Strategic Buying

Real Estate Investing
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Today's Article: "Strategic Buying"


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Well, the one thing you must do first so that you can go to the bank later is to consider how you will sell a property before you buy it!  The exit strategies we consider are determined at the beginning of a deal process. We make our money when we buy the home, such as when we negotiate a sellers debt in a short sale process, however we don’t realize our money until we exercise one of the below exit strategies.

  • Wholesale – The business of locating houses, usually needing repairs, at bargain prices and quickly passing them off to bargain hunters well below retail value.
  • Retailing – The business of locating houses at bargain prices, usually rehabbing them and selling to the end user for all cash with new financing. This exit can offer the greatest return however, requires the most resources.
  • Quick Turn – The business of acquiring a home, needing little repairs, well below market value, perhaps through a short sale, and immediately putting the home on the market to find a 100% financed homeowner.
  • Getting Ownership – The business of getting ownership to pretty houses in lovely areas by taking over existing debt. Creating seller carry back financing, and finding a new homeowner.
  • Lease Options and Options – Taking control of a property by leasing it from the seller or obtaining ownership from the seller with the intent to quickly find a new quick turn buyer or lease option buyer for the home.
  • Auctioning – The business of taking a home that we acquired well below market value and holding an auction for the home to create instant buyers and quick sales. This exit strategy is targeted for executive style homes.

Why is it so important to know how you will sell? You need to know your options. Let me explain. If you don’t know all your options to sell than you taking a huge risk of losing a deal when new complications arise that I refer to in one of my courses, The 77 Biggest Mistake Real Estate Investors Make.

Biggest Mistake #44 that a lot of real estate investors make is they do not have more than one exit strategy to their deal. Now, the reason why this is important for you to know is because the more exit strategies that you have in your business with your properties and your deals, the easier it’s going to be for you to get in and get out and get paid and move on to the next deal.

Whereas if your only exit strategy is to sell a property for all cash to an end-user buyer, then you’re very limited on the people that can buy that property from you, and you’re really cutting yourself short to a lot of different exit strategy avenues. Quite frankly, most of what you’re going to be able to do with your exit strategy is going to depend on how you purchased the property.

So, just keep in mind that whenever you plan to make an acquisition, whenever you plan to purchase a property, you always want to have an idea on what your exit strategy will be when you purchase that home. For example, if you can buy a property and have the seller owner-finance it to you, then you have a lot more flexibility on what you can do with it in the back end.

If you want to sell it for all cash to an end-user buyer and the numbers make sense, you can do that. If you want to sell the property as a lease to own and put a tenant in it and collect a down payment, you can do that. If you want to sell the property with owner financing and do a wraparound mortgage to your end-user buyer, you could have the option to do that.

Whereas if you buy a property and get a mortgage on it in your own name and do a small rehab job to it and it’s a one or two year ARM where the rate is going to go up soon and you’re going to be very limited after the rate adjusts, your only goal and your only intention is, “Man, I’ve got to sell this thing for cash so I can get out of it and pay off that loan!”

Well, you’re very limited to what your exit strategy is with an approach like that. And unfortunately, this is where a lot of real estate investors fail, because they do not have flexibility with their exit strategies. They only have one exit strategy that they can do in their business.

So, just keep this in mind as you begin or continue and grow your business: Always think about what your exit will be before you buy. Keep your exit in mind and be as flexible as you possibly can to the end-user buyer so that way you can get in, get out, and get paid quickly.


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