In the real estate “game,” nothing is more exciting than finding, rehabbing, and then flipping a property for a sizable profit in the time span you originally envisioned. Still, reality can often intrude and you will be stuck with a property that you cannot sell at a profitable price. When this happens, the prudent real estate investor has a secondary plan or “exit strategy” to deal with this eventuality.
Not sure what your exit strategy is?
Here are a few suggestions:
Lower the Asking Price
While drastically reducing the price on a property is the “go to” solution for any investor who has gotten in over their head, one should not take this step too impulsively. Instead, reexamine the state of the local market and readjust your asking price according to the latest comps. Also, keep in mind that any offer is better than no offer and look for a reason to accept rather than decline when holding an unwanted property.
Find a Partner
Real estate investing is often about spreading the risk, although you will also be spreading the potential profit. If a property you intended to flip suddenly becomes one that you need to hold, consider finding a partner. That way you can keep a substantial portion of your original capital, while giving your new partner an income and excellent return on their investment dollars. That same investor will be happy to lock in long term income while you can recoup half or more of your investment capital. Whatever you do decide, be sure to structure the deal so that you maintain operational control.
Provide a Lease-Purchase OptionSometimes the best option is to convince a renter that the best deal is to actually buy the home after they determine that it is really what they want. Excellent deals can be structured that benefit both the seller and the buyer. One thing to remember, however, is to keep the option period under one year in case market conditions change for the better.
A Final Thought
In the end, fix and flip loans are some of the hardest to service – especially if you are new to the real estate market. Instead of pursuing one on your own, consider getting some advice from a reputable private money lender. These companies have the expertise, experience, and contacts to make the whole loan process far easier, less aggravating and, most importantly, more affordable for the new investor.