Real Estate Exit Strategies For Investors

With real estate investments, you need multiple exit strategies. You cannot always sell real estate in the traditional way and you cannot always rent it out. What will you do if your flip fails and you only have short-term funding? Consider the following unconventional real estate exit strategies just in case their main strategy didn't work for some reason.

1. Converting Property to a Short-Term Rental.

The conclusion of a long-term lease does not always bring the maximum income from real estate and maybe in your marketplace, real estate can generate more rental income than vacation rentals on Airbnb. Each market is unique, and becoming an Airbnb landlord may or may not make financial sense for your particular property. And there's more to it when it comes to cash flow, as vacation rental management requires a lot more work than long-term rental management. You can of course hire a property manager, but expect them to take a larger share than your typical long-term rental manager.

2. Auctions.

Selling properties by auction works great when you need a quick sale, but don't expect big money, as the date of sale is more important than the sale price. But when you absolutely need to sell your property by a certain date, auctions are a sure fast way to sell. One thing to remember, reputable auction companies attract serious, reputable bidders. They also have a powerful marketing engine to reach the largest possible audience. They build extensive mailing lists, consistent ad slots with local publishers, and are familiar with the best ways to reach the right leads in the local market. But remember, your final price will depend on who shows up that day, which may be affected by random variables such as the weather, or seemingly unrelated events such as a conference passing through a city.

3. Doing 1031 Exchange.

You do not need to pay taxes on the profits from the sale of real estate if you use them to buy other property using the 1031 exchange. Within 45 days of the sale of your old property, you designate the new property you plan to purchase. You must then stay on the new property within 180 days of the sale of the old one. The new property should cost at least as much as the property you sold and is a great tool to grow your real estate portfolio. Before you pull the trigger on this strategy, make sure to learn how the 1031 exchange works and keep investing real estate profits in larger, more cash flowing rental properties.

4.Selling Multiple Properties.

Do you need to sell multiple properties at one time? Consider selling them as a portfolio. The properties can be combined to offer a "discount package", or they can be completely renovated or turnkey properties sold for a lot of money. Selling as a set means only one “product” to be sold. This helps investors and marketers focus their efforts and frees up more time and resources to go to market, which comes together more aggressively.

5. Pull Out Equity with Loans.

You can sell real estate to cash out, but then you lose the asset and no longer benefit from the current cash flow or appreciation. There's a strategy that will let you keep the property and still receive capital through a rental loan. This limits your cash flow, but you keep a property that continues to rise in price, and you can raise your rent every year. You are paid for your capital, but you do not need to pay taxes on it. 

6. Use a Niche Realtor Specializing in Investors.

The best realtors occupy a deep niche; they may not do everything, but they do one or two things exceptionally well. This niche includes the location of your property and your realtor should be the absolute expert in this market. But if you are trying to sell to another investor and want to use the services of a realtor, you need to find a local realtor who knows almost every investor in the market. In this case, you are not paying for their access to the MLS, but you pay for their network. You pay them to make phone calls and call every investor they knew until they found the one who's a buyer of your property. The right realtor will find you a buyer in one day, as the really good ones have their phone book filed with many hungry investors and know exactly who to turn to for a particular type of property.

As real estate investors expand their portfolios and implement larger projects, they need to understand all the options at their disposal for selling their property. Life sometimes is unpredictable, and the higher the stakes, the greater the need for contingency plans. Scaling your real estate business means both managing risk and building systems for a profitable exit.