Why You Need to Pick Your Exit Before You Make an Offer
A common way to analyze a deal is to pick a strategy first — "I'm a wholesaler" or "I flip houses" — and then run the numbers for that one exit. If it works, you move forward. If it doesn't, you move on.
That approach can leave money on the table on the deals you walk away from.
The professional move is to evaluate a property across every viable exit simultaneously, then let the numbers tell you which strategy produces the best outcome given your capital, timeline, and risk tolerance. A deal that doesn't work as a wholesale assignment might be an exceptional BRRRR candidate. A property that's too expensive to flip might pencil out perfectly as a seller-finance exit.
There are 8 primary exit strategies used by residential real estate investors in the United States. Here is exactly what each one is, when it works best, and what the numbers need to look like for it to make sense.
1. Wholesale
Wholesaling means getting a property under contract at a discount and assigning that contract to a cash buyer for an assignment fee — typically without ever taking title to the property. Your profit is the spread between what the seller accepted and what your end buyer pays you.
When wholesale works
Wholesale works best on deeply discounted distressed properties where the gap between your contract price and the end buyer's acquisition cost is wide enough to support your fee and still leave the buyer with a viable flip or rental. As a rule of thumb, the property needs to be 25–35% below ARV after accounting for estimated repairs; confirm what your buyers will actually pay.
What the numbers need to look like
- A common starting formula for your contract price is (ARV × 70%) − estimated repairs − your assignment fee
- Assignment fees vary widely with the market, the deal, and its size
- Your end buyer often wants to be all-in at or below roughly 70–75% of ARV to make the deal work for them; confirm what your buyers will actually pay
Wholesale typically requires less capital and carries less property risk than the other exits — you never own the property. The tradeoff is that your upside is capped at the assignment fee, and you need a reliable cash buyer pipeline to close consistently.
2. Fix and Flip
Fix and flip means purchasing a distressed property, renovating it to retail condition, and selling it to an end buyer — typically a homeowner — for a profit. Your return is the difference between your all-in cost and your net sale proceeds.
When fix and flip works
Flipping works best in markets with strong buyer demand, rising or stable values, and a contractor ecosystem that allows predictable rehab timelines. It can produce a large cash profit but ties up significant capital and carries execution risk — cost overruns and timeline delays are the classic deal killers.
What the numbers need to look like
- All-in cost (purchase + rehab + carrying costs + closing costs) should leave room for your profit; 75–80% of ARV is a common planning ceiling, so confirm yours
- Target the net profit you require to justify the risk and capital deployed
- Rehab timeline should be modeled conservatively — pad contractor estimates by a buffer you set from your own experience
- Carrying costs (hard money interest, insurance, utilities, taxes) accrue daily — speed matters
3. Buy and Hold
Buy and hold means acquiring a property and renting it out for long-term cash flow and equity accumulation. It is a foundational wealth-building strategy for many real estate investors.
When buy and hold works
Buy and hold works best in landlord-friendly markets with strong rental demand, job growth, and population stability. The property does not need to be deeply discounted — it needs to cash flow after all expenses including vacancy, maintenance, property management, a capital reserve for long-lived items, and debt service.
What the numbers need to look like
- Monthly rent should cover PITI (principal, interest, taxes, insurance) plus a vacancy allowance and maintenance reserve sized to the property (10% each is a common starting assumption), and a capital reserve for long-lived items such as the roof and furnace
- A minimum cash-on-cash return on capital deployed, set before you look at deals
- Cap rate should meet or exceed the benchmarks for the local market, which vary by market and property type
- DSCR (debt service coverage ratio) at or above your lender's minimum (1.25 is a common benchmark) for financing purposes
4. BRRRR
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You purchase a distressed property at a discount, renovate it, place a tenant, then refinance based on the new appraised value — aiming to pull out most or all of your invested capital to redeploy into the next deal.
When BRRRR works
BRRRR works best when you can acquire and rehab a property for significantly less than its stabilized appraised value, and when the rental market supports rents that cover the refinanced mortgage. It can be a capital-efficient way to scale a rental portfolio, because the refinance can return much of the cash you put in.
What the numbers need to look like
- All-in cost (purchase + rehab) should sit low enough against ARV to leave room for a profitable refinance; 70–75% of ARV or less is a common planning assumption, so confirm yours
- Post-rehab appraised value should support a cash-out refinance that returns most of your capital; 70–75% LTV is a common planning assumption, but the lender sets the limit, so confirm yours
- Stabilized rent must cover the new mortgage payment plus operating expenses and a capital reserve with positive cash flow remaining
- The deal fails if rents don't support the refinanced debt — model this before you buy
BRRRR only works if the refinance does. Get the refinance math wrong and your capital stays stuck in the property instead of moving to the next deal.
5. Subject-To
Subject-to means acquiring a property while the seller's existing mortgage stays in place. You take title and make payments on a loan that remains in the seller's name. No new financing required.
When subject-to works
Subject-to works best when the seller's existing mortgage has a lower interest rate than a new loan would carry, when the seller is motivated to exit quickly (pre-foreclosure, divorce, relocation), and when the existing payment is low enough to support positive cash flow as a rental. When a new loan would cost well above the seller's existing rate, say a 3–4% existing mortgage against 7% for new financing, inheriting that rate is a major advantage.
What the numbers need to look like
- Existing mortgage payment plus taxes, insurance, vacancy, maintenance and a capital reserve should still leave positive cash flow at market rents
- Remaining loan balance should be low enough relative to ARV to protect your equity position
- Model the due-on-sale risk — a lender may not act on it while payments are current, but nothing obliges it not to, so it must be factored
- Have an exit plan if you need to sell or refinance before the loan is paid off
6. Lease Option
A lease option gives a tenant-buyer the right to purchase the property at a predetermined price within a set timeframe, while they pay above-market rent in the interim. You collect an upfront option fee, monthly rent premium, and either sell at the option price or retain the property if the tenant does not exercise.
When lease option works
Lease options work best with properties in good condition in stable neighborhoods, and with tenant-buyers who have the income to qualify for a mortgage but need time to repair credit or save a larger down payment. They produce strong monthly cash flow and a large payday if the tenant exercises.
What the numbers need to look like
- Option fee: negotiated, and often sized as a percentage of the purchase price, non-refundable
- Monthly rent: often set above market rent, with a portion credited toward the purchase price
- Option purchase price: set at or slightly above current ARV to allow for appreciation upside
- Term: negotiated, commonly a few years to give the tenant-buyer time to qualify for conventional financing
7. Seller Finance
Seller financing means you act as the bank. Instead of selling the property for cash, you sell it on terms — the buyer makes monthly payments to you at an agreed interest rate and amortization schedule. You hold the note and receive passive income for years or decades.
When seller finance works
Seller financing works best after a rehab when you want ongoing cash flow rather than a lump sum, when the buyer pool includes people who cannot qualify for conventional financing, or when selling on terms lets you command a higher sale price than a cash sale. It is also a powerful tax strategy — installment sale treatment spreads capital gains over the life of the note.
What the numbers need to look like
- Down payment: negotiated; a larger down payment protects the seller by giving the buyer skin in the game
- Interest rate: negotiated with the seller, and worth comparing against what a new bank loan would cost — you are taking on lender risk
- Amortization: negotiated; a long amortization with a balloon payment a few years out is a structure you will often see
- Sale price: a seller who carries financing can often ask more than a cash price, because the terms have value to the buyer
8. Novation
Novation is less widely discussed than the other exits, but when it fits, it can be one of the most powerful. In a novation, you partner with the seller to renovate their property and list it on the MLS at retail price. When it sells, you and the seller split the proceeds according to a pre-agreed formula. You never take title — you replace yourself in the seller's listing contract with the end buyer.
When novation works
Novation works best when a seller wants retail price but cannot afford repairs, when the property is in a location that attracts retail buyers (not cash investors), and when the spread between distressed value and retail ARV is large enough to cover repairs and leave profit for both parties. It lets you access retail buyer pools — FHA, VA, and conventional financed buyers — without wholesaling to another investor at a discount.
What the numbers need to look like
- Repair cost must be covered by the spread between distressed value and retail ARV
- Your profit share should be clearly defined in the novation agreement before work begins
- Title must be clean — novation requires a cooperative seller and a clear path to MLS listing
- Listing on the MLS means working through a licensed agent or broker
Novation monetizes leads that a wholesale-only approach would throw away. If a seller wants retail but you can only offer wholesale, novation can turn a dead lead into a profitable deal.
How to Know Which Exit Fits Your Deal
The right exit strategy depends on four variables that are specific to every deal: the property's condition, the market's buyer pool, your available capital, and your timeline. Here is a simple decision framework:
- Need fast cash with no capital at risk? Wholesale first, novation second.
- Have rehab capital and want the highest cash profit? Fix and flip.
- Want long-term cash flow and equity? Buy and hold or BRRRR depending on whether you need capital back.
- Found a motivated seller with a low-rate existing mortgage? Subject-to, then rent or wrap with a lease option.
- Want passive income without managing tenants? Seller finance after a rehab.
- Seller wants retail but can't make repairs? Novation.
If you want this framework on a single page you can keep next to you while you underwrite, grab our free 8-exit-strategy cheat sheet — it lays out the core formula, the green-light signal, and the rookie mistake to avoid for each of the eight exits.
The problem with making this decision manually is that you are evaluating one exit at a time against a property whose numbers are changing as you negotiate. By the time you have run all 8 scenarios in a spreadsheet, the deal is gone or your assumptions are stale.
The Case for Modeling All 8 Simultaneously
Picking a strategy first and hunting for deals that fit it leaves the other exits unexamined. A better approach is to find undervalued properties and let the analysis determine which exit produces the best outcome. That requires a tool that models all 8 exits on the same property at the same time, with the same comps, the same repair estimates, and the same market data.
Appraize does exactly that. Enter any US property address and get all 8 exit strategies modeled simultaneously in under 30 seconds — with real MLS comps, line-item repair estimates calibrated to local costs, and an AI Deal Chat that can walk you through why one exit outperforms another on that specific property.
Start Analyzing Deals the Right Way
Stop leaving exits on the table. Every deal you analyze with only one strategy is a deal where you might be missing the most profitable path. Run all 8 exits on your next property and let the numbers make the decision for you.
