Buy and hold - Exit Strategies

[Sam D.]

I work full-time and working on building a portfolio SFH's. While I have a few SFH's, the risk is low because the full-time job can cover P&I for all the properties in the event all properties vacant at the same time - for any duration of time.

While I expect the best and plan for the worst....I've seen many experienced investors that hold 50+ units and I am curious to understand the mindset of how you balance out risk and the exit strategy for a worst-case-scenario. 

1) If you have 50+ units and if 30+ units are vacant. What do you plan to do? Assuming the property has a mortgage.

2) What's the exit strategy after you can no longer sustain? Again assuming the property has a mortgage

Selling the property seems like an obvious choice but are there better exit strategies?

[Barry H.]

SAM - I have been a REI for about 13 years. My strategy was (is) quite different because I only purchased low-end properties with strong ROI for cash (no financing). That said, my exit strategy should be no different from yours. If you are seeing large equity gains, there is no way to time the market perfectly, but selling IS the exit strategy, and you should have a defined number or percentage (e.g. 25% market appreciation). If you are committed to borrowing for future real estate investments, you can at least pull out a good chunk of equity and diversify when you hit an appreciation / equity target (aggressive stock portfolio, be a hard money lender, like me, etc).

That said, if you are a Buy/Hold/Rent Investor and your properties are pretty much on auto-pilot making a solid ROI, even if property values go down in the future, RENTS will not (typically) go down - or they will only go down slightly. I went through it in 2007-2011 and my rents never dropped more than about 15%.

OK - that is just one way to look at it - and it worked for me.  I just hit my equity / appreciation target this year and I am selling all my rental units.