My REI Process & Exit Strategy with Every Deal - Jeff Filali

My REI Process & Exit Strategy with Every Deal

Even though I didn't start to pursue REI as a business until I was ahead in life in my late 30's, I grew up around the business, and guess its kind of always been in my blood. My grandfather was a real estate developer when I was a young child, and was buying tax liens back in the 1970s to 1990s, and always had a house flipping project going on that he would "let me" do work and learn from him...FREE labor! Then my father owned several rentals, and use to pay me to maintain the lawns during the summers, or do cleanouts when tenants left them a mess after moving. I never realized "why" they were involved in REI at the time. To me it was just a side project that made a lot more work for me...

Since I started investing in RE, I've never lost money on a real estate deal YET... or even broke even for that matter. One thing I do differently, then most people, is I never predetermine my exit strategy on any deal, meaning I don't look at deals as this one is a wholesale, that one is a fix-flip, and that one is one I'm going to hold as rental. In the long run I want to have a nice portfolio of buy/hold rentals for my retirement, and to leave behind after I am long gone, but I don't have to look for them, they'll happen.

This is my process and exit strategy on every single deal.

Step 1: I never go above my criteria numbers, for SFRs (65% ARV minus repairs) & for Multi-Units (50x gross monthly revenue), if it doesn't fit that, its not a deal for me. (Note: in your market, your preset numbers may be different, but figure out what they are & stick to them.)

Step 2: I only contract to purchase properties that I have the financial ability, and intent to close on myself. As soon as I have a signed contract, it's forwarded to Title Co./Escrow, and I start offering "the contract" wholesale prior to Closing, and I'm not afraid to turn offers down, but if I can move the deal fast, make a decent profit without doing anything to the property, and help another buyer locate a deal, its a win, win. (Note: even creative finance deals can be wholesaled.)

Step 3: If I do not wholesale the deal prior to closing, I close the deal and continue offering it wholesale for up to 2 more weeks, while scheduling contractors to do the rehab, or any repairs.

Step 4: If it's not sold by 2 weeks after closing, then I start the rehab/repairs but still continue marketing it as "under construction" with list of planned updates and the price raised to ARV. (If the right offer comes mid-rehab, I can sell it & contract with rehab included.) You don't have to wait until the rehab is finished to sell the property. Builders pre-sell properties all the time, so can you.

Step 5: If still available Post-Rehab, I continue to offer for sale by owner for full ARV cash or other financing only. Usually I allow up to 15 days at full ARV or even a little higher to see interest level. If a lot of interest but no offers, I may let it go a third week. If it hasn't sold by three weeks, A. Lower Price, or B. Offer other terms in Step 6.

Step 6: I offer additional terms to get the property occupied, and cash-flow coming in...

Step 6-A: Offer Seller Financing.

Step 6-B: Offer Rent-to-Own, or Lease-Option.

Step 6-C: Offer as straight Rental.

Step 7: After getting the property occupied, there are still additional options, and exit strategies... You can "HOLD" the property for cash-flow, or you can continue to market it as occupied rental, or sell your interest in the Note on a seller financed property, or even a RTO or Lease-Option contract could be sold, as long as there's no stipulations against it within your contracts.

Conclusion…

I never predetermine which deals will be my buy & holds, I look to wholesale or rehab/flip every single deal, because growing your capital only puts you in a better position for more deals. The buy & holds will happen once they don't sell and make it to step 6. Sure there may be ones that are perfect for buy and holds, but I still offer those for sale but may be firm on a higher price. 

Today, I own 10 investment properties free & clear with no mortgages, with enough cash-flow to live off of if I decided to retire and always have a few being rehabbed, a few under contract, and a few ready to be sold or occupied...Those 10 properties are now my free & clear “nest egg” that could survive a real estate crash. But I also continue wholesaling and rehab/flipping as a full-time business, and flipped or wholesaled 27 deals in 2017. My goal is to continue building more capital to be able to expand acquisitions into larger apartment complexes in 2019, while also looking to help others learn how to build their own real estate business.

Feel free to reach out to me thru my contact information on my BP Profile anytime for free advice.

Good Selling!! Keep Grinding!! Follow me on social media for daily motivation, and read more of my Blogs - Jeff Filali (OklahomaCashHomeBuyer.com)

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Disclaimer: Author is not an Accountant, Attorney, Financial Advisor, Tax Advisor, Broker, or Agent. This is for general information, and not tax or investment advice. Readers should do their own due diligence and seek professional counsel prior to making any kind of tax changes or investments.