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Have Multiple Exit Strategies

Analyzing Deals, Podcasts

So I just got done listening to Episode 358 of the BiggerPockets Real Estate podcast. And as always, some great nuggets from this podcast.

They’re talking about multiple ways that you can invest in real estate in today’s market as of November 2019 of the podcast. However, most of the strategies they talked about were things I was familiar with, such as the BRRRR method or using other people’s money.

But one nugget that I took away from here that I think is beneficial is the idea that no matter what property you look to purchase, make sure you have multiple exit strategies.

What they meant by this is that when you purchase a property, you’re not just buying and putting all your eggs into the traditional rental income bucket, the flip bucket, or the Airbnb rental bucket.

They argued that you should buy a house, make sure the numbers work, and make sure the numbers work even if you have to switch plans midway through the process.

One thing that I know scares me, as somebody who has yet to purchase a home and is still in the analysis paralysis phase of this, is the idea of getting stuck with a property that, after running the numbers, the market would crash, and my numbers don’t work.

Their counterargument is that if you run the numbers and run them in a way that considers other ways to utilize the property, you will set yourself up to be safe.

For example, if you’re planning to flip a property and the value of the neighborhood plummets, have a backup strategy to rent it out for a while until the market rebounds. Or if you’re looking to buy a long-term rental property using the BRRRR method, do so in a way that after fixing up the property, you would have enough wiggle room to refinance or sell even if the property value would drop by 10%, 20%, or even 30%.

Additionally, they talked about making sure that you’re trying to find the highest and best use of it whenever you look at a property. And looking at it from the aspect of what can I do this property, make sure I am going to maximize the value and the income I can get from it.

And with the mindset of having more options and multiple exit strategies, I can look to add value and look to ways to cover my back if something happens to the market or my financial situation.

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