hey guys,
what exit strategy(ies) do you guys use? i would like to know what the pros are using and why.
I’m in the rental business. Why? I like a relatively steady income every month and the equity (net worth) for safety.
Mike
I am a buy and hold guy, too. My exit strategy is to die rich and let the heirs sell at a stepped up basis with no capital gains impact.
I also focus on buying and holding. Closed on my first investment property last month. For me it is all about doing what I like most - I want to get to a point where I can work few days per week and few hours per day and take 3 or 4 days weekends with my family. I believe PropertyManager’s objective is to work 3 or 4 days per week, 3 or 4 hours per day. When I read it for the first time it clicked and I decided that I also wanted that for me… :O)
Bottom line, I see the rental business as a way to be able to retire from my day job and do what I like to do with my family.
My agenda is to buy & hold residential and commercial property for 30 to 40+ years, and sell it for a fortune when I’m ready to retire. I might sell pieces of property during that timeframe though, and therefore exit individual deals, if I can obtain a large (but long-term) capital gains on a deal. But after 30-40 years I’ll exit the business entirely, and cash out a super rich old coot.
Starting in a couple years I’ll begin flipping houses, when the market comes back, in addition to buying & holding the previously mentioned real estate. I will exit those flipping projects every 60-90 days I anticipate, and cash out with significant chunks of earned income.
The buy and hold timeline has lengthened greatly. Take a look at Japan. Nikkei from 1990 to now. Tokyo real estate from 1990 to now. US equity markets 1998 to now. There have NO or NEGATIVE gains.
We are entering a deflationary spiral like Japan 1990, your time horizon needs to increase substantially. I would not buy and hold in this environment…
My exit strategy is to either sell my furnished rental home business intact, probably by carrying the loan or to break it into the individual properties. The individual properties will mostly be free and clear of loans by then.
I like the plan of accepting small downpayments and charging higher interest. We will carry the loans. Payments will go through an escrow/collection agency who will keep track of everything and make sure the insurance and taxes are current. The agency will direct deposit the mortgage payments into our bank account.
I will be living in my small deluxe hotel complex. The maids will come in every morning with hot coffee, fresh orange juice, and croissants. They will clean my casita, pick up the dry cleaning, go grocery shopping, fill the car with gas. I will supervise the gardeners, order the bird feeders filled, chat with guests, visit with my future grandchildren, walk my future dog. In the evening we will eat at the on-site gourmet restaurant, enjoy the fireplace and the live music in the cocktail lounge.
Now I just need to figure out how to get from this rental business to my little resort hotel. Sounds a lot better than an old folks home, doesn’t it?!
Furnishedowner
We are entering a deflationary spiral like Japan 1990, your time horizon needs to increase substantially. I would not buy and hold in this environment
I agree that we’re in for the mother of all depressions. However, as long as the rent is being paid by someone, I think that rentals will be one of the safest businesses to be in. Flipping to retail buyers is DEAD (at least in this part of the country). Wholesaling is also dead (and even in the boom, I don’t know a single person who made a good living wholesaling). Commercial real estate is next up for a collapse (as businesses begin to falter).
Mike
My favorite strategy right now is purchase options or lease options or either combined with wholesaling. I truly believe we are in the perfect lease option storm (Sellers with low rates needing to sell, buyers who can’t get financing because of credit)
Good Luck!
While it’s a cliché that cash is king, it’s especially true in a deflationary period. With prices dropping, your cash becomes more valuable every day (i.e. the opposite of inflation). Thus, you want to hoard cash and/or enter into agreements where others pay you money over time. This might include hard money loans and perhaps rentals owned outright. I’d be careful of leveraging myself in these deals since the money you are paying back is more valuable over time.
During times of inflation, you generally want to be an overleveraged borrower, paying your debts back with less valuable cash as time goes on.
With more banks opting out of the credit market, now is a great time to be a short term, conservative, lender.
Cash is king indeed and some real good posts before this one here.
I like the wholesaling gig myself and use that cash to keep up with bills, money for marketing so I keep the leads strong and also take some and by some bullion and short term day t-bills.
Also buy things cheap for cash - and then sell with owner financing to have income coming in and actually being the bank.
Good topic and thanks for those that shared.
Warmly,
RPB