You’ve purchased your investment property. You’ve put money and hard work into renovating the property. Now what? Exit strategies are not one size fits all; they must be customized to fit each individual situation. While it’s important to have an exit strategy before you purchase a property, fluctuations in the market and your own financial circumstances may occasionally force you to change that strategy later on. Here are a few tips for how to match the right exit strategy to the right project.

1. Be aware of how much your property actually costs to maintain. Calculate the monthly costs of holding onto the property; this includes upkeep, property taxes, and mortgage payments. Rental income can offset these costs, allowing you to hold on to the property longer and potentially maximize your profits. However, if the maintenance costs outweigh the benefits of holding on to the property, then it’s time to sell the property.
2. Keep an eye on current interest rates. If you routinely invest in real estate, you should follow mortgage rate trends in your area. Refinancing can allow you to hold on to properties until you are able to get the maximum return on investment (ROI) or as a long-term income-producing property by reducing your financial obligations. Be aware whether the financing you are obtaining is a fixed rate or a floating rate.
3. Determine the goal of your investment.   Are you purchasing the property as a fix and flip? If the answer is yes, you likely want to sell quickly to get cash to buy the next property. Another strategy is to decide that you want to hold on to the property as a long-term investment (especially if it is income-producing property). If this is your strategy then it would help if you have flexibility in your finances and can wait out downturns in the market until you can sell it for top dollar. You need to understand that unexpected financial events may make waiting untenable, forcing you to sell sooner rather than later.

Talking to a local real estate agent can give you a better measure of how the local market is doing and whether or not now is a good time to sell. This is just one reason it’s a good idea to build relationships with local real estate agents.

The Bottom Line: The most important factor to keep in mind when debating how long to keep a property in your portfolio is your profit margin. Once your profit margin cancels out your ROI, then it’s no longer worth maintaining the property. The trick to profitable real estate investment is finding the right balance between cost and profit.