Exit Strategy for Buy and Hold Real Estate Investors
Most investors today are Buy and Hold Real Estate Investors and for good reason! Market conditions are ripe for great cash flow and future appreciation. Investors today can be comforted in knowing their investments will gain great increase in value as the market conditions improve. While markets are rebounding, you will see your asset sheet grow and your balance sheet grow as well for years to come. Fast forward 5 to 10 years, you have made great cash flow and your values have risen.
Within 10 years you probably saw your property value double. What is your next step?
The purposeful Buy and Hold investor knows that the properly executed exit strategy is paramount to capitalizing on the investment. As a purposeful Buy and Hold investor you will want to hold your investment as long as it makes sense to hold. You will want to watch market conditions so you can sell at a time when it is best positioned to give the highest returns.
Here are things you will want to watch for:
- Time on market: when the average time on the market for listed real estate for sale hits 30 days or less, suggests a peak sellers’ market
- Building activity has reached a peak
- Jobs are plentiful but showing signs of a slowdown
- Population growth is slowing down
There are a number of things you can watch for to determine when it is the optimal time to sell, many of these things require deeper diligence and an eagle eye on the economy. Looking deep to forecast where the market is heading is the edge that the seasoned investor holds.
Considering exit strategy, everyone knows you should "buy low and sell high" yet most people do the opposite. Most people follow what the masses are doing. Of course the masses tend to get caught up in the hype during the peak of a seller’s market everyone tends to get caught up in bidding wars and therefore prices rise beyond values. The non-seasoned investors are fearful that they may lose out by waiting so they buy. (Buy at a time they should be selling.)
The seasoned investor knows that what follows a seller’s market is a decline swinging down toward a buyer’s market. This is the time to sell your currant investment property and reposition to the next emerging market.
A Buy and Hold strategy is the best way to mass a fortune in real estate. This does not mean you need to hold one property for many years. You want to hold a property for a number of years until market conditions suggest to sell and reposition to the next emerging market.
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