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exit strategy planning

What is an exit strategy in the context of property investing?

An exit strategy in property investing refers to the predetermined plan or method by which an investor intends to sell or dispose of a property investment to realise a capital gain or mitigate losses. The exit strategy serves as a guideline for navigating various market conditions and achieving desired financial goals over time. It’s essential for your exit strategy to be considered before you’ve decided on which property to purchase. This way, you ensure the property type suits your objectives and exit strategy. 

Common exit strategies include selling the property outright, refinancing to access equity, leasing or renting for ongoing income, or implementing value-adding renovations to increase the property’s market value. The choice of exit strategy is influenced by factors such as market trends, economic conditions, investment objectives, and individual risk tolerance. Developing a clear and flexible exit strategy is essential for property investors to effectively manage their investments and optimise returns in both favourable and challenging market environments.

Factors influencing a property exit strategy

Your exit strategy will be shaped by three main factors.

Property investment objectives

Before purchasing a property, you need to decide if you’re aiming for capital growth (either short or long-term), or if your priority is on regular rental income, influencing a buy-and-hold strategy. Whether you’re looking to fix and flip a property fast or buy and hold for rental income will help dictate your exit strategy. 

Property investment horizon

Your exit strategy will be heavily influenced by your investment timeline. If you’re considering a shorter timeframe, you’ll likely be looking into strategies that can provide higher returns in a short period of time — for example, purchasing a property that needs a lot of work, fixing it up and then selling it. For a longer-term approach, you might consider investing in rental properties that provide steady income over many years.

Risk tolerance

Your comfort level with risk will also impact your exit strategy. If you’re risk-averse, you may prefer a strategy focusing on long-term rental income from properties in established markets. Conversely, if you’re open to higher risk for potentially higher returns, you might opt for a strategy involving buying and selling properties in emerging markets.

How do NDIS investment properties fit into an exit strategy?

An exit strategy for an NDIS SDA investment property would typically align with a long-term property investment approach focused on rental income. This is because these types of properties are generally cash flow positive, generating a strong rental yield compared to regular residential property. 

Property investors often opt to hold onto these SDA properties for the foreseeable future, due to the fact that the property is eligible for additional SDA payments for 20 years after SDA enrolment. Property investors objective for NDIS investment properties often to generate positive cash flow and potential capital appreciation. 

The exit strategy for NDIS SDA properties would likely involve continuing to rent out the property to eligible tenants under the NDIS scheme, holding for the medium to long-term. However, it’s important to note that SDA property investments may also fit into alternate exit strategies. It is essential to seek advice specific to your circumstances when deciding if an investment property is right for you. 

Crafting an effective exit strategy is essential when investing in property. While factors such as investment objectives, timeline, and risk tolerance shape the choice of exit strategy, it’s essential to consider the unique dynamics of each property investment opportunity. Navigating the complexities of property investing, especially in niche sectors like NDIS SDA properties, requires expertise and tailored finance solutions. At NDIS Loan Experts, we’re dedicated to helping investors through the intricacies of property investment in the NDIS space. Contact us today to discuss how we can support your investment journey.

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