Strategies for selling your property
As a real estate investor, you make money when you buy, buy, buy because that means you’re going to turn around and sell, sell, sell. There are so many strategies out there for selling your property, how do you decide which one to use? As soon as you get a property under contract you should immediately be thinking about how you are going to sell it. Keep in mind that you have several different exit strategies to choose from each time you plan on putting a property on the market. 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’ll be finished with the property at the time of the sale and never have to deal with that property again. However, your profits will be somewhat reduced due to the fact that you have to pay agent fees. 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 for a slightly higher price than what you picked it up for. Whatever the difference is between the price you bought it for the price you sell it for will be your profit minus closing costs. 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 to use if your existing property has not sold, you have payments due and you’re ready to start the next deal. In this situation 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, and at the end of the time period they have 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. When using this strategy, 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 and if, for any reason, you don’t get the high bid you were looking for, you can easily move on to any of the other strategies or simply host the sale again.
How do you usually sell your properties? What way works best for you and why? Leave your comments below!