8 Exit Strategies We must know our exit BEFORE we enter into a project.* These are only 8 of the exit strategies that we have available. They are not right or wrong * but we can always change our mind 1
8 Exit Strategies Exit Strategies can be chosen based on our: 1. Cashflow needs 2. Business philosophy 3. Commitments to our community & planet. 4. Fit with the rest of our portfolio & business plan For sure it should be â€œOn Purposeâ€? 2
1. Buy and Wholesale Flip This strategy will transfer the ownership to another investor, usually before close of escrow and certainly before any work is completed. We make less money because we are leaving most of the equity for the investor. But it is fast and the investor has to do all the work of renovation. 3
2. Buy, Renovate, & Retail to the Homeowner This is the standard â€œFlip That Houseâ€? strategy as seen on TV. Our improvements to the TV portrayal include, web marketing, promotion of our Three Packages, and using houses in process as models which usually results in the homes being sold before they are finished. 4
3. Buy, Rehab and Retail Flip with Discount Equity. Sell quickly at 20 - 25% below ARV. These must be bought and rehabbed right to allow discount and quick sale. These projects may get less than 100% of our optimal renovation to meet the lower price point. 5
4. Buy, Rehab, Seller Finance and Mortgage Note. With reasonable down payment, Buyer qualifies for 65-80% financing. We hold the second, most or all of which is profit. Second can be sold after seasoning if we need the cash.
5. Buy, Rehab, Rent, Cash Flow & Investor Flip Many Investors dont want to be involved in the details of renovation, rehab and will pay a premium for performing properties that are freshly rehabbed with screened tenants and 3 months payment history. Several of these combined may become the next Strategy #6 7
6. Buy, Rehab, Rent, Package & Sell to Investor. Groups of 5 homes, all rehabbed and performing. These can be listed for free on LoopNet.com, opening up the field of commercial investors world wide. This strategy works best with web marketing which opens up the whole world of investors. 8
7. Buy, Rehab, Sell with Lease-Option Here we are looking to sell to good people who cannot qualify for bank financing. The property is financed for 3-5 years interest only. During their lease option time we are assisting them with credit repair and down payment accumulation thru sweat equity build-up or our own down payment assistance programs. 9
8. Buy, Rehab, Re-Finance Equity, & Rent Here we will Refi and get all of our equity back out after the rehab. These are usually 65% - 80% loans. The spread between our payment and rent is cash flow. The difference between this and #7 is the renters have no plans of purchasing the home and long term financing is in place. 10
Flexibility In Times Of Change In the last 4 months we have seen the switch from a buyers market to a sellers market. Then banks sold way below listing prices. Now they are selling above full price with multiple offers. Inventory has shrunk dramatically. 11
Flexibility In Times Of Change The only great deals now are the really ugly houses. That scare away competitors. This situation may change soon as 9000 more homes are ready to be released into the market (Fresno County)
Results of the Changed Market More open to Seller Finance and Lease Option Sales. Good time to look for other niches where the competition is not so great. Good time to sit out and wait for the next wave Dont do anything from desperation. 13
Report on Lemonade Projects 1. Illegal addition is torn down and new plans are approved and construction resumed. 2. Construction Resumed on Mini Split AC System. Will be featured in a national publication 3. Stuck finance home to sailor on way to Afghanistan SOLD with Lease Option. 14
* but we can always change our mind We must know our exit BEFORE we enter into a project.* These are only 8 of the exit strategies that we h...