What is your exit strategy? | Twelve Grains Capital

Hi! David here! I’m sure you’ve heard the saying “start with the end in mind”. Often, property investors fail to realise how important it is to have an exit strategy. Not only will it provide investors with action plan, but it will also minimise forthcoming risks. Failing to do so might reduce profitability and increase risk at the same time. But what are the most common exit strategies that real estate investors follow? Read more below!

Here are some examples of exit strategies that work:

✅ Land bank loan — client purchased another block of land while working on current development. With proceed of sale from this project, client was able to pay down the land bank loan.

✅ Equity release loan — client took out an urgent 12-month term loan from a private lender against his commercial property to pay out a business partner. The loan was refinanced to a mainstream bank in less than 6 months for lower repayment, and current lender was paid out in full before expiry.

✅ Development loan — client took out a private development finance to build 10 townhouses to hold. As private lenders only provide short term solution, once the project is completed and properties are tenanted, client was able to refinance to a bank for longer term loan with lower repayment.

Here are some examples that don’t work:

❌ Client is looking to build a 400-unit apartment in Tasmania without pre-sale in the hope that they would sell all once they’re built.

❌ Client is looking to cash out against their property to invest in cryptocurrency in the hope that it’ll go up in value and they’d repay the loan from crypto sale.

❌ Client is looking to cash out against his property to start a new business in the hope that the business would turn a profit within a year to pay down the loan.

So before you take out any loan in the future, just remember the conversation always needs to cover the exit strategy in detail!

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