Exit Strategies

Posted on June 27, 2013 by

When in real estate, a person has to learn to adapt to any situation. In order to do this, you must have the knowledge to do so. In real estate you can try to “fake it til you make it” but sooner rather than later you will be discovered. To prevent embarrassment and improve your odds of success learn, learn and learn some more!!

A great example of this is a new wholesaler with very little to no guidance or training. They post ads, signs and hands out cards claiming they will buy your house cash without any the ability to do so. Now, let’s say that he/she is able to convince someone to sell them their property and was savvy enough to get a due diligence period built in. The wholesaler is excited that he/she finally has a property under contract. But is it a deal? With very little guidance or training, the likelihood of the property being a decent deal, much less a good deal, is very slim. The wholesaler’s only exit strategy was to wholesale the deal. If he cannot accomplish then the deal is dead. You can make money being a “one trick pony” in real estate investing but the more you know the more you make.

In the last few months I ran across a few wholesalers with this exact issue. One deal was great but the wholesaler was marketing it all wrong. He was trying to fit a square peg into a round hole by trying to pitch this deal as a rental with a marginal ROI. He was asking for a $2,000 fee.  It had the potential to make more so I contracted the property. I closed on this property with the intentions of repairing it and selling it retail. Because I closed on the deal in a week I still did not have all the contractors lined up and ready to go, as I should have. While waiting on the final bids, I decided to list the property in an attempt to line up a retail buyer before completing the renovations. I also offered the property at a discount if purchased as-is. An investor decided to make me an offer where he knew he would make money. Fortunately for him, his offer made me enough of a profit to sell.  Although I had planned to renovate the property, I gave myself another possible exit strategy and it worked out for the best.

Another property I contracted and had planned to owner finance did not work out as planned either. The down payment I was requesting covered the purchase price of the home plus a bit more for all my hard work.  The remaining balance was profit plus interest on that profit spread over a few years. I had tons of inquiries and the phone would not stop ringing but no contracts. After 15 days, I decided to reevaluate the deal. It turned out that a few properties had sold and made this property an amazing investment opportunity. While continuing to market the owner finance I also began to market to investors, showing the potential profit after renovations. Still, I had no contracts coming in. Finally, I decided to call every real estate agent that had sold a house in the area and pitched them the property.  In a week I received a call, out of the blue, from an agent who had an interested buyer with an all cash offer, no owner finance needed. Again, I could have given up but instead I adapted to the situation. I am not accustomed to working with very low income properties but I figured out who was and closed the deal.

 When you plan make sure to include contingency plans. It is better to think “what if?” than waiting until it is too late and working on “what now?” In both cases a profit was made and more importantly they were all win-win situations.

Michael VazquezMichael Vazquez has been offering properties to real estate investors significantly below market value since 2006 in both Texas and Georgia. Michael taken on projects starting with just 4 brick walls (literally) to managing his own rental portfolio. When it comes to investing in real estate he has done much more than many twice his age. Michael is always looking for more investors to work with.

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