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Exit Strategy For Real Estate: Short Term Vs Long Term

Updated: Apr 30


Exit Strategy For Real Estate: Short Term Vs Long Term

Having an exit strategy for real estate is essential before taking on a project. Real estate investors should consider their exit strategy at the very beginning and include it in their business plan. When you have an exit strategy in place you will be able to minimize risks while maximizing your profits. 

In this article we will discuss what a real estate investing exit strategy is and why it’s important. We will also compare a short term fix and flip exit strategy with a long term rental strategy. 

What Is An Exit Strategy For Real Estate?

An exit strategy for real estate is essentially a back up plan that allows you to remove yourself from a project after it is completed. Even though this is the final step of the investment process your exit strategy will determine every aspect of the project. Everything from the amount of time, money and effort you put into the project will all be impacted by the exit strategy that you have in place.

Apart from how the exit strategy impacts your decision making throughout the deal, it also helps you maximize profitability. Don’t fall into the trap of overlooking your potential exit strategies in the interest of time. While speed is important in executing these deals, going into a deal without understanding each scenario could be very costly. You don’t want to be in a position where you are negotiating with a seller without knowing how you can exit from the deal. This is not only risky but you will also lose your ability to negotiate from a position of power. 

Long Term Rentals Vs Short Term Fix & Flip

Since there is no one size fits all exit strategy and each real estate investment is unique it’s important to consider the many different factors that will go into deciding what strategy you need to implement. 

The two strategies we will cover now are the long term rental and short term fix & flip. According to real estate investor Brandon Turner Renting is more of an investment while flipping is more of a business.

Short Term Fix & Flip

In this strategy when the investor buys the property they do so with the intention of renovating it and then selling it at a higher value. The investor should know beforehand what type of repairs are needed and they should also make sure they are buying the property below market value. This way the cost of rehabbing the property will ensure that there is a significant increase in the value. 

This strategy is popular because of the large profit margins but due to how complex these deals can be there are a few things you need to keep in mind. You need to make sure you have a highly recommended contractor so that there are no issues with the rehab process. You also want to work with an experienced private money lender like Alpha Tech Lending.

If you are confident you have all the pieces in place to execute the fix and flip exit strategy it’s definitely worth going for. This is the most lucrative exit strategy and you will get your ROI quickly which is why it’s a good short term strategy. 

Long Term Rentals

Simply put the long term rental exit strategy is when an investor holds onto a property and decides to rent it out to have cash flow over a long period of time. There are many times where selling the property may not be the best move. In these cases an investor will rent out the property to get steady cash flow and wait for the best time to sell the property as it grows in equity. This strategy is also known as the BRRRR method.

While there is some work involved in this strategy (rental maintenance, operations, tenants, income, budget, ect.) you can always hire a property manager as well as a real estate tax advisor to help manage your taxable income.



Work With Us!

Regardless of which exit strategy you chose to use for your real estate investment property, working with a trusted private money lender is a huge component of your success. Our team at Alpha Tech Lending can help you get the funding you need to execute your plan. 

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