An exit strategy should always be part of your property investment plans – for each individual property – regardless of your age. That’s because, when you have worked out your ideal exit strategy, you’ll know exactly when to sell up, happy in the knowledge that you have enough money to enjoy the lifestyle you’ve spent your life working for. Having an exit strategy should also mean that in the event of a possible recession, you’ll be able to sell quickly without taking too much of a financial hit to the profits you’ve made through your property business.
Have more than one exit strategy.
But it’s not necessarily a good idea just to have one exit strategy. Life has a way of throwing a curveball at us every now and again. So, you may have a preferred exit strategy ready to put into action when the time is right, but it’s always good to have a few others up your sleeve too. This way you not only mitigate the risk of losing money, but you will also end up with at least one good exit strategy to deal with whatever situation comes your way. And that can save on an awful lot of sleepless nights.
A selection of property exit strategies
So, what are some of the different types of exit strategy out there and which type would suit your planned needs best? Here is a rundown of some of a few of the most popular exit strategies currently in use by property investors and landlords in the UK today:
- Capital value. Perhaps you plan on selling once the property you’ve purchased has gained so much money (equity) that it’s reached a certain value. At which point, you may then buy another two less expensive properties and build up your property empire accordingly. This is also a good retirement strategy, where you can sell one or two properties to pay off the remaining mortgages on the others (depending on how big your portfolio is) and live on the rental income from those mortgage-free properties.
- This is the type of exit strategy that landlords a decade or two from retiral tend to opt for. They will aim to acquire as much equity as possible in their buy to let flats or houses, so that once they do retire they can sell the lot and use it as the major part of their pension fund (or to reinvest in ‘hands-off’ property strategies) and they don’t have to worry about servicing tenants anymore. The properties don’t have to be sold off all at once (that would prove quite an effort) but could be sold individually over a number of years.
- Focus on yield. Quite a few property investors we know use this type of exit strategy, which involves selling a property when its yield falls below a certain level. This means you’re unlikely to lose money on a property (because you’re getting out while it is still profitable – just). But it does make it difficult to predict the future i.e. that yield could remain good for an entire decade or it could fall in a few months’ time. In other words, this exit strategy very much relies on the state of the property market at any given time.