Experienced real estate investors know that when they pitch a property to a lender, there’s more than just the amount of down payment needed and a credit report reviewed. Sure, the lender wants to make sure you have your own skin in the game exit strategy for investment real estatewith a down payment of 20 to 30 percent or more before making a commitment. And your past history with loans is also a solid indicator of your willingness to repay the loan. But the lender also wants to know one more thing: your exit.

 Your exit strategy is how you’re going to pay off the loan when it balloons or otherwise sell the property to repay the note. You can apply for and receive funding to buy and rehabilitate a duplex but once you’ve finished your six-month project…then what? It’s just as important to document an exit strategy as with any other portion of your presentation.

The lender wants to know if the property is marketable once it’s completed and if it is, how will you sell it and for what price? Will there be buyers at the ready? Will you use an agent to sell the home or are you planning on selling it yourself as a FSBO?  If push comes to shove, do you have enough personal or business funds available to retire the note without selling the property?

If the lender agrees that you’ve got a real deal on your hands and the flip will be a quick and easy one, your loan application should sail through. If the lender is not as excited as you are about your trendy geodesic dome project, then it will be a tougher sell.

A solid exit plan will highlight the current market conditions, the pool of potential buyers and the ultimate list price of your real estate compared to similar properties in the area. With a bona fide exit strategy, a lender will not only be more willing to approve your loan but potentially offer you better terms. Plan ahead. Way ahead.