Every Deal Needs an Exit Strategy
Before making an offer, it's helpful to know your plan.
Are you planning to flip, refinance, or hold the property as a rental? Your exit strategy can influence everything from your offer price to your financing and renovation budget.
Do you determine your exit strategy before analyzing a deal, or does it depend on the property?
- Siahna Im
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#2 Real Estate Success Stories Contributor
- CPA, CFP®, PFS
- FL
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#2 Real Estate Success Stories Contributor
- CPA, CFP®, PFS
- FL
Siahna, I’d want the exit strategy before I make the offer, but I’d also want at least one backup exit in case the first plan stops making sense.
For me, the strongest deals are the ones where you're not dependent on a single outcome. If the plan is to flip, I still want to know what the property looks like as a rental. If the plan is to BRRRR, I want to know what happens if the refinance comes in lower than expected. If the plan is long-term hold, I want to know the likely sale implications and whether the property still works without aggressive appreciation assumptions.
The tax side changes with the exit too. A flip is generally active business income, while a long-term rental brings depreciation and passive-loss rules into play. A future sale can involve capital gain and depreciation recapture, and a 1031 exchange may be an option if you stay invested.
So I’d say the exit strategy should shape the underwriting from day one, but the best deals are the ones where you’ve already thought through Plan B before you close.
Happy to connect!
- Ashish Acharya
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- 941-914-7779
