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Planning an Exit Strategy
Every short-term loan needs a repayment plan. Here's how experienced investors think about theirs.
Private financing is almost always short-term, which means every loan needs a plan for how it gets repaid. Lenders call this the exit strategy, and it's one of the first things they'll ask about.
Common exit strategies
Sale of the property, typically after renovation is complete. Refinance into long-term financing, often after a rental property is stabilized and leased. Payoff from another source of funds, such as the sale of a different asset.
Build in a buffer
Renovation timelines slip, and markets shift. Experienced investors plan for their exit to take longer than the best-case scenario, and confirm what an extension would cost before they need one — rather than finding out under time pressure.
Have a backup plan
If your primary exit doesn't materialize on schedule — a sale falls through, or a refinance takes longer than expected — what's the fallback? A realistic secondary plan, even a rough one, reduces risk on every project.