Developing exit strategies before you purchase a property is an important step to help ensure that you have options. You will want to consider different options. The more exit strategies, the better.
An example of a property with a few exit strategies: A property that you purchase under market value, that can be improved upon, and is able to be rented.
Exit Strategy 1: Flip
You will want to be sure that you have the means to do the repairs and maintenance needed to increase the value of the home. It is important to factor in what the market value is of the home and what it will cost to sell the house. This is where a Realtor comes in handy.
Cost of House Market Value after Flip
Cost of Repairs - Cost of Flip
+ Cost of Selling Profit or Exit Strategy 1
Cost of Flip
Exit Strategy 2: Hold
Holding the property is another great long-term exit strategy. In this strategy, you hold the property for an extended period of time and then sell it for a profit. However, this is not the only way to make money on the property. In fact, there are 4 ways to make money on a property.
1. Cash Flow- Rental Income: you will want to talk with a Realtor to get an idea of what your property could bring.
2. Tax Benefits- Consult a tax adviser.
3. Appreciation- This fluctuates but on average, it's 3% a year.
4. Mortgage Pay Down- If you have tenants, they are doing this for you!