Exit Strategy
The plan for how and when an investor will eventually sell or dispose of an investment property.
Definition
An exit strategy is the investor's plan for how they will eventually monetize or exit a real estate investment. Smart investors identify their exit strategy before they acquire a property — because the exit strategy determines what properties to buy, how to structure financing, and how long to hold.
Common exit strategies include: retail sale (listing on MLS to an owner-occupant), wholesale assignment (assigning the contract to another investor), lease option, 1031 exchange (reinvesting proceeds tax-deferred), seller financing (carrying the note yourself), short-term rental conversion, and long-term hold for passive income.
Having multiple exit strategies for any deal is the mark of a sophisticated investor. A flip investor should know: 'If this doesn't sell quickly, can I rent it? If rents don't cover costs, can I wholesale it?' Flexibility prevents being locked into a losing situation if market conditions shift during your hold period.
Related Terms
Fix and Flip
Buying a distressed property, renovating it, then selling it quickly for a profit.
Buy-and-Hold
An investment strategy of purchasing property and holding it long-term for rental income and appreciation.
Wholesaling
Finding distressed properties, getting them under contract, then selling that contract to another investor for a fee.
Refinance
Replacing an existing loan with a new loan — often to access equity, lower the rate, or change loan terms.
Seller Financing
A transaction where the seller extends credit to the buyer, eliminating the need for a traditional bank loan.
Also in "E"
Earnest Money
A deposit paid by the buyer to demonstrate serious intent — held in escrow until closing.
Equity
The difference between a property's market value and the outstanding balance of all loans against it.
Escrow
A neutral third-party account that holds funds and documents during a real estate transaction.