Rental Property Exit Strategies

Rental Property Exit Strategies

Rental Property Exit Strategies

Many people enter the real estate investing business for the financial benefits this market offers – it’s no secret that the whole point of purchasing investment properties is to make money through appreciation or rent in the years to come. No successful real estate investor enters the market without establishing an efficient business model (plan) – hence, having rental property exit strategies before even purchasing a real estate investment property.

What are Rental Property Exit strategies?

As the name suggests, rental property exit strategies are plans for real estate investor to remove him/herself from a real estate investing deal.

Exit Strategy #1: Fix-and-FlipThis real estate exit strategy results in the highest profit margins. It allows the real estate investor to sell the real estate property at full market value. It involves purchasing investment properties that need repair (below market value), renovating them, and then selling them for more than the original purchase price plus repair costs.

Exit Strategy #2: Buy-and-Hold – This exit strategy is popular for real estate investors looking for passive income in a real estate property The real estate investor chooses to hold it for a period of time and rent it out to receive monthly cash flow (rental income). As appreciation and equity build up, you may sell these investment properties for a profit.

Exit Strategy #3: WholesalingA wholesale deal occurs when a real estate investor (wholesaler) acts as the middleman between a property seller and a property buyer. Basically, a real estate wholesaler finds and quickly sells a cheap real estate property for a profit margin. Real estate wholesalers place the investment property under a purchase contract and then sell this contract (or “assign” it) to the buyer for a small profit. This exit strategy is often used when rel estate investors are just starting out and don’t have a lot of capital.

Exit Strategy #4: Seller Financing – This is an excellent strategy for exiting a real estate property while continuing to produce a profit. In this case, the seller finances the real estate investing deal and acts as a bank. The seller and the buyer exchange a promissory note, including an interest rate and a repayment schedule. This exit strategy benefits sellers as they are awarded monthly payments to cover the mortgage loan, and their return on investment increases through interest income.

Exit Strategy #5: Rent to Own (Lease Option) – This type of exit strategies allows the real estate property owner to rent the investment property to a tenant, but with the option to purchase it after a set period of time. In some cases, a portion of the monthly payments is put towards the purchase price of the home.

Rental Property Exit Strategies

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