Many investors neglect the exit aspect.
The investor should already start considering when and how to make an exit at the time of acquiring the property.
Exit of Private Investors
Even if private investors are long-term investors, they at least need to give some thought to the exit strategy aspect. The exit strategy is a must for professional investors.
Steady appreciation and sustainable leasing capacity give cost-conscious private investors the impression that risk management and exit strategies are superfluous planning instruments that only occasion costs.
Various reasons may induce private investors to sell, such as:
- Property-based reasons
- Investment alternatives with better yield prospects
- Property fatigue (administrative expense, tenants’ complaints, failure on the part of tenants to look after rental properties, change in tenant structure etc.)
- Life cycle of the property
- Pressure to sell by the lending bank
- Non-property based reasons
- Family reasons
- Succession (descendants want to use real estate asset for their own interests)
- Liquidity pressure to cover the company’s loss
In the case of private investors the sudden need to exit is usually accompanied by the following paralysing contributory factors:
- Failure to monitor the property market and a sobering reality check
- Selling price is oriented toward the purchase price, plus investments that increase the value of the property
- Land taxes reduce revenue
Exit of Professional Investors
Professional investors usually address the following points in an exit strategy: