Why is it important to have an exit strategy for your investment property?

Exit Strategy in Investment

Why is it important to have an exit strategy for your investment property?

Posted on April 18, 2018 by Mirren Property Investment

If you started a business, you’d have an exit strategy. When people buy shares, they have their exit strategy already figured out. It’s smart and practical.

The same applies to your investment property. One of the important factors is having a good financial strategy that includes how, when and why to sell your investment property.

What is an exit strategy?

The reason you invest in property is to make a profit. But sometimes things don’t work out quite the way you’d hoped. An exit strategy is a plan to help you determine the optimal time to sell the property so that you sell at a profit and minimise any losses.

Some exit strategies for an investment property include selling the property or changing the loan structure. You could also keep the property to pass on to your children or just receive capital growth and rental income.

Why do I need an exit strategy?

If there was a hike in interest rates, could you afford to repay your mortgage? If you were made redundant at work, or you retired could you afford to repay your mortgage? If your personal situation changed, how would that affect your financial situation?

An exit strategy will determine when the best time is to sell your investment property and how to do it.

Why do I need financial goals?

As with any investment, it’s crucial to know what your end goal is. Why are you investing? What do you hope to achieve? What are the results you’re looking for?

Clear goals will help guide you to make good financial decisions. Once you’ve determined your goals, you can move onto the next phase of setting out a plan on how to achieve these goals.

So when should I think about an exit strategy?

You might think you don’t need to think about an exit strategy until you want to sell the property. But how do you know when that is?

The best time to plan your exit strategy is when you first look at investing. Here’s where your goals come into play. If you know what you are trying to achieve with your property investment, you can determine what the key milestones are and then know when you achieve them.

Understanding the Property Value

Mirren’s Rene Marzinger says “You need to understand that your property has certain values; tax values, capital growth values and rental income.

“With new properties, the longer you hold the property the less tax benefits there are.”

And we know these values change with time and you need to be aware of what affect that has on your property investment strategy.

Optimal Time

With any property investment, you need to determine where the optimal intersection between tax value, capital growth, and rental income is. Optimal Time

“The optimal point for sale is where the lines meet, that is the point to decide to sell replace or do something else.” says Rene.

“At Mirren, we also impose the property growth cycle of each suburb on this to make the decision even more accurate.”

“With an exit strategy in place, you will know in advance where that point is and how to position ourselves to execute the exit strategy.”

No emotions needed here

It is important to remember that investing in property is a financial decision. Too many people buy and sell property based on emotion, without doing proper research.

An exit strategy, combined with good financial goals and plans will ensure that you’re making the right decisions at the right time.

Where do I start?
As with anything, it pays to do your research. Or meet with a team like Mirren who understand the market and property investment at a very deep level.

And their advice is simple. Create a plan, stick to the plan, know your goals, create a buffer for emergencies and think ahead!

Don’t forget to review!
Reviewing your financial goals and plans regularly just makes sense.

And check that your goals are still the same and you’re headed in the right direction. Check that your exit strategy is still sound will ensure that you’re on track to financial security.

Are you ready?
Don’t delay – request your free consultation today! Positively geared properties are only a phone call away.

Are you ready to pay off your home sooner and achieve financial success through property investment?

Call Mirren today.

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