Our goal is a long term real estate investment but sometimes life has other plans. The type of investment we make in real estate lasts from five to ten years. While we may have a plan and have a vision for what the next five to ten years of our lives may look like, we all know that unexpected things happen. So what happens if an individual needs out of a deal early? Is there anything they can do?
First, I aim to be as upfront and open about everything as possible before we venture into business together. Yes, we are the ones doing all of the hands-on work, but you as an investor will be fully informed of everything as the process goes on. This is how you build a trusting and successful partnership for the long term. Once the main deal is done, a tenant has moved in and we’re receiving positive cash flow each month, quarterly reports ensure everyone knows exactly what is going on with the property, including how much it’s worth and what has been paid down so far.
If for some reason you need out of the deal, we as your partners can buy you out. Exiting the deal early may mean that you take a loss on your initial investment since there hasn’t been enough time to build appreciation and pay down the mortgage. This may or may not be the case depending on how long the partnership has been in place for and what the current market situation is. It would be entirely dependent on the specific situation since there is no way to give a blanket answer for something that has so many variables. It’s obviously not an ideal situation if you needed out early and had to take a loss, but understanding that life can throw you curveballs, it’s an option that is available should the need arise.
Another option that can be explored is having another investor person buy you out. The investor would have to be a good match for the deal, but it’s an arrangement that can be facilitated with the assistance of a legal team on both sides. If you have an interested party and they seem like they would be a good fit for what we’re trying to accomplish then this is definitely a viable possibility. Again, how the process would work would be completely dependent on the initial deal but it’s nothing that couldn’t be sorted out with legal assistance. This is why we ensure we’re very clear with our initial partnership agreement so that both parties are covered should any unexpected situations emerge.
A partnership is only successful when both parties are well informed of what to expect and are both in it for the same goals. When we enter a partnership with someone, the intent is that both parties are in it for the long haul to build appreciation and pay down the mortgage while receiving monthly cash flow from tenants. Buying the property, renovating, finding a tenant and letting it build value over the course of five to ten years is the optimal plan. The longer a property appreciates the bigger the end payout is for both parties. That being said, we all know that situations come up that we didn’t or couldn’t prepare for. That’s life. This is why there are options available should an individual need to exit the deal early.
Investing in real estate is a large investment that can yield impressive returns and help build long term wealth. It’s not something that you jump into with a partner without knowing there are options available should the unforeseeable happen. Our goal is to mitigate risk and having alternatives available should someone need out of the deal early is just one way that we try to offset the unknown. Being as prepared as possible, even for things we don’t anticipate, is what helps protect both partners. Having an exit strategy – even if that exit occurs early – is one of those things that exists to give peace of mind and offer solutions for the unexpected.
Are you seriously researching a partnership opportunity in real estate? Let us know your questions at info@artolinvestments.com
