Real Estate Investing – What’s Your Exit Strategy?

When it comes to real estate investing, there are only two words that matter: exit strategy. Without an exit strategy, you are bound to the contract without any exception. Without an exit strategy, you’re putting yourself at risk by leaving yourself open to lawsuits if you decide that the property is not for you, you realize that the property will not create enough Return on Investment (ROI), or you find out that the property is actually over-priced.

By definition, an exit strategy is your Plan B: it’s a plan you have in case things go awry. You add specific clauses in your real estate contract to make sure that you can walk away if and should things go in a downward spiral. The last thing anybody wants is to be stuck making payments on a property you didn’t want after all. To make sure you’re prepared for anything, the EzDealio team has decided to put together a few tips for you to take into consideration when you’re thinking of investing in real estate.

Your Exit Strategy:

  1. Contingency Clauses: if for any reason, you want (or need) to get out of the contract without violating any clause and leaving yourself wide open for a lawsuit, make sure you add contingency clauses in your contract.
  2. Time Frame Clauses: always secure a 30-90 day timeframe to close the contract. This will give you enough time to come up with the money, research the market, research the property and research the seller/buyer. If during this timeframe you decide the property is no longer for you, you’re allowed to step away from the contract with no obligation.
  3. And/or assigns Clauses: always, always, always add and/or assigns at the end of your signature. This will allow you to assign the contract to a spouse, family member or renter without being sued by the seller. If you feel like the property is no longer for you, one year down the contract, this clause will give you the right to assign the contract to someone else, so you can walk away without any legal obligations.
  4. Financing Clause: if you add a “subject to financing” or “subject to contractor verifying rehab costs,” you can walk away freely from the property if your contractor doesn’t like the house or if you don’t have the finances to pay for the house. The seller/buyer is not allowed to pursue you in any way.

 


Of course, please check with your attorney before signing any contract for real estate investing, renting or buying. When you’re ready, turn your knowledge into money with EzDealio real estate classifieds.