Something has Gone Wrong With Every Home I Have Purchased….and Have an Exit Strategy!!

Yes, you read that title correctly.  Something has gone wrong with everyone investment that I have made and funny enough, there were warning signs for every problem.  Does this mean I panicked and sold the property?  No, but sometimes I do think about that.  Actually, not a month goes by when I don’t consider selling all of my assets, but I have committed myself to the long haul here and I need to stick with it.

What does this mean for my future investments?  Heed the signs, but don’t think that every investment is going to be perfect.

As always, make sure you are doing due diligence.  It is important to know what you are getting into and have a plan for some of the ‘foreseeable’ issues that are typical of the type of investment you are looking at.

For real estate, I am a firm believer that it is important to have an exit strategy BEFORE making a purchase.  This strategy can change from time to time, but having something in place is very important.

My student rental is one example.  I purchased this property in 2009 and since then, the investment landscape in Kitchener/Waterloo has gone through several changes and fluctuations.  The recent implementation of licensing fees and new regulations for lodging houses has affected me somewhat, but not to the point that I cannot deal with it.  Luckily, 5 bedroom lodging houses were grandfathered into the rental system (going forward, 3 bedrooms is the maximum) so I’m thinking that my property will actually increase in value….once the storm cloud raises around this licensing debacle.  To read more on what changes took place, click HERE.

I personally think it will take a year or two for this licensing issue to ‘blow over’ and KW will start looking like a positive place to invest again, but I digress….back to my exit strategy!

I have 3 separate exit strategies in place for this property.

1.       Keep it as a student rental and sell it as a student rental - My plan here would be to rent it out and sell it several months before the lease is up.  For example, I would sell it in November or December with a lease that runs until April 30^th.  That way, I am offering a “turn-key” investment with tenants already in place that will cash flow for 5 or 6 months before the new owner will have to think about getting new tenants.  No worries about vacancy = simple investment!!

2.       Sell it as a single family home – This house is in a great area and is near schools, shopping, churches and other amenities.  I could always put a little money into renovations and flip it to a family.

3.       Rent to own – As I have mentioned, I do have a couple of rent-to-own properties and this is one way I could keep good cash flow and have a predetermined selling price 2 or 3 years in the future.   Again, I would have to put in some money towards renovations, but this would just be cosmetic.

All of these are options and who knows…I might just keep it forever! J But the most important thing here is to have options.  Life throws curve balls constantly and if the need arose to sell this property, at least I have done some planning ahead of time!

What do you think?  Keep, sell as a rental, sell to a family, RTO?