Exit strategy How to take your profits or recycle your deposit

Posted on Wednesday, May 29 2013

Part 3 -What Is Your Exit Plan, Or Strategic Withdrawal ?


In this article i would like to cover few strategies for capitalizing on the profit you make when successfully investing or developing Real Estate. Sometime in business things don’t go to plan and strategic withdrawal to minimize losses is the right thing to do.

Develop & Sell your property, or project to realize the profit as hard earned cash.
Trading properties as a developer or renovator is a full time business and as mentioned previously can be lucrative if done correctly.

Considering that for many investors the goal is to accumulate wealth, rightly many use property development profits for reducing debt on their buy & hold portfolio.

It is important to remember that as covered in our eBook titled:
New Zealand Real Estate A Great Place to Own Investment Property.
Property investing is a long term strategy and it is the long term investor who buys & holds who end up accumulating and preserving wealth.

Develop, Add value and re-finance your new equity is great way for growing your Property Investment portfolio.

Let’s say you have some equity in your own home, Property investment portfolio or just completed your “Add Value” project and has sufficient equity to release or Re-finance and withdrew $95,000.

Investing Exit Strategy

You purchase a $300,000 property and use $60,000 as a 20% deposit with mortgage of $240,000 as most lenders would land you up to 80% of the purchase price (or valuation, whichever is lower), Then you spend your remaining $35,000 on purchase costs and on a renovation including a new kitchen and bathroom.

If you bought well on the outset (remember the golden rule in Real Estate you make your money when you buy) and done a substantial renovation, and done it well, this could easily increase your properties value to $400,000 and should considerably increase its rental return. Down the track you could refinance your newly refurbished property, again to 80% of its value, which gives you $320,000. You pay off your original loan of $240,000, leaving you with around $80,000 to go and do it all again and again.

By recycling your deposit, and possibly some or all of your refurbishment costs through
Wise refinancing, you are effectively using the same money, over and over again for building your property portfolio which is growing over time.

One of the major limitations of this strategy is lack of ability to make principle repayments on the mortgage of your property that’s why it may be a good idea to add value and Sell a property for reducing debt.


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Expert's Bio

Hadar Orkibi

Hadar is a full time Property Investor and Trader, Specialising in Do-ups & Add value, Multiple income properties, High Yielding, Commercial, Equity and "Move Forward" Properties. Hadar is co-owner and Sales & Marketing Mangers at www.PropertyGenie.co.nz. Owner of the Private House Buyers companies www.WeBuyProperty.co.nz & www.PropertyBuyersAuckland.co.nz/ Find Hadar on Google+

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