Property Investment Exit Strategies

If you are planning on entering into any kind of property investment, it is best to have an idea of what your end game is.  Your exit strategy should match your abilities and the situation that you are currently in, but in the end it comes down to three options: buying to rent, flipping, or assigning the contract to other investors.

1. Renting - This strategy is more of a long term plan for generating passive income.  It's a way to build up your wealth slowing since by holding the property for a long period of time, you will see a significant return on your investment over the long haul.  You do need to put quite a bit of money down upfront so you are bringing in more in rent each month than you are paying out to the bank, on property taxes, and on insurance.  This method is best for the lazy people who don't want to do a lot of work (or no work with a property manager), but want to sit back and watch a small amount of profit come in each month while building equity in the property.

2.  Selling - Are you a fix-it-up kind of person?  Then you might be able to buy a cheap house that needs a lot of work, do that hard work by upgrading certain features, and then putting the property back on the market for a substantial profit.  With this method you can see a quicker return on your investment, since you only have to hold it long enough to make the upgrades and find a buyer.  You will have to be able to put in the time and money to fix-up the property.  If you are not able to do the work yourself then flipping may not be the best method for you to make money.  Contractors charge quite a bit for the work they do and the more of your budget you burn through the less profit you make when you go to sell.  Of course something to keep in mind is that not all properties need a lot of work in order to make money flipping them.

3.  Assigning - With this method you can either purchase and then resell or you can assign the contract to another investor for a finder's fee.  To use this tactic you need to have a list of investors that are in the market and looking for a deal.  It is recommended that you have at least five potential investors lined up in order to make sure you have the financing before making an offer on a property.

So before you go out and start investing in property, make sure you have an exit strategy in place detailing how you plan on making money off of that piece of real estate.