Things Didn’t Go as Planned, Now What? Choose One of These 4 Exit Strategies

Don’t panic! Just because things didn’t go exactly as planned with your deal, there’s no need to assume you’re facing a huge loss. A big part of real estate investing is being able to roll with the punches because the reality is that things don’t always happen the way we want them to.

Chances are, you got into real estate investing with the goal of making money. At some point, for a variety of reasons, you may decide you want to get rid of one of your properties. That’s where an exit strategy comes into play.

You’ll want to choose the best strategy to sell your house eventually, just as you chose a strategy to purchase it. However, it’s important to first understand the process of putting your property back on the market to sell.

 

Strategy #1: Selling with A Real Estate Agent 

You’ll want to be sure you shop around for a real estate agent you’re not only comfortable with, but that will sell your house quickly at a reasonable price.

Pricing is incredibly important. You obviously don’t want to list the property too low, but at the same time, it’s important to recognize that if you can’t sell the property fast enough, you’ll need to lower your price or consider renting.

Selling at a lower price means less money from the sale, plus the additional holding costs during the wasted months, while renting means having to deal with a tenant.

A good agent will make sure you set the right price for the property from the get-go. Though, don’t assume that your agent will take care of all the work once you hire them! If you truly want the property to sell, you should do your part to make the property more sellable.

For example, you can start by making sure the property is pleasing to the eye. You want to stand out among your competition, and that includes curb appeal on the outside and an inside that pops – especially the kitchen and bathrooms.

You may also want to consider staging the home with furniture and decorations to allow the buyer to better picture themselves living there.

For $1,000, you can rent a sofa and tables for a high-end home. For regular homes, knick-knacks like towels, candles, framed pictures, and a bowl of fake fruit can dramatically change the way the house shows.

 

Strategy #2: Selling “For Sale by Owner” (FSBO)

Most homes are sold with a real estate agent, but that doesn’t mean you need to use one – especially given that a real estate agent can cost you an extra 6%. For some, that cost is simply too high.

The main downside of selling FSBO is not having the property listed on MLS, which means far fewer people who are looking for a property will see your listing.

You will need to do a bit of marketing yourself to create awareness. We suggest ads in the newspaper, posting & renewing ads on Craigslist daily, putting up signs in the area, and notifying your friends and family through social media.

An open house can also provide a focal point for your marketing. Given that it’s an event with a definite start and stop time, you’re more likely to get people to take action and come see it this week instead of “someday.” Plus, you have the advantage of competition motivating people to make an offer once they see everyone else inside the home.

 

Strategy #3: Seller Financing  

Seller financing is when an owner sells their property but still carries the mortgage instead of making the buyer get their own mortgage. This can be beneficial for buyers who don’t qualify for a normal mortgage.

Seller financing is also useful for sellers who want a monthly income without having to worry about tenants, maintenance, or rentals because the property is then entirely the new buyer’s responsibility.

The new buyers also become responsible for insurance, taxes, and maintenance. And, as the seller, you can offset taxes due as the sale is considered an installment sale by the IRS.

 

Strategy #4: Lease Options

Another exit strategy investors will use is known as the “lease option” or “lease purchase.” The lease is one we’re all familiar with. It’s when a tenant moves into the house and makes monthly payments as rent.

The tenant enters an agreement with you to purchase the home at an already-determined price in a set length of time, while you begin generating a monthly cash flow on the property.

Of course, choosing the right exit strategy depends on the state of the market and whether you’re getting any interested buyers or tenants. Consider all your options, as a sudden turn in the market could force you to consider other avenues.

For example, if you can’t find a buyer for a standard sale, even after lowering the asking price, renting or leasing could be a viable alternative even if it isn’t the preferred choice.

In the end, an unexpected setback doesn’t have to be considered a major loss. Even if you don’t make as much as you’d hoped, losing the battle doesn’t mean that you’ve lost the war. After all, you’re still in business. Learn from these experiences, take lessons from them, and over time you’ll get better at (and win) the real estate game!

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