3 Real Estate Exit Strategies

1) Retail For Cash

Once you pick up a bargain property with the right margins, you will renovate and/or update the home to make it ready to sell to a retail buyer. You have a couple options going this route--you can either list it or try to sell FSBO.

*Pro Tip:

The thing to do here is to start as a FSBO as soon as you get in under contract. The day you put it under contract (or close), immediately stake your sign in the front yard. Here is an example of what your sign should say:

"For Sale By Owner

555-555-5555

www.YourWebsite.com"

If you don't have a website, then put your email.

If your sign is large enough, you can also put in # of bed and baths, for example:

"For Sale By Owner

3 Bed 2 Bath

555-555-5555

www.YourWebsite.com"

We reccommend making the website the smaller font compared to the other lines.

This sign MUST be legible at a far distance. Use fat black sharpies or stickers on a white or yellow sign if you aren’t printing. If you do print, we recommend using Vistaprint.

Also, make sure that on day one, you put yourself on every free classifieds out there such as Craigslist.com and get on Zillow.com.

The reason behind doing this is as you are renovating, you are collecting potential buyers. They may not buy this house, but they could buy a future one. Also, if you do find a retail buyer right away, they may be able to take it off your hands right then for a good price and you wouldn't have to lay a finger on the property, yet you still collected most--if not all of your profits.

Once the renovations have been completed, keep it as a FSBO no more than 6 weeks. Do not hesitate to spend a chunk on marketing--it will get it sold fast and will make your portfolio look excellent. Make sure you have an open house scheduled the first weekend you’re ready on a Saturday from 2-3pm. Continue to do open houses as often as possible until sold.

If you had no luck by the 6-week mark, make sure that you have exhausted every trick up your sleeve before listing with a real estate agent. This way you know that you did everything that YOU could do before you had to list it. And make sure that when you do list, pay the agent a fair commission and send a gift once they sold it. This will help build your credibility. Remember, your network is your net-worth.

2) Wholesale

Wholesaling is simple: you find a bargain property, complete a general repair estimate, get the expenses together such as fees, repair costs and commissions, and then sell to an investor or cash-buyer within 2 weeks. There are 2 ways you can wholesale: the first way is the most common way which is to assign your contract to another buyer for a fee. How this works is as soon as you get it under contract with a standard Purchase and Sales agreement, you find your end-buyer and assign the contract using an assignment agreement for a fee. The fee is entirely up to you, just make sure that there is a good margin for your end-buyer to profit, as well. 

*Pro Tip:

Before you start wholesaling, collect your buyers and know what they want, how often they buy, and how fast they can close in advance.

3) Lease-Option

You will make the most money by selling with a lease-option, period. A lease option is also referred to as a lease-purchase or rent-to-own - they all mean the same thing. It means that in the beginning, you and the tenant-buyer agree on the purchase price, a rent payment, a down payment/option-deposit and a length of term (never longer than 18 mo). Once all those terms are laid out and you get it in writting, you rent/lease the house for the term you agreed upon and you collect your option-deposit up front. They pay you rent that does not apply towards the purchase price and they have an option to buy the property within the term given and they must cash you out or else they lose their option to buy and their option-deposit. 

This is our favorite exit strategy because you receive rent payments on top of your margin - this is how often we can buy at almost full market value, because we know this will be our exit and our costs will be covered. It is also rewarding because you are giving them an opportunity to live in the home they want to buy as they are working on getting qualified.

What is also great about these tenant-buyers is that they treat the home as if they own it - which makes them buyer-minded and not tenant-minded. This means they will likely update the home rather than damage it.

The only con to this exit strategy is the risk that it takes time. Often times you are out more money in the beginning if you didn't buy the house with seller financing yourself.

*Pro Tip:

Selling rent to own is a rewarding service because only 20% of the market is able to qualify for a home-loan. This means you can access the other 80% by offering terms that give them time. We pre-qualify all our potential tenant-buyers and have them work with a credit-repair specialist so that we know when they will be able to cash us out - 80% of the time they are able to qualify in less than 12 months.

You must make the option-deposit non-refundable. The reason is because you need collateral to ensure that they will do everything in their power to cash you out within the time given. And if you have to stick someone else in there, you have enough funds to cover vacancies, damages and then some.