Exit strategies....What would you do?

Question

I purchased a beautiful 3/2 single family back in February for 75k. Total investment including repairs, updating, and closing costs is 88k. I've done my comps for the area and figured the ARV to be 130k. I still owe 30k on the property through owner financing. There are a few deals I am looking into at the moment and need the capital to get the ball rolling. The property is in a beautiful area and amazing neighborhood. The house came out beautiful after updates. House could easily rent for $1100+/month. My 2 exit strategies Im debating on would be 1.) cash out refinance and rent out the property and use the funds for next deal -or- 2.) flip it and move on

I understand both options have their pros and cons but really want to build long term wealth as well as have capital for other deals.

I would really love to hear feedback from more experienced investors on what you would do in my situation and open my mind to other options that may be available.

Any information or opinions are appreciated!

Thanks a bunch!

-Christian

I understand both options have their pros and cons but really want to build long term wealth as well as have capital for other deals.

I would really love to hear feedback from more experienced investors on what you would do in my situation and open my mind to other options that may be available.

Any information or opinions are appreciated!

Thanks a bunch!

-Christian

Joe Villeneuve · Answer

I know where you are headed, and your experience in business will help...and hurt.  Much of REI involves the cerebral side, as opposed to the physical side.  Success in REI is based on thinking it through first...this is the analysis part.

There are 3 things every REI MUST know in order to be a success.  They are all equally important, and are all intertwined in use.  In no particular order:

1 - Market Analysis.  EVERYTHING is based on finding the right Market to invest in.  You don't analyze "properties"...you analyze "markets", then find the right properties in them.2 - How Money Works (for you).  You don't work for your money...it's the other way around.  You also must not think like a "Homeowner" where Money Sources are concerned, or us a "stock/bond" investment mentality/action where investing is concerned.  REI is nothing like either.3 - The difference is between a Plan, Goals and Steps...and how to develop a Plan that involves the "other 2".

Brent Coombs · Answer

@Christian Smith, if you can find a Lender to let you borrow $90k against it, (appraising at $130k), then I'd be inclined to recommend you do that. Pay off the original $30k owner "loan", and you've regained your original $60k - to go get another one! (Then another, and so on). My 2c. Congrats!...

Joe Villeneuve · Answer

Not enough info to even guess at an exit strategy that's best for you.  Exit strategies are not based on the property, they are based on the entrance strategy of the next property.  Actually, the entrance strategy for this property should have been based on the exit strategy options, which would lead you to the next entrance strategy.  Don't invest one property at a time.  Invest with a plan, based on your ultimate financial goals (i.e. personal bills/expenses).  That ultimate exit (bills/expenses) dictates the criteria for you property profiles, which then dictate the market you should be investing in.

What works for me, what works for others, isn't necessarily what's best for you.

In other words, you should be reverse engineering your plan.

Patsy Waldron · Answer

@Brandt Smith

I read his post to mean that his repairs, etc, cost $13K so that his entire investment so far is $88K ($75K purchase + $13K rehab and other costs). Sounds like he is looking at a profit of $(130-88)K= $42K. Not too shabby!

Christian Smith · Answer

@Michael McDevitt Thanks Michael! I appreciate your reply! Thats why I asked this question. I love hearing other investors opinion on what they would do with the property with the knowledge and experience you have acquired. But you are 100% right, it is ultimately up to me what I want to do with it. Thanks again!

-Christian

Christian Smith · Answer

@Joe Villeneuve Thank you for your response! That was a great answer and I should have provided more information. I love your method and agree with it 100%. I just started investing in real estate. This is my first property I've purchased. I own an equipment rental company and every year I had plenty of write offs which ultimately screwed myself for getting any type of conventional loan or hard money loan although I have a perfect credit score and funds to secure any deal, they still wouldn't touch me. Most investors will say "if the deal is there the money is easy to find" and in my case it was the most difficult part. Even with a deal that has 40k+ profit and funds for a down payments and other expenses I couldn't find the money to back me because of my little income to show. I was looking at multiple properties at the time but since I couldn't find the funds to back any of them I decided to focus my energy on locking in one property to get started. Now that I purchased my first property I feel I can finally move forward financially and actually develop a plan and have the funds to pursue other deals. I understand everyone has different long term goals but I just wanted a little insight on what other experienced investors like yourself would do with a property like this if you had to start where I am today. Any stories, info, insight would be appreciated!

Thank you so much!

-Christian

Christian Smith · Answer

@Patsy Waldron Thank you!

Christian Smith · Answer

@Brandt Smith Sorry, I should have worded that better. Total investment is 88k. Thanks!

Brandt Smith · Answer

@Christian Smith am I reading this correctly that you are $163k into the house ($75k + $88k)? Or is it $88k? Or is it $118k ($88k + $30k)? What is your total investment (purchase+closing+rehab)?

Exit strategies....What would you do?

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