Real Estate Exit Strategies: A Beginner’s Guide

As a real estate investor, understanding different exit strategies is crucial for maximizing profits and minimizing risk. Each strategy offers unique advantages depending on your goals, capital, risk tolerance, and the condition of the property. Below are the most common real estate exit strategies explained in detail, with implementation steps and helpful tips to get started.

1. Wholesale

What It Is

Wholesaling involves finding a discounted property and putting it under contract, then assigning that contract to another investor for a fee, typically without doing any repairs or purchasing the property yourself. It’s a fast-moving, low-capital strategy ideal for newer investors.

When to Use It

• ✅ When you need quick cash and want to avoid holding properties
• ✅ When you find a distressed property with motivated sellers
• ✅ When you lack the funds for purchasing or renovating

How to Implement

1. Find a motivated seller willing to sell below market value
2. Get the property under contract with assignable terms
3. Market the deal to cash buyers
4. Assign the contract and collect a wholesale fee (often $5K–$30K+)

2. Wholetailing

What It Is

Wholetailing combines elements of wholesaling and fixing-and-flipping. Instead of assigning the contract, you close on the property, make light cosmetic updates (if any), and list it on the MLS to sell to retail buyers. The goal is to capture a larger profit margin without taking on a full renovation project.

When to Use It

• ✅ When the property needs minimal work to appeal to retail buyers
• ✅ When you want higher profits than a traditional wholesale
• ✅ When you have access to short-term funding for the purchase

How to Implement

1. Purchase the property outright (cash or hard money)
2. Make basic updates like cleaning, landscaping, or paint
3. List it on the MLS for a retail price
4. Sell to an owner-occupant or retail buyer for a profit

3. Buy and Hold

What It Is

Buy and hold refers to purchasing rental properties to generate ongoing cash flow while also building equity over time. This strategy focuses on long-term wealth, using tenants to pay down your mortgage while the property appreciates in value.

When to Use It

• ✅ When you're focused on building passive income
• ✅ When the rental market is strong with low vacancy
• ✅ When you want long-term tax advantages and equity growth

How to Implement

1. Find a cash-flowing property in a solid rental market
2. Secure financing (conventional, private, or creative)
3. Rent it out (long-term or short-term rentals)
4. Manage in-house or hire a property manager

4. Fix and Flip

What It Is

Fix and flip involves purchasing a distressed or outdated property, renovating it quickly, and selling it for a profit. It’s ideal for markets with strong buyer demand and where you can add value through repairs or upgrades.

When to Use It

• ✅ When you have access to renovation capital or partners
• ✅ When the local market supports fast sales and appreciation
• ✅ When you're confident estimating rehab costs and timelines

How to Implement

1. Find undervalued properties with good resale potential
2. Estimate ARV (After Repair Value) and repair costs
3. Buy the property below 70% of ARV minus repairs
4. Complete renovations efficiently with a reliable crew
5. List and sell for a profit

5. BRRRR Method (Buy, Rehab, Rent, Refinance, Repeat)

What It Is

The BRRRR strategy allows you to recycle your capital and scale quickly. You buy a distressed rental, rehab it, rent it out, refinance to pull your money back, then repeat with a new deal.

When to Use It

• ✅ When you want to build a rental portfolio with minimal capital
• ✅ When you can increase value through rehab
• ✅ When local lenders allow cash-out refinances on investment properties

How to Implement

1. Buy below market and add value through rehab
2. Stabilize income by renting to long-term tenants
3. Refinance at the new appraised value to pull out equity
4. Repeat the process on your next deal

6. Lease Option (Rent-to-Own)

What It Is

A lease option lets a tenant rent a property with the future option to buy. You generate rental income while also collecting an upfront option fee, and possibly locking in a higher future sale price.

When to Use It

• ✅ When you can’t sell traditionally due to condition or timing
• ✅ When you want higher-than-market rent from tenant-buyers
• ✅ When your buyer pool is limited by financing constraints
  
  

How to Implement

1. Market your property to tenant-buyers
2. Sign a lease and option agreement with non-refundable fee
3. Collect rent for 12–36 months while buyer builds credit
4. If exercised, close sale at predetermined price

7. Seller Financing

What It Is

Seller financing lets a property owner act as the bank, allowing a buyer to make monthly payments directly to them. It’s ideal when traditional financing isn’t an option or when sellers want consistent income over a lump sum.

When to Use It

• ✅ When the seller owns the property free and clear
• ✅ When buyers can’t qualify for bank financing
• ✅ When sellers prefer monthly cash flow over a large sale payout

How to Implement

1. Negotiate terms with the seller (down payment, term, interest)
2. Sign a promissory note and deed of trust or land contract
3. Make monthly payments directly to the seller

8. Novations

What It Is

Novations are hybrid deals where you partner with the seller to fix and list their property, then split profits after it sells retail. The investor covers the repair costs and markets it to end buyers on the MLS.

When to Use It

• ✅ When a seller wants full retail but can’t make repairs
• ✅ When you want access to retail buyers without buying the home yourself
• ✅ When your goal is higher spreads with less capital outlay

How to Implement

1. Sign a novation agreement with the seller
2. Make improvements to the property
3. List and sell the home on the MLS
4. Pay off seller’s loan and split the net profit

9. Subject-To (Sub-To)

What It Is

Subject-To deals involve buying a property “subject to” the existing mortgage staying in place. You take title and start making payments on the seller’s behalf, but the loan remains in their name.

When to Use It

• ✅ When the seller is behind on payments or facing foreclosure
• ✅ When you need long-term financing with low upfront costs
• ✅ When traditional financing is out of reach

How to Implement

1. Negotiate subject-to terms and disclosures
2. Transfer title while keeping loan in place
3. Begin making mortgage payments directly
4. Use the property as a rental, flip, or BRRRR

10. Listing on the MLS

What It Is

Listing on the MLS is the traditional method of selling a property with a licensed real estate agent. It provides broad exposure to end buyers and typically yields the highest sale prices, although it comes with commissions and longer timelines.

When to Use It

• ✅ When the property is in good condition or recently rehabbed
• ✅ When you're looking to maximize sales price
• ✅ When time is not a pressing concern

How to Implement

1. Hire a local agent familiar with investor-friendly deals
2. Set a competitive price and prepare the home for showings
3. Market via photos, signs, and MLS exposure
4. Accept the best offer and close traditionally

Summary

Choosing the right exit strategy depends on your capital, experience level, and market conditions. New investors often start with wholesaling or wholetailing for quick cash flow, while experienced investors build wealth through buy-and-hold, BRRRR, or creative financing methods. Understanding each strategy allows you to adapt to different deals, reduce risk, and maximize your long-term returns.