EXIT STRATEGIES; ALWAYS BEGIN WITH THE END IN MIND SHARON VORNHOLT
Taking the exit strategy one step further; it makes a
difference in your renovation whether you plan to
sell the house to a landlord or to a retail buyer (a
Whatever exit strategy
you ultimately choose
isn’t nearly as important as
knowing what that strategy is
the day you make your offer
on the property.
home owner).
In most cases, a real estate
investor wouldn’t put in granite counter tops and
expensive upgraded cabinets in a rental home. In
a bad market you may make different choices in
your finishes than you would in a good market just
in case you have to fall back on “plan B”. You may
decide to put in finishes that are more “middle of
the road” so to speak. Just remember, that If you
buy the house at the right price, you will always
have options available should one exit strategy not
What exactly is a backup strategy?
Let’s face it. Things don’t always work out as
planned. For instance, you may purchase a
work out the way you planned.
Does my exit strategy affect how much
money I will need?
property with the intention of rehabbing it and then
selling it to a retail buyer. But what happens if you
Yes! The amount of money you will need will
can’t find a buyer? You may have to rent the house
depend on your exit strategy. Some are short term
until the market improves, so it’s important to know
strategies, and others are long term strategies.
whether or not this property would cash flow if you
find yourself in that situation. You will also have to
consider the effect it will have on your financing if
you have to hold the property long term, especially
if you have used some type of short term or
construction financing for the purchase and rehab
of the property. You need to be sure that you will
be able to refinance later if you can’t find a buyer.
In my area, this has become a big part of the
“buying criteria” for rehabbers. They have passed
on some properties that would have been good
deals to flip, but wouldn’t cash flow as a rental if
they weren’t able to find a buyer.