I’m joined today by my mentor and coach Dr. Marijo Wilson to share some essential tips about real estate exit strategies.
Exit strategies are essential for anyone investing in real estate as they are key to calculating maximum allowable offer.
Click the video below to watch now.
I’m Chimene Van Gundy, bestselling author and Mobile Home Millionaire. I’m joined by Dr Mary Jo Wilson, who has been a mentor and trainer for more than 15 years in the real estate space.
Today we’re discussing the four key strategies to planning an exit strategy; anyone entering real estate needs to have a keen familiarity with these before ever buying a piece of real estate, as an exit strategy determines the maximum allowable offer.
Wholesaling as a strategy requires nothing down and is not affected by credit. Really, one functions as a transactional engineer with an “And/Or Assigns” agreement (I include this document for my students). One can see these types of agreements in typical mortgages. When I buy a home and go through the mortgage process, more often than not, my mortgage is then sold to a third party – what we’re really doing is selling our contract. When wholesaling, we’re helping the person who wants to sell their home and we’re helping the person who needs to buy a home by putting the two together.
2. Lease options
We also serve as transactional engineers when dealing with lease options. Although there are many types of lease options, I speak here of lease with an option to purchase, where a customer puts down money and then they can lease the property. Additionally, there is the option for an advanced lease option called a sandwich lease option where the transactional engineer gets paid up front, in monthly payments and also in equity as the property appreciates (I speak about this in another video).
3. Buy, fix, and sell
This is perhaps the most widely known option – we find a property, buy it at a discount price, fix it up and then sell it at the fair market value price of that property. Typically we can get anywhere from $30k to $50k or more. A fair warning: you just have to make sure that you really vet your deal and you don’t go over MAO – maximum allowable offer.
4. Buy and hold
In this case, we buy a property with leverage, either through our own money, a bank, a private investor, or even hard money. We hold the property for a certain time frame and then refinance and pay off the hard money lender. Our ultimate goal, if we go in with the exit strategy of buying and holding, is to create passive monthly income, whether through a three year hold or five-year hold. If it’s a large commercial property or an apartment building or a mobile home park, we may plan to holding it 10 years or longer.
I should repeat: there are options other than banks that will actually provide loans: hard money lenders, who work based on the hard assets as opposed to credit etc.. If payments default, they can take the asset – so they will loan you typically up to 65% on the asset. Hard money lenders a lot of times can charge three to five points, which is 1% of the loan, which can scare many away. I will share a little reminder: it doesn’t matter the cost of the shovel if digging for gold.
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