the best real estate exit strategy: choose wisely to avoid FAILURE!

How To Choose The BEST Real Estate Exit Strategy to Avoid Failure!
Exit Strategies

It is important to understand exit strategies with any investment you make. There are many different ways to implement a real estate exit strategy when investing. This allows you to be creative and build some great safety nets for yourself. That being said, you still need to plan ahead for these items, as opposed to just taking it in stride. 

The last thing you want to do is get finished with a project, realize it won’t cash flow, and not have planned out any way to exit the deal without losing money.

1. Wholesale

A great real estate ext strategy you can use immediately is to wholesale the house to another investor. Wholesaling is the art of putting a property under contract, then "assigning" that contract to another real estate investor at a higher price.

Let's say you get a property under contract for $50k, that will be worth $100k after completing $20k in renovations. You could wholesale this property to another investor for $60k, and they would still have room to make a profit after they fix it up!

This is a good strategy if you get a property under contract and realize that you are too busy to complete it, or just want to make a quick buck.

2. Sale

This is the most self-explanatory exit strategy of them all. However, there can be some intricacies involved in the sale of your home. You need to understand that if you list the home with a realtor, you will traditionally pay out a 6% commission that is split between the buyers’ and sellers’ agent(s). You may also be responsible for some closing costs and even some repairs depending on the results of the inspection. Be sure to factor this in before listing the home. Ensure you won’t have to bring money to the closing table because you’re losing money by selling the home. 

Also, selling your home as a for sale by owner (FSBO) might mean you’re eliminating the realtor’s commission, but FSBO homes stay on the market longer and sell for less money than homes sold by agents. Don’t get sucked into the FSBO trap. Just list the home with a realtor and avoid all the headaches of trying to do it yourself.  

Capital Gains Tax Upon Sale

If the property appreciated a lot in value, you could be on the hook for capital gains tax when you sell. Long-term capital gains tax ranges from 0%-20%, depending on how much money you would be receiving in capital gains. Short-term capital gains are even more expensive, but you won’t have to worry about that if you owned the home for at least one year.

Also, if you live in the home as your primary residence for 24 months (cumulatively) out of the previous 60 months leading up to the sale of the home, you will not have to pay any capital gains tax when you sell. For active duty, you can avoid capital gains tax if you lived in the property for 24 months (cumulatively) out of the last 15 years prior to the sale of the home! Talk about an incredible tax benefit! You can avoid paying capital gains tax for up to 15 years after moving out of the house, as long as you reside there for 24 months during that time period. 
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My name is David Pere, I am an active duty Marine, and have realized that service members and the working class use the phrase "I don't get paid enough" entirely too often. The reality is that most often our financial situation is self-inflicted. After having success with real estate investing, I started From Military to Millionaire to teach personal finance and real estate investing to service members and the working class. As a result, I have helped many of my readers increase their savings gap, and increase their chances of achieving financial freedom!
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