Getting started in real estate takes some trial and error. You can do all the self-education that you want and still make an error or two. That's OK. Part of the learning process of starting in real estate is bouncing back from mistakes. Getting into real estate is not the hardest part of your future. The exit strategy that you choose can be as difficult or as easy as you make it. What is a real estate exit strategy? You buy into investment property for a reason. Some investors are searching for the monthly cash flow and others are building a retirement. There are a lot of personal decisions that you will make as a property investor concerning your future. Planning your exit strategy can assure you that your goals will be met when you reach the end of the line as an investor.
If you are new to real estate, it might appear that it is too early to start thinking about the end. What you have to understand is that the end can come a lot sooner for some people. The plans you make today could not materialize like you want them to and your real estate career could be over. Knowing how your money is used and how it is invested over the long-term can help you plan your exit strategy.
One of the first questions that you must ask yourself is "How long do I plan to hold this investment property?"
Real estate normally appreciates in value year after year. Creating a long-term plan to maximize the appreciation you receive can help you if you go to sell your property. Buying and holding are two things that must be mastered to get the most profit from an investment property. Holding a property for a period of up to five years can bring more profit to you on a sale compared to holding it for one or two years.
The second question that you must ask is "What type of buyer will want this investment property?"
Incorporating the buyers that you have in mind in advance is a big plus to your exit strategy. Ask any real estate agent or investor what one of the hardest things to do is and they will likely tell you finding a buyer is hard. If you own a single family home, people in your inner circle or friends and family could be at the top of the list as potential buyers.
The third question that you must ask is "How will a sale affect my taxable income?"
Uncle Sam would like to get his hands on as much of the income that you earn from a property sale as possible. Tax planning as early as possible is one major asset to your real estate exit strategy. The sale of a property could put you into a higher bracket for taxes and take a large bite out of your profits. Consulting with a tax professional and organizing ways to reduce your tax burden is best.
Positoning yourself with a solid plan for your real estate exit strategy can help you end your career in real estate and let you enjoy the fruits of your labor without issues.