NEVER TOO EARLY FOR AN EXIT STRATEGY! BILL WALSTON
When deciding on an exit strategy, one of the first
The third question is: How will a sale affect my
questions that you should ask yourself is: How
taxable income?
long do I plan to hold this property?
Uncle Sam would like to get his hands on as much
Real estate normally appreciates in value year
of the income that you earn from a property sale as
after year. Creating a long-term plan to maximize
possible. The sale of a property could put you into
the appreciation on your property will increase your
a higher bracket for taxes and take a large bite out
profits when it comes time to sell. Holding a
of
property for a period of up to five years can bring
competent, real estate savvy tax pro, will allow you
more profit to you on a sale compared to holding it
to minimize any potential tax burden.
for one or two years. On the other hand, you may
remember the words of Judge Learned Hand,
decide on a quick turn over. Your answer to this
“Anyone may so arrange his affairs that his taxes
question will help you decide on the type of
shall be as low as possible.”
your
profits.
Early
tax
planning
with
a
Always
property you purchase, how you will structure your
deal, and how you will dispose of the property
Having several exit strategies is a must in real
when the time comes.
estate investing.
Here are a few for you to
consider:
The second question that you should ask is: What
type of buyer will want this investment property?
Flip the deal.
This is a fast cash exit strategy.
Put a property under contract and assign your
Will you be selling a wholesale deal to another
contract to another buyer, usually another investor,
investor? Or does selling to an “end buyer” strike
who will pay you a fee. This is one of
your fancy?
the quickest ways of generating what
we call “quick cash.”
Retail the deal.
Sell the property
for the highest price you can get on
the retail market.
You can sell the
property as a “for sale by owner” or
you may want to outsource the job of
selling to an agent.
Sell with owner financing.
As a
seller you “carry” some, or all, of the
purchase price as a loan that your
buyer