Written by Annette Densham, Chief Storyteller
Multi-award-winning PR specialist Annette Densham is considered the go-to for all things business storytelling, award submission writing, and assisting business leaders in establishing themselves as authorities in their field.
“Wait, what? We’re in a buyer’s market?” Whenever Moxin Reza from Investor Partner Group tells his new clients this, they’re shocked. After all, the mortgage rate is peaking at over 8%, and affordability is at an all-time low. Acquiring property feels more difficult than it ever has.
While the buying conditions may be challenging, there are more properties than buyers, which gives buyers more negotiation power. So yes, technically, we’re in a buyer’s market.
As difficult as it might be to break into property ownership right now, getting out (or planning how you would get out) is just as important, according to Mox. An exit strategy goes hand in hand with buying property, and it can actually grow your portfolio faster by giving you more equity.
First, what is an exit strategy, actually?
What’s an exit strategy (and why you need one before you buy)?
Mox explains: “An exit strategy is your plan for removing yourself from a deal or cashing out an investment. It means putting the resources in place so that the option to divest is available. It’s an essential step in the investment process because it safeguards your gains and minimises losses.”
Having a clear and practical exit plan from the beginning helps investors align their investment goals with how long they plan to hold the property and the current market conditions.
Sell, flip, refinance: The most common exit strategies explained
Selling is the obvious exit strategy, and there are two ways an investor can do it.
The long-term hold-and-sell strategy relies on the value of a property increasing over time and selling it at a profit. However, this may not be enough because it depends on property prices rising more than inflation.
The second approach is a hold-and-flip strategy. This involves drastically increasing the market value of the property in a short space of time (by renovating, for example) and then selling the house at a profit. Your profit must cover the time and expenses you invest in increasing the property’s value.
While refinancing isn’t a direct exit, it enables an investor to access equity without losing the property. By taking out a loan against the value of the property, investors can pay off the existing loan while getting better interest rates. This option is ideal for investors who want to fund new investments or improve cash flow without exiting ownership.
Seller financing is an exit strategy that helps investors who are struggling to sell, especially in the current economic climate when affordability is one of the biggest obstacles for buyers. This involves the seller providing the buyer with the financing. It means the monthly repayments go to the seller, who also benefits from the interest that the bank would have earned. While it requires background checks and affordability investigations into the buyer, it can be a powerful win-win solution.
The art of the exit: Timing it right for maximum profit
Timing an exit well plays a crucial role in determining the outcome of your investment. How your investment has been performing, alongside current market trends, will dictate the best time to exit.
Investors will also gain more from an exit by putting effort into the property, ensuring its maintenance is up to date and its visual appeal is high.
Market volatility and consumer demand will help determine whether it’s a good time to divest. Sometimes, waiting for a shift in the market is worthwhile.
Consider the tax implications. Different exit strategies will have different tax requirements. Sometimes, these can “make or break” your investment plans. Capital gains tax is the big one to look into. Choosing the perfect exit strategy relies heavily on every external factor, including tax.
Every property move needs a plan
Mox says that going into an investment with a clear strategy for multiple exit pathways is a bit like having insurance; it’s a safeguard. “A good investment strategy will align investment goals with market conditions, and this includes knowing when to exit the market,” he says. A good property investment expert can make the entire journey a stress-free learning experience with a lucrative outcome.
Annette Densham, Chief Storyteller Multi-award-winning PR specialist Annette Densham is considered the go-to for all things business storytelling, award submission writing, and assisting business leaders in establishing themselves as authorities in their field. She has shared her insights into storytelling, media, and business across Australia, UK, and the US speaking for Professional Speakers Association, Stevie Awards, Queensland Government, and many more. Three times winner of the Grand Stevie Award for Women in Business, gold Stevie International Business Award, and a finalist in Australian Small Business Champion awards, Annette audaciously challenges anyone in small business to cast aside modesty, embrace their genius and share their stories.
