When purchasing real estate, it’s important to have an exit strategy in the plan for the investment. This is especially important when choosing a private lender to help fund the purchase and rehab of the project as well. Is this a property you want to flip fast, or are you looking to hold the property as a rental and refinance with a conventional lender? These are the questions your lender will want to know.
What is an exit strategy?
An exit strategy is how you plan to pay back your loan at the end of the agreed upon term. It’s basically how you will get out, or exit, from the investment property, earn your return on investment (hopefully) and pay back the loan. With a sound exit strategy in your plan before you purchase the property you will be able to prevent any losses, or at least keep those to a minimum.
The Fix and Flip Exit Strategy
With this exit strategy the intent is to purchase a house that needs repairs, complete the renovations and relist the home on the market for a profit. This method typically produces the fastest short-term profits for investors, who want to then repay the loan and move on to another property to flip.
The Fix and Lease Exit Strategy
Fixing and leasing a property means that you are typically planning on refinancing the property to a conventional lender and holding the property as a rental unit. If you plan to refinance the property you will need to have stronger credit scores than a fix and flip project. Typically for a fix and lease scenario, RCN Capital will look at investors with a 650 credit score or higher. Your credit score needs to show your ability to secure another loan by the end of the term.
Do Your Homework!
It’s important to know what you are going to do with a property before you buy it. So do your homework! Experienced real estate investors also have a backup plan or a “Plan B” in their pockets as well. Having more than one exit strategy gives you options and doing your homework before investing shows you those options. Before you invest do your homework. Plan your exit.
As a direct private lender, RCN Capital is here to help you fund your next fix and flip or fix and lease property. Our experienced loan officers and in-house underwriting help the process run smoothly and quickly.
For more information on how RCN can help you, visit RCNCapital.com
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