll find yourself becoming the MacGyver of real estate — an escape artist, able to exit any property without taking a hit.

What alternative exit strategies have you used successfully? What have you struggled with in the past?

One investor’s story is another investor’s saving lesson…

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their living expenses. Through his company at SparkRental.com, he offers free rental tools such as a rental income calculator, free landlord software (including a free online rental application and tenant screening), and a free masterclasses on how to reach financial independence within 5 years.

    John Mathewson from Schererville, Indiana
    Replied almost 3 years ago
    Great post. Most investors don’t plan for worst case scenario if they can’t get rid of a property. These are great tips.
    G. Brian Davis from Baltimore, MD
    Replied almost 3 years ago
    Thanks John! Having been there myself, I totally agree – you have to plan for the worst, or else sooner or later it will happen.
    Casey Murray Real Estate Agent from San Diego, CA
    Replied almost 3 years ago
    This is a great article. Leveraging off point #5, sellers can also offer seller financing. Much like a lease option but the ownership transfers to the buyer immediately. And no banks involved which leaves more room for negotiation.
    G. Brian Davis from Baltimore, MD
    Replied almost 3 years ago
    Thanks Casey, and that’s a great point about seller financing. It’s a little more advanced, and sellers will need to be ready to file foreclosure if the buyer/borrower fails to pay, but can be a great way to move properties for top dollar.
    Emaar
    Replied almost 3 years ago
    Great article on a something not many investors tend to consider a great deal. Plan B and even sometimes C make a crucial part of any investing strategy.
    G. Brian Davis from Baltimore, MD
    Replied almost 3 years ago
    Thanks Emaar, I completely agree. Most investors don’t think about it until Plan A goes out the window, and by then they’re in trouble!
    Akash
    Replied over 2 years ago
    This is the first post I’ve read of yours and I am now a fan! You’ve really broken down the art of commenting into it’s necessary and essential components.
    Matthew Law from Clermont, FL
    Replied over 2 years ago
    Thanks Brian, great tips. We’re still small-time, so I wouldn’t have even thought about wrapping my brain around bundled properties, but that’s definitely something to keep in mind for the future.
    Jorge Vega
    Replied over 2 years ago
    Thanks Brian, this is such a great article! Very useful information.