Have You a Plan for When It’s Over?

No, we’re not talking about being deceased and your will. We’re talking about the exit strategy for the real estate investor with long term rental properties, whether single family residential, multi-family, or commercial. Sure, you can start out with the plan to hold properties as long as they’re producing great cash flow, but at some point you’ll need or want to change the plan.

Just Sell Each Property and Retire

Let’s say that you’ve been really successful and grown a portfolio of single family residential homes in a variety of neighborhoods and maybe even in different cities or states. If you have many of them, the downside will be the time it takes you to sell them individually, as well as the costs of sale, including real estate commissions and other closing costs. The good news is that you’ll probably realize a nice gain by being able to maximize the profits deal-by-deal.

Sell the Whole Portfolio in Bulk

There are investors out there with the money and desire to purchase a performing rental property portfolio in bulk. You’ll certainly cut down on the costs as compared to dozens or even hundreds of individual transactions. This is especially true if you don’t list them with real estate brokerages, adding from 4% to 6% to your bottom line from the sale. On the flipside, the buyer will want a bargain, so your overall selling price will be lower than doing individual sales. However, with lower costs and economy of scale, you can still do as well or maybe better.

Keep Growing for the Heirs

Both of the previous strategies are assuming that you’re ready to retire and be done with landlording. However, some of us just aren’t cut out for a fishing rod and the beach. If you love what you’re doing, why not stay sharp and involved, as your heirs will be getting a much bigger portfolio if you keep building on it. The good news is that we still have the 1031 Exchange to grow our net worth and keep capital gains out of our hair.

These are things you need to think about, even if you’re just getting started in real estate investment. Always plan for the future if you don’t want to be taken by surprise when it arrives.