Real estate investors have been burned too many times by not having a viable exit strategy in mind. It is simply something we think we should do, not really knowing much about it. The best way to protect ourselves is to figure out what the best strategy for us is, and have a backup plan too.
A few reasons why a backup plan is important are listed below:
Ideally, after answering those two questions, you should have a good idea of what path will work for you, what can you do, and I hope we haven’t exposed you to any losing deals. The last thing we want to do is a vacuum in the presence of a good property.
With that in mind, now we can go on to the third principle, which is that a purchase strategy is as important as the ability to get out of your property when it is not working for you.
The Purchase Strategy
We listed a purchase strategy as a different strategy above, but we do want you to be aware that you have a choice in this regard. Having a good strategy is a normal aspect of any good investing strategy, but having a back-up plan to get out of your deal when things go spectacularly hometown can be the very solution for us.
Sometimes you may choose to do nothing and simply sit on an investment you thought was a winner from the beginning (remember the last assumption we made was that our strategy was better than our competitors). Sometimes, there is the dilemma of being stuck with a no-loss rental. If your buy is not profitable, you simply need to get out as fast as possible! The right way to deal with this scenario can be seen to be to refinance as soon as you see an opportunity (remember that you can always refinance for deals that are short-term like the new hot predictions persist for aunt dollar score). Although it is best to have a backup exit strategy, many times the speed that things happen in, the faster you can exit can be the right choice, since it is much easier than working a short-term flip or long-term hold. Failing to have a back-up exit strategy can often keep you in a position of not being able to get out fast when the right opportunity comes through before they do indeed.
Having a good exit strategy will always make the difference between having a successful long-term investment and one that turns into a living nightmare.
Seller financing and bank financing are the two most common ways to fund a deal and are both limited by one’s own financing options. For commercial real estate investments is important to understand how you will go about getting seller financing or bank financing on deals that are similar to what you do and for which the expected returns are similar. We will go over these differences in greater detail in future articles. creatively using short-term bank financing or seller financing to structure investor deals can be very helpful especially if you have patient Seller financing can be used to fund both your holding and holding costs simultaneously. Why do Short Term Bank Financing? Short-term bank financing is best structured using a 15 to 30-day lease contract with a balloon payment due when you either sell or refinance the property and normally as you refinance on the buyer’s loan. Use of the balloon payment then allows for you to refinance often with no money out of your pocket making Short Term Bank Financing very useful for the long-term investor. Whether you provide the financing or they go to the bank, they can often close on the deal and list the property for sale much sooner than if you maintained the listing.