We conclude our review of the Investment Property Lifecycle today by taking a look at the final stage…our exit. As Steven Covey says, we should ‘begin with the end in mind’ and so having a clear picture of our exit before we venture forward to even acquire an investment property is essential. We will share another acronym in our main discussion today…to help us to stay on TRACK when it comes to our exit plans. In addition, we have Your Voice, with another great 5-star review, which ends in the phrase ‘Thank you Richard for kicking my backside’, which should at least intrigue you as to why; along with a couple of great resources aimed at making operating globally easier in the Shout Out.

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Use the acronym TRACK to test the best exit conditions for your next project. Determine your exit options based on the three main alternatives: sell, rent or give away. Finally, don’t forget to factor in taxation, holding & transaction costs into your deliberations.

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Hello and welcome to another edition of The Property Voice Podcast, my name is Richard Brown and as always it is a pleasure to have you join me again on the show today.

We conclude our review of the Investment Property Lifecycle today by taking a look at the final stage…our exit. As you will recall the four stages of the property investment lifecycle are: acquire, finance, works and exit.

As Steven Covey says, we should ‘begin with the end in mind’ and so having a clear picture of our exit before we venture forward to even acquire an investment property is essential. Like many aspects of property investment, there are several moving and interrelated parts that we need to weigh up at the same time. The process of looking at an individual investment property and it’s full lifecycle is no different. As we shall note, our exit has a bearing on the acquisition, financing and potentially works aspects of our investment property.

We will share another acronym in our main discussion today…to help us to stay on TRACK when it comes to our exit plans. In addition, we have Your Voice, with another great 5-star review, which ends in the phrase ‘Thank you Richard for kicking my backside’, which should at least intrigue you as to why; along with a couple of great resources aimed at making operating globally easier in the Shout Out.

Here we go then with our main topic for today…staying on TRACK with our investment property exit plans.

As I mentioned, many of the stages of the investment property lifecycle are related to each other. We should therefore consider each in turn, but equally, consider how they relate to one another – they are not isolated steps to be considered alone and should be considered as a collective. In order to assist us in looking at this final stage of the lifecycle, I have come up with a simple acronym to make sure we stay on TRACK when considering our exit options.

Yes, it is the word TRACK, which here stands for:

These questions are designed to get us thinking about the property and our ability to achieve certain results at any given time. Even if we have a very clear and focussed strategy, such as say buying city centre new build flats as one example, by asking these questions, we can start to see that at certain times it is possible that proceeding with this planned strategy may not always be the wisest thing to do. Think about the glut of city centre apartments that existed in many regional cities in 2008/9 for instance. So, having a reference point to fall back on can help us make a considered decision as to our exit options on each occasion that we are considering a property investment opportunity.

Now that we have some general considerations to weigh up, let’s take a look at the most common exit options for an individual investment property. Quite simply there are 3 and a half different exit options that most of us will consider:

The half is actually hybrid – a combination of two or more the above options, perhaps staggered over time.

Let’s look at each one in turn now then.

Sell

Rent Out

Give away

As I mentioned previously, we may also have a hybrid of some of these different options, such as:

Having considered the main exit options that are normally available to us, let’s have a quick word on tax, holding and transaction costs.

Firstly, with taxation. I have only mentioned taxation briefly in passing so far. The reason for this is that it is a complex and personal matter and one that requires careful consideration and advice based on your personal situation. However, as you can see from a couple of references, there are ways of doing things that can alter the after-tax effect of our investment returns. The best thing to do here is to get professional advice on tax; weigh up your pre and post-tax position and how the different taxes will be affected by each option taken.

Next, holding costs, which are the costs involved in retaining a property for any period of time and include:

There are costs in holding onto property and so we should factor these into our evaluation and decision-making, when considering the different exit options.

Similarly, transaction costs are costs associated with doing a property deal and will need to be taken into consideration along with all other factors mentioned. They could be linked to buying, selling and applying for finance and include:

These costs add up and can represent a fair chunk of our profit, particularly if we are buying and selling or financing frequently. It is surprising how much they add up to in fact and some investors can get caught out when overlooking in underestimating these costs. This is one of the reasons why I personally seek decent double-digit returns on short-term flip projects for example. To give you some sort of context, on a recent project I was looking at, the combined holding and transaction costs amounted to 25% of my gross profit before any costs of works were taken into consideration!

So, there we have it – the exit stage of the investment property lifecycle. We started by looking at some general questions to help us with our initial thinking by using the questions posed by the TRACK acronym. Then we looked at the 3 and a half main ways of exiting an investment property deal, looking at some of the variations that can apply within each heading. Finally, we considered some of the associated issues that arise with our property deal exit, such as taxation, holding and transaction costs.

Adding it all up then, we have a few things to keep in mind to make the best decision to suit our circumstances. The good news, however, is that as we get more proficient at looking at investment property deals, we do develop systems and methods or simplifying this stage. For example, I have a spreadsheet model that has several different exit options included within it. It also tracks all the associated holding and transaction costs in each case. As far as taxation is concerned, I have professional advisors that guide me on this as far as my portfolio and property business develops.

I hope that you can see the linkage between all of the various stages having completed the full cycle. In fact, you can probably also see how all three cycles that we have covered in this series are very much interrelated. The overall property cycle, our portfolio development cycle and the individual investment property cycle and in effect 3 concentric circles if you think about it. That is why I shared this series, drawing all three of them together into what is essentially a strategic approach to our investment activities.

I hope you have found these discussions useful over the series. I will let you know what to expect next a little later in the show, however, right now let’s find out why I have been thanked for a kick up the backside!

We return with a listener review in today’s Your Voice, this time a 5-star review from Hikekel, who says:

I had to laugh when I saw this review from Hikekel as we had an exchange of emails over time as you can probably gather. He asked me to give him the kick up the backside in fact – in other words, he wasn’t looking for a warm and friendly, you are doing great kind of response, he really did want a between the eyes assessment of his situation. So, in my defence, I was given permission for said butt-kicking here!

Hikekel and I exchanged notes on his current position and future strategy, which I hope has helped him with his next steps. This is something I did on a casual basis for him but equally it is also something that I do on a more formal basis as well. If this is interesting to you in any way just drop me a note [email protected] and we can have a chat…I don’t always kick people up the backside you know though…sometimes an arm around the shoulder works pretty well too

Anyway, please do keep those reviews coming in won’t you – I love to hear how the show is impacting your property journey. Meanwhile, let’s share a couple of resources next shall we.

Today’s Shout Out is related to language translation, which I have found to be increasingly important and useful in recent times.

The first mention goes to the Google Translator App. This neat little app allows me to translate text between languages as you might expect, however, it also has a text to speech and speech to text feature as well. Then, there is an amazing feature where you can use the camera to read text in one language and see it translated into your home language right before your eyes…which is great for menus, signs and documents written in a foreign language.

Then, we have a familiar app but with a recent twist. Pretty much everyone will have heard of Skype by now, many will have used it as well. In an increasingly competitive landscape for VOIP telecoms, which now includes services from Whatsapp, Viber and even Facebook now, Skype has seen it’s positon as the go-to free Internet call service under threat. To be fair, Skype has some other useful features like an ability to make and receive calls from non-VOIP numbers, voicemail, your own dedicated inbound number, conference calling and video calling among others. But now they have just released Skype Translator as well. I heard about this a while ago when they were undertaking trials, however, now it has been fully released, at least for the desktop version of Skype. Basically, it translates a call from one language into another whilst you are on it…think about the UN and EU translation services and it something like that. I think it is pretty cool, even if I have yet to fully road test it as yet…let me know if you want to give it a try and we could talk property for a while in your language!

So, there we have some useful language apps that are very practical and becoming ever more necessary in our global reach economy. Check them out.

As I mentioned earlier, today’s episode brings our second series on the Investment Property Lifecycle to an end. I am planning another complete series of the show, however, before that I am about to take a bit of a holiday. I shall be away over the next couple of weeks, however, rather than leave you without your weekly fix of the Property Voice Podcast, I have some short episodes planned for you over the next few weeks. I will call these episodes ‘Soundbites’, as they will be short and sweet topics without being a full on podcast episode as such. Look out for these and then we shall have a few of the Musings episodes again, where we look at a particular top of mind topic in a little more detail, along with the other features in the show like Your Voice and the Shout Out.

We shall be bringing you the third series soon after that, where we get into the nitty gritty of a particular theme as we have in the first two series of the podcast. I need to do some planning for that to make sure I get it right. I have not finalised the third series theme as yet, so if you still want to influence what it is, there is still some time. Just drop me an email as always and start a conversation: [email protected] , meanwhile all the show notes will be over at the website www.thepropertyvoice.net

Thank you for joining me in this second series; I have some exciting news on the horizon that I cannot wait to share with you, so make sure you listen in over the next few weeks to find out what that is all about J

However, as always I would like to say thank you very much for listening again this week and until next time on The Property Voice Podcast…it’s ciao-ciao

The post Property Cycles: The Investment Property Lifecycle – Exit | PVP S2E16 appeared first on The Property Voice.