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One key part of investing in property in fact, it’s a good habit to practice in nearly every part of our lives is the idea of having an exit strategy should things fail to go according to plan (the “Murphy’s Law” scenario)!

The exit strategy you choose will depend, in some part, on the phase of property investing you’re going through.

Create an exit strategy before you even put down a deposit. Know what you plan to do with the property (buy and hold, flip, renovate) and be open to last minute changes to your plan if necessary.

3 Stages of Wealth Creation

Essentially, a property investor will go through each of the following three-wealth creation phases numerous times before they’re ready to stop actively investing:

• Acquisition phase
• Consolidation phase
• Lifestyle/Legacy phase

Acquisition Phase

During this period of your property-investing career, you are in the process of showing lenders that you are a safe risk. They’ll want to be assured that your income is secure and that you have the capacity to service your debt.

You will need to understand how to use tax deductions to your advantage and make the most of leverage even if it means lender’s mortgage insurance (LMI) is part of the deal.

Consolidation Phase

During this phase, you are “streamlining” your investment portfolio, selling properties to reduce your debts and to maximise your cash flow. You also want to be certain that your ownership structures are compatible with your strategies.

For example, your capital tax obligations will be different depending upon whether you own property as an individual, in a company trust structure or your SMSF.

Lifestyle/Legacy Phase

This stage is reached once you’ve begun nearing retirement. The plans you set when you first began investing in property may change at this point because let’s face it “life” happens.

You may decide that you want to start a new venture after retiring from your chosen profession rather than sit back and enjoy your retirement.

As you may already have realised, these phases aren’t cut and dried, and you may find yourself going through each of them a number of times before you can call your wealth creation journey complete.

As suggested earlier, the exit strategy you choose will be dependent upon the phase you are in.

Exit Strategies

There are a number of strategies you can employ as a property investor to mitigate any losses and make the best use of your finances.