There are several exit strategies that an investor can use in real estate, but rentals are the market of choice for long-term wealth accumulation. In the case of rentals, an investor will purchase an REO foreclosure, rehab it as needed and then rent it out so that they can benefit from the property’s appreciation. Let’s not forget to mention that in specific marketplaces a sizable monthly cash flow is very possible, meaning that the property will produce monthly income above and beyond your monthly expenses.



The first step in making this strategy work is to buy REO foreclosure properties at a significant discount. These properties can often be found on the MLS with the help of a local Realtor. The Realtor will help with negotiations, which frees up your time to look for other properties.

One thing I teach is that an investor should spend no more than ten minutes assessing a property to see if they should make an offer or not. The reason is because with most of the deals you’ll find, you’re only interested in submitting an offer to start negotiations (and I recommend submitting at least 15 offers per week). Once an offer is accepted, you’ll have a few days to perform your due diligence on that property.

The second step in this strategy is to fix up the property so that it is "rent ready." One thing you will find is that the majority of REO properties are vacant and are in dire need of major repair. For that reason, you’ll need to find a reputable contractor who can determine the cost of rehab and complete the project in a timely fashion.

Remember that you will need to factor in the estimated cost of repairs into your purchase price to determine how profitable the deal really is. One other thing to keep in mind is that investors need to tread carefully when determining what kind of repairs to take on. For example, minor cosmetic repairs are actually the easiest and best to work with, but for the new investor, taking on a property with structural damage might be over their head unless they already have experience in home construction.

The third step in this strategy is to rent out the property. Before you even purchase a property you should have some idea of what the rental market is like. You should also compare like properties with like properties and see how much they are renting for. You should check to see if there’s a rental market for the type of property you’re purchasing.

For example, you can get a great deal on a high-end property, but if there’s no rental market for that property, then you will be losing money. For that reason, I recommend staying in the middle to the bottom of the market scope because that’s where your bread and butter properties are. Your local property manager can help you assess the rental market as well as provide you with good and bad rental neighborhoods.