REI Wealth Monthly Issue 04 | Page 7

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.