If you’re making offers without a clear exit strategy, you’re walking a tightrope without a net. It’s crucial to know your exit before you even think about entering a deal. And I’m here to tell you, there are only a few ways to exit – you’re either cashing out, wholesaling, rehabbing, lease optioning, owner financing, or you might even move in yourself. Let’s break these down.
Firstly, understand this: if you’re cashing out, which includes wholesaling or rehabbing, your offer needs to be way below the market. But if your plan is to put a lease option tenant buyer in, or to owner finance the deal, forget about making a cash offer. In my world, if I buy on terms, I sell on terms. Simple as that.
Now, let’s talk about tenant buyers and down payments. If you can’t get a decent down payment, you’re setting yourself up for trouble. I’m talking at least 5 to 10 percent down. Anything less? You might as well leave that house vacant. Remember, that deposit is not just money in your pocket – it’s your peace of mind.
Here’s where many investors trip up – worrying about the first payment before getting a property leased. You need to have a plan for this. Don’t make the rookie mistake of accepting a low down payment just to cover that first payment. All you’re doing is brewing a bigger problem for later.
When buying with the intent to sell on terms, ensure that the down payment from your buyer exceeds any down payment you might make. If I’m putting nothing down (which is often the case), every penny from my tenant buyer’s deposit is profit.
Now, if you’re thinking about moving into the property, weigh the pros and cons. Don’t get strangled by payments. Always think about your exit first; it will guide your offers.
Remember, wholesale and rehab mean cash out. Terms mean terms out. Buy on terms, sell on terms. But don’t kill your golden goose. Every property I keep brings in a non-refundable option deposit as large as a wholesale or rehab profit, without the work.
Here’s the thing – every time you cash out, you’re slaughtering your golden goose. The longer you hold a property, the more money it makes you. Appreciation, debt pay-down, long-term capital gains, and the joy of collecting big deposits over and over – that’s where the real wealth is.
In conclusion, real estate investing isn’t about making quick cash; it’s about building long-term, sustainable wealth. Think about your exit strategy first, make your offers accordingly, and remember, the best investors are those who plan their moves strategically. Don’t just play the game; master it.
