Planning the Exit Before You Buy

Most investors plan the purchase in detail and the sale not at all. The sequence for deciding how an asset will be released.

An investment is not complete until it is sold or transferred, yet exit is almost always considered only when circumstances force it. Deciding in advance how and when an asset will be released changes which asset you buy in the first place.

Before stage one

Before purchasing, three questions deserve written answers: who buys this asset from you, what condition must it be in, and what would trigger a decision to sell.

• The likely buyer profile at exit: owner occupier, investor or developer.
• The expected holding period and what it is based on.
• The triggers that would prompt an earlier sale.
• What documentation a future buyer will want and how it will be maintained.

Stage 1: Define the exit buyer at purchase

Identify who would buy this property and why, since that determines what matters about it.

• Deliverable: A written note on the expected buyer and what they will value.
• Owner: Investor.
• Approval gate: Purchase proceeds only if a realistic buyer profile exists.

Stage 2: Set triggers rather than dates

Define the conditions that would prompt a sale: a target value, a change in yield, a district trend or a personal capital requirement.

• Deliverable: A short list of triggers, written down.
• Owner: Investor.
• Approval gate: Triggers agreed before ownership, since decisions made under pressure tend to be worse.

Stage 3: Maintain the exit file

Keep documentation current throughout ownership: title, permits, tenancy records, maintenance history and warranties.

• Deliverable: A file that could be handed to a buyer's adviser without preparation.
• Owner: Investor or manager.
• Approval gate: Reviewed annually rather than assembled at sale.

Stage 4: Maintain the asset for the exit buyer

Keep the property in the condition that the expected buyer will require, rather than the minimum a tenant tolerates.

• Deliverable: A maintenance approach aligned with the exit, not only with occupancy.
• Owner: Investor.
• Approval gate: Condition reviewed against comparable properties selling in the area.

Stage 5: Review the triggers periodically

Compare the asset against the triggers annually, and against alternatives for the same capital.

• Deliverable: An annual decision to hold or sell, made deliberately.
• Owner: Investor.
• Approval gate: The decision is made and recorded rather than defaulted to holding.

Stage 6: Execute the exit

Prepare, price and market the property, or transfer it, with the documentation already in order.

• Deliverable: Completed sale with proceeds deployed as planned.
• Owner: Investor with adviser.
• Approval gate: Proceeds have a destination decided before the sale, not after.

Handovers between stages

The weak point is the annual review, which is easy to skip because holding requires no action. Assets are most often held past their useful point not by decision but by absence of decision.

How you know it is finished

Exit planning is working when you could sell within a reasonable period without scrambling for documents, when you know what would prompt you to sell, and when the property is in the condition your expected buyer requires.

If you are buying, selling or investing, Domira can verify the documents, assess the property and build the numbers with you before you commit to a transaction.