Know Your Exit Strategy Before You Buy


While investing, there is a fine line between dealing with things as they present themselves and being proactive. You should give yourself a blueprint and a guideline for how you want things to go. That blueprint should start before you buy any property and continue all the way to the point that you either sell or rent the property out. Knowing your exit strategy before you buy can save you time and money down the road.

If your intention is to rent the property and hold it long term, you probably wouldn’t do the same work as if you were selling the property. Knowing this and following through with it will save you money. These funds can be allocated to other investments or used to improve different aspects of your business. It will also have an impact on what you are willing to pay and the time frame for which you are willing to do so. Too many investors will struggle to get a deal; only to be confused with how to carry on once they get one. At this point, you will be left scrambling to make a quick decision that can leave you regretting your choices if you are not careful.

Knowing your exit strategy will impact your offer price, any rehab budget and even a potential list price. This will also allow you to be more focused and to concentrate on what you want to do instead of just doing work and figuring it out when you are done. There is a difference in the work you do to attract a seller and a renter. This doesn’t mean the quality has to suffer, but you may not get new appliances or a new roof if you are renting. That money may not come back to you if you spend it on a rental property.

Every acquisition you make is part of your portfolio. With this in mind, you can look at properties that you only want to rent for a few years or properties that you only want to hold for six months. It is OK to be flexible with some properties and some decisions, but if you do this enough it will cause indecisiveness and regret. You will constantly be in the stop and start mode where nothing really gets accomplished. Eventually, you will succumb to outside influences instead of sticking to your plan and trusting your gut.

Working from the end of the process to the beginning will help you find properties you really want. Getting a good deal is great, but not if you don’t know what you are going to do with it. All this will do is leave you spinning your wheels for weeks while avoiding other properties at the same time. If you have a defined, prolonged plan for every property, you will be much more efficient and much more successful with every property you buy.