EXIT STRATEGY

How do you know when it is time for you to sell or trade up?

INVESTMENT GOALS, DO YOU HAVE THEM?

• Crazy as it may sound, most investors drive blind. • They don’t have investment goals• They don’t have a monthly or annual review of their investments• They don’t have an investment strategy.

• The reason this is critical to your exit strategy, is because you need to know where and when you are going to get off the investment highway.

WHAT ARE YOUR INVESTMENT GOALS?

• Retirement: How do you know if you have enough?• It is different for all of us• Time line?

• So I don’t have to work - Rich Dad Poor Dad

• Build a real estate empire

• Other goals • Vacation, immigration, speculation, for kids or grand kids

TACTICS I CAN USE TO BUILD MY REAL ESTATE EMPIRE

• Sell and buy more

• Refinance and buy more real estate

• Should all of my real estate assets be free and clear?

• Buy low sell high?

• When you have cash.. do you buy more real estate?

NET SHEET – WHAT IS IT REALLY COSTING YOU, WHEN YOU SELL AND

BUY ANOTHER PROPERTY?

• Accounting is important- the back of a napkin does not cut it ...

HOW OLD ARE YOU?

30, 40, 50 60,70 years old?

• Do you have the same energy or risk tolerance you had 10 years ago?

• Can you handle the management hassles? The constantly changing laws? If so… • Then keep buying more real estate

DO YOU REALLY KNOW HOW MUCH YOUR REAL ESTATE INVESTMENTS ARE WORTH?

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100%

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• Real estate investors need to annually inspect their properties and review their investment portfolio?

• Real estate investors should keep a schedule of annual value of their real estate investments.

• This is easier if you have a separate checkbooks for each property and don’t mix your personal expenses with your business expenses.

• Do you really know what your property is costing you ?

• How are you valuing your sweat equity?

DO YOU REALLY KNOW HOW MUCH YOUR REAL ESTATE INVESTMENTS ARE WORTH… so you can plan your exit ?

INVESTORS SHOULD REVIEW THE MARKETPLACE ON AN ANNUAL BASIS

• To check on rents • Compare expenses• Understand what other like properties are selling for • Talk to appraisers and real estate sales people to get the

pulse of the marketplace• Ask them about the demand for similar properties in the

market place• Understand current interest rates and lending terms for

your properties• Understanding current economic conditions

NOW THAT YOU ARE UPDATED IN THE MARKET PLACE AND KNOW WHAT

YOUR PROPERTY IS WORTH• How much equity do you have?

• Can you refinance and take some money to buy more real estate? ( 70% bank equity rule)

• If you buy again the biggest challenge is finding a profitable up-leg for your 1031 exchange, that meets your exit strategy plans

WHAT ARE EXIT OPTIONS?

Where do you take your money? That depends on how you want to use the money you  will be receiving.

Some of your options are to: • Take the cash• Trade/1031 exchange or pay taxes• Sell your properties and carry the paper• Sell your high maintenance properties and purchase:

• NNN properties ( easier to manager)• TIC investments

• Money to kids.. Grand kids• Trusts – Generation skipping trusts – trusts in perpetuity• Manage your empire from the grave

• Charitable giving – gift annuity - 10 or 20 years• Gift the properties to a foundation or a charitable institution ( Like Phil Knight or Joe Weston)

WHAT ARE MY EXIT OPTIONS?

• See your very creative banker or insurance investments advisor to trade into a real estate related annuity.

• Tax impacts if you decide to hold your cash –

• Federal – 23.8% Capital Gains

• State – 9% Capital Gains• Depreciation recapture – 25% of the Depreciation you have

written off

• Fine Print – please review with your CPA who has real estate experience

 

SUMMARY

• There is no “one size fits all” exit plan

• You need to customize your plan

• You need to review annually with your advisors (Real estate agent, Property Manager, CPA, significant other)

• You need to be willing to change direction

• And if you don’t have a plan, don’t feel bad, you can develop your plan today

• If you want advice.. it won’t be free .. you can call me to help you create a direction.

Does somebody want to be the guinea pig to discuss their long term investment and exit

strategies??