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Updated almost 4 years ago on . Most recent reply
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What would be your exit strategy be on this fourplex?
Hi BP! Newbie here. I am in contract for a fourplex. I am purchasing it for $250,000. It is located in an area where property values have continued to increase annually. I would like to fix up units as they become vacant and increase rents. Potential rent is $3,000/ month ($750/unit). There is currently one vacant unit and one unit being rented below market rent. My plan is to budget $2,000-$3,000 per unit for the rehab. My long term goal is to scale by owning one apartment with many units. I am wondering which exit strategy will work best. Here is my logic on each exit strategy.
Which exit strategy would you choose?
Option 1- BRRR. Pro: I can use cash out money to purchase another property and still benefit from cash flow of this one. Con: Decreases monthly cash flow on property. Short lived until next property starts to cash flow.
Option 2- Value add. Add value by fixing up properties. Get rents to market value. Hold for 2 years while increasing rents each year. Sell and purchase larger property. Pro: No need to fix up properties as nice as if I was relying on a cash out for BRRR. Just nice enough to increase rent. Con: Money tied up in property for 2 years.
Option 3- Combination of option 1 and 2- Fix up property and increase rents. Cash out refinance. Purchase another property with the cash out money. Sell property in 2 years in order to purchase larger MF.
Option 4: Other. Enlighten me.
Most Popular Reply
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A problem with the selling options is selling and finding another property to purchase within the 1031 time limit. You don't want to be paying taxes on your gains every couple years.