end lease exit strategy (by Don H [MO]) Apr 12, 2018 11:57 AM
end lease exit strategy (by Patrick [VA]) Apr 12, 2018 12:15 PM
end lease exit strategy (by S i d [MO]) Apr 12, 2018 1:45 PM
end lease exit strategy (by plenty [MO]) Apr 12, 2018 3:32 PM
end lease exit strategy (by NE [PA]) Apr 12, 2018 3:35 PM
end lease exit strategy (by RB [MI]) Apr 12, 2018 4:53 PM
end lease exit strategy (by Deanna [TX]) Apr 12, 2018 8:15 PM
end lease exit strategy (by NC INVESTOR [NC]) Apr 12, 2018 11:37 PM
end lease exit strategy (by Don H [MO]) Posted on: Apr 12, 2018 11:57 AM Message:
While I have read may blogs and attended REIAs about how to start in the rental business, I have never seen anything comprehensive on exit strategy. At end of lease, when I am not willing to renew the lease and plan on selling, some items to be positioned for are:
1. Being prepared for the bad tenant who likely will not pay last months rent and may want to go to court over any security deposit no returned. Lawyer representation is $400 for LLC.
2. Being positioned beforehand, for buyer's inspections, as well as municipal inspections. How to address buyers wish list resultant from his inspection(s).
3. Minimizing the cost of addressing any lack of electrical, plumbing or building permits which the prior owner may not have acquired.
4. Minimizing the the time it takes to bring the property up to snuff for sale.
5. Minimizing tax consequences of additional income from sale.
6. Mitigating the possibility of any buyer being able to come back at the seller after closing.
7. Other known unknowns...
--162.229.xx.xxx |
end lease exit strategy (by Patrick [VA]) Posted on: Apr 12, 2018 12:15 PM Message:
As for Item 1, let your lease help you with the bad tenant. My lease spells out I will inspect a minimum of once a month, inside and out. I also address safety and city codes and compliance. If the house is trashed, I will send a crew and clean it at their expense. Since fines and fees get applied before rent, if their rent isnt covered on the first, I am at the courthouse on the 2nd.
Often times, just doing the inspections is enough. For many, if they know you are inspecting, they will never let it get that bad. --70.184.xxx.xx |
end lease exit strategy (by S i d [MO]) Posted on: Apr 12, 2018 1:45 PM Message:
Is this an exit LEASE strategy or an exit LANDLORDING strategy? It's not clear since some questions apply to each distinct scenario.
Are your properties "rentals" or possible owner-occupied candidates? I think that's a big thing there.
Land lords often sell to other investors, so you don't have to worry about bringing the property up to snuff. Investor will probably do it anyway. Unless you're selling to a newbie who wants a turnkey rental.
Personally, I don't ever plan to cash out entirely. I may sell some and 1031 exchange in to nicer ones, but just liquidate? Probably not. The capitals gains taxes and depreciation recovery would be a huge ouch, and debt free these little ATMs will throw off plenty of cash. I plan to leave them to my heirs on a stepped up basis and hopefully tax laws won't change so I can truly avoid one of the great inevitable when I die.
Why don't they address this? I dunno. There's an old saying to "begin with the end in mind." Probably the majority of would-be investors are more concerned with getting started vs. asking where they are headed long-term. --173.17.xx.xx |
end lease exit strategy (by plenty [MO]) Posted on: Apr 12, 2018 3:32 PM Message:
Awesome questions! We should talk about these events. Perhaps even at a round table at the Convention... You got a ticket? I'll save you a seat! --99.203.xx.xxx |
end lease exit strategy (by NE [PA]) Posted on: Apr 12, 2018 3:35 PM Message:
Don't be so worried on how to get out that you never get in. --174.201.xx.xxx |
end lease exit strategy (by RB [MI]) Posted on: Apr 12, 2018 4:53 PM Message:
Ancient Chinese Secret.
You will know, when you get there. --47.35.xx.xx |
end lease exit strategy (by Deanna [TX]) Posted on: Apr 12, 2018 8:15 PM Message:
If a bad tenant who doesn't pay the last month's rent makes you want to sell----!!! :) Ya gotta be made of sterner stuff. :)
Generallly, you think about selling when a lump sum is more valuable than a steady flow of lesser income. In some markets, it means to liquidate lesser properties and reinvest the money into superior properties. In other markets, it means buy-and-hold until retirement... or beyond.
But your reasons for exiting the biz will dictate the most sensible way in which to exit. For someone in a growth phase, their priorities will be different from someone who is considering a permanent exit from the biz. --166.137.xxx.xxx |
end lease exit strategy (by NC INVESTOR [NC]) Posted on: Apr 12, 2018 11:37 PM Message:
Q1: Welcome to the wonderful world of being a landlord. It's not a question of "if" it is a matter of "when" and how often. If you want to minimize the number of times it occurs I recommend you read this site often. Most on here are experienced LL's and some for many years...and we are all still learning from one another.
Q2: As a Realtor I always insist on a pre-sale inspection. I don't like surprises. Once you know what is going to come up you either fix the issues that most buyers will demand or you price the property accordingly.
Q3: While inspections are important before selling they are crucial before buying. Homeowners buy on aesthetics investors buy on value and potential returns. I can always fix how it looks as long as it is structurally sound. It also depends on your business plan. Some like low cost cash cows others want Class A for higher rents and greater appreciation albeit higher expenses.
Q4: Depends on how well you've maintained it. I'm selling some properties and doing major upgrades before putting them on the market. It's taking 2 to 3 weeks. It requires diligent pre-planning, staying on top of contractors and remembering that time is money.
Q5: Hire a good CPA experienced in real estate investments. Talk to a tax attorney also familiar with RE investments. Let them setup your books from the outset. What many fail to realize is if you are allowed to depreciate and don't you will still have to pay recapture depreciation when you sell. So you might as well take advantage of it.
Q6: Very few things can legally survive closing. The reasons sellers are sued after closing are misrepresentation, failure to disclose and duplicity/self dealing. And most of those issues are completely avoidable if they have an experienced, ethical agent representing their best interests. Sadly, many do not.
My one rule on exit strategy is never, never ever sell to an investor unless you like discounting your assets.
--71.75.xx.xx |
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