Explaining investment exit strategy

July 18, 2019 1:34 pm Published by what is investment exit

This post is part of our CREST investment series, explaining the 5 things investors should consider when evaluating an investment opportunity.

What does exiting an investment mean?

AKA ‘cashing out’, exiting an investment is the point at which you are no longer active as an investor. Your initial investment plus any expected returns have been repaid.

 

Exit sign

 

Exit strategy

Investopedia describes an exit strategy, broadly, as “a conscious plan to dispose of an investment in a business venture or financial asset”.

As an investor, you should be clear about this at the point of investment. What is the exit strategy for the investment you have made and when will it happen?

The exit is usually clear and straightforward. Our investors ‘cash out’ once all the homes in the development in which they have invested have been sold (i.e. buyers have completed their purchases).

An introvert friend of mine employs a similar exit strategy for parties; The ‘Frexit’ (French exit). This involves quietly thanking your host and slipping off home early (without saying goodbye to everyone else). You can achieve a more polished Frexit by buying a round of drinks just before you leave and/or sending flowers to your host the following day.

I digress, but the important lessons here are:

  1. having a plan for what will happen
  2. knowing when to execute this plan

 

Alternative exits

However, it may be that the developer has a different exit strategy in mind for a particular development.

Instead of selling the developed homes, the developer may be planning on holding them and renting them out. Alternatively, the developer may plan to refinance the development from one bank loan to another to release some capital.

No one exit strategy is ‘better’ than another. And our duty to our investors is to ensure that the exit strategy for the particular development in which they have invested is clear.

Exit strategy

 

Click here to read the rest of our CREST investment series. This explores the 5 things investors should consider when evaluating an investment opportunity.

Contact us to learn how you can invest in property with us (and ask to be added to our exclusive investment opportunity email group).

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