As a real estate investor, you need a good strategy when you buy properties so you can turn around and sell them quickly.
As soon as you get a property under contract, you should plan for how you are going to sell it. You have several different exit strategies to choose from. Deciding which one is the best for each individual property requires understanding your market and the pros and cons of each exit.
Probably the most commonly used strategy would be a conventional sale using a real estate agent. With a conventional sale, you close the deal and finish with that property. However, paying agent fees means you’ll make less profit. Also, the sale may take a little longer using this method than when using some of the other strategies.
Wholesaling is when you sell your properties to other investors before you rehab them. In this instance, you already have the property under contract and must find another investor to purchase it from you. There are several ways to structure a wholesale deal, but whichever one you choose, it’s a great way to make a quick profit. Keep in mind that your profit margin is usually lower when using this method.
A lease option, or a ‘rent-to- own’ opportunity, is an effective tool if you have a tenant who isn’t quite ready to own yet. So you rent your house to them for a designated length of time, typically two years. After those two years, the tenant has the option to buy it. When setting up a lease option deal, the tenant pays you a non-refundable option payment, which pays for their option to buy later. This payment is profit in your pocket and the first way you get paid. Then you will also be receiving monthly payments slightly higher than your mortgage payments as profit. Finally, you will also get paid when the tenant purchases the property at the end of their lease period.
Owner financing is a great way to sell the property quickly and to get rid of the monthly payments. You’ll also get some quick cash for yourself. When you set up an owner financed deal, you (the seller), essentially act as the bank for the buyer by financing the loan. The buyers will put down a large down payment and then pay your mortgage payments for you. Then after six months, you can sell the note to a note buyer for additional profit. If you plan on holding the property long term for cash flow you will need to refinance from hard money into a conventional loan.
The 5 Day Sale
The 5 Day Sale is an auction to sell your property within 5 days of advertising it. You will get out of your property quickly and make the most immediate profit. This is the fastest exit strategy. If you don’t get the bid you wanted, move on to any of the other strategies or simply host the sale again.