Looking Down the Road: Exit Strategies For Turnkey Rentals
Whenever you invest in real estate, you should have an exit strategy. An exit strategy is a way out of a deal. Sometimes an investor will get into a real estate investment with a definite exit strategy and timeline already in mind. Other times, life events require the investor to quickly liquidate assets. Before you invest in any real estate, be sure you already know what exit strategies are available to you. Turnkey rentals offer several exit strategies that you can consider.
Why Exit Strategies Matter
Exit strategies matter because no matter what kind of investment you’re in, eventually you may need or want to adjust your portfolio. They’re important because they enable an investor to get out of an investment for any reason. Knowing what your exit strategy options are ahead of time allows you to better understand your risk and your financial position. That knowledge also enables you to maximize future profits; you’ll have a better idea of when to strike your next move or when it’s best to hold.
Exit strategies give you a safety net. Tying up your money is one thing, but being stuck in an investment when you have a cash crisis is something no one wants. Finally, exit strategies offer investors the chance to free up cash in order to take advantage of other investment opportunities.
Turnkey Rental Exit Strategies
There are at least four viable turnkey rental exit strategies:
1. Sell Your Turnkey Rental to a Family
If your turnkey rental is a single-family home, you could probably easily sell it to a family looking for a new home. This exit strategy might reap you the highest returns since homebuyers aren’t interested in cap rates or ROI; they’re interested in building a life. That’s why it often makes sense to purchase turnkey rentals in areas where there is a strong sense of community, where there aren’t a lot of rental properties, where there are job opportunities and where there is an abundance of attractive neighborhood amenities like parks, playgrounds, sidewalks, restaurants and cafes.
Keep in mind that you may need to do additional renovations and vacate your rental property before you put it on the market for sale. Properties that are sold in this way may also sit on the market for 30 days or more.
2. Sell Your Turnkey Rental to an Investor
If you purchased your turnkey rental from a quality turnkey provider, you can bet that it’s in a solid market where other investors are eager to buy. When you need to exit from your investment, you could market your property to another investor. They’ll evaluate things like cap rate and ROI and make you an offer based on their findings. For that reason, you should look at those same indicators when you buy your turnkey rental property. You can find investors who may want to buy on sites like Biggerpockets.com.
3. Refinance your Turnkey Rental Property
If you don’t necessarily want to completely lose your turnkey rental, but you need to generate some cash for something else, you can refinance it. Refinancing at the right time could yield you substantial dollars that you can use to fund another investment or take care of a pressing financial need. In fact, many turnkey rental owners do end up refinancing their investment properties in order to liquidate some equity. Be sure to shop around for your refinancing institution, as rates and terms can vary considerably.
4. Orchestrate a Rent to Own
Another option for exiting out of your turnkey rental property is to sell it as a rent to own. You could offer this to the current tenants, a family member or to the general public. Rent to own deals typically include a large deposit as well as slightly higher than normal rental rates, so you can see a little cash upfront and more cash flow during the deal. If you’re willing to wait a year or two to exit your turnkey rental investment, this might be an option worth considering.
You should always consider the exit strategy possibilities when you invest. As you can see, turnkey rentals offer at least four very easy to implement exit strategies, which serve to minimize your risks as well as add more value to your portfolio. For more information about investing in turnkey rentals, please contact MartelTurnkey.