The sales strategy of your real estate investment business plan is another big section. You really need to focus on that. Ultimately, you have got to be able to sell your properties at a profit. This is your business. You’re going to be buying, maybe holding for awhile, but ultimately have to be able to sell or provide some sort of exit strategy that makes sense.
Buying vs. Flipping
Now if you’re going to be buying a property and holding it, for the most part it’s a strategy that I think makes more sense. Certainly in this economic environment I think it makes a lot more sense. Then your private lenders can hang in there with you for a couple of years for the most part, and you’d allow them to just get payments over time.
Then somewhere down the road, 3, 4, 5, even 10 years down the road, you’d sell the property and you’d pay off your private investor. So part of the sales strategy is how are you going to execute that? Are you going to be buying and holding or are you going to be buying and flipping? You’ve got to be able to lay that out for the investor.
What is Your Selling Strategy?
Are you going to be doing the selling? I would assume that most of the people on this call are not realtors, so the question is going to be, are you going to sell it yourself? Are you going to be hiring professionals to sell it on your behalf, including realtors and going through that process?
You need to make those decisions. You need to think that through as to whether you want to sell it through that mechanism or you’re going to try to sell it yourself.
Decide on a Selling Price
You need to understand how you’re going to price the property. Are you going to price it real aggressive to sell quickly, thereby foregoing some potential profit but trying to sell the property relatively quickly? In this environment, that may be your only option, but hopefully as the real estate market quiets down and kind of gets back to normal you would have some options and you could sometimes price it a little bit more aggressively. You need to think those things through.
Then you need to think through, again, I think we’ve talked about this once, which is the lease option. Are you going to sell it through a lease option, meaning you would offer the tenants or the prospective buyers the option to rent the property for a year or two or three, but ultimately give them the right to purchase the property at some point down the road?