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Property Investment Exit Strategies

By HopwoodHouse
06 November, 2017


When investing in property, it is very important that you consider all aspects of the investment, and that includes your ability to exit the investment. Firstly, you need to determine what you want to achieve by making your investment and what type of investment you wish to make, and then you need to determine your exit strategy.

An exit strategy typically refers to when you no longer wish to be an active investor and you are looking elsewhere or looking to retire. When you are buying the property outright, keeping the property in your possession until you need the money or until you are going to pass it on is almost certainly the best method. However, when making property investments with mortgages attached, it can sometimes be a little more complex, and so we have compiled a list of the potential exist strategies that you could consider.

Sell your entire portfolio

Selling your property portfolio would be a good exit strategy for if you were looking to retire or if you were looking to try something completely different and were no longer interested in owning property. This would give you the money that you are entitled to, but it would of course mean that you are subject to capital gains tax.

Sell part of your portfolio

A good way of ensuring that you are in a comfortable financial position would be to split your portfolio, where you would sell off a certain amount of your portfolio to pay off other properties within your portfolio. Not only does this mean that your properties will now be under your full outright ownership, but you will also still be able to have a constant income from them for as long as they are occupied and for as long as you want the properties. Providing that you haven’t refinanced, the value of the properties that you sell will almost certainly have increased, whilst the debt that you owe will remain the same. This means that by the time that you come to retire; you may only need to sell one property to pay off any remaining debts.

If you do not wish to sell the property left within your portfolio then changing house prices won’t affect you, and with prices of rent rising in accordance with wages, drops in capital aren’t likely to be an issue for you. If your properties are subject to a rise in valuation, you will need to consider capital gains tax, however this can be controlled by the way that your properties are sold. This strategy can be very effective, although if you do not leave yourself with a diverse enough portfolio, you may leave yourself open to void periods.

Holding your property

Many people think that mortgages aren’t available to people over the age of 60, but this isn’t the whole truth. A residential mortgage may be more difficult to acquire due to the fact that lenders aren’t sure enough that you are going to have an income in order to make the monthly repayments. In comparison, buy to let property investment mortgages are different to this and you would be able to take a loan out for this past 60, and may not even need an exit strategy. If you were to pass away following taking a mortgage, the heirs to your property would need to refinance the property or sell it to pay the inheritance tax that it may be subject to.

Following recent tax changes, more and more people own property through a company, which you are able to do providing that another director of the business has enough income that they are able to guarantee the loan. The only issue with holding your property is that regulations may change in the future meaning that the financial element of your property may be affected in the future, leaving you with less money during your retirement.

Restructuring your portfolio

When looking into an exit strategy, it might be the case that a total restructure, including various exit strategies into one, will be the best avenue to take. You may look to sell part of your portfolio for other investment opportunities, reducing your loans and keeping properties with lower mortgages to keep an income from the properties. To ensure a regular income, it would be good to keep properties that have a stronger yield.

 

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