What Happens When I Exit a Deal?

In a deal, the word “exit” can refer to the sale of the property or any liquidity event such as a refinance. At the sale of the property, assets are sold, a profit is made and sometimes taxes are paid.

When Investors exit a deal, they will get a portion of their money back to reinvest while deferring tax on their capital gains.

Refinancing to Increase Return

• Investors buy an apartment building

  • The renovation budget is set to increase the value & income of the property

• Later down the road they will be able to refinance at a higher valuation

  • The loan proceeds from the higher valuation is used to repay the old loan and also return all or part of the capital to the investors

• Refinance is a preferred method to some investors because they get a portion of their initial investment back while still keeping equity in the deal.

At Sale

Typically, an investor will pay taxes on the capital gains, but there are other options.

1031 Exchange

• The investor uses the profits from the sale of the property to buy another “similar” property to defer pay in capital gains.

• Refinance/hold is the ideal strategy.

Just like with every investment, there are some risk profiles to consider when exiting a deal.

• Repositioning capital

  • Do you have a deal in mind or somewhere to place your new capital gains?

• Consider tax implications

  • Depending on how your invested you could pay UBIT (unrelated business income tax)

  • If you’re invested with your self- directed IRA you could be taxed this way

• It’s always a good idea to talk with your CPA

Please join our Investors Club where we can share current investment opportunities with you. From there you will be able to book a 1:1 Investor Strategy Session where you will walk away with:

·       CLARITY ON YOUR WEALTH GOALS

·       KNOWING YOUR CURRENT ABILITY TO INVEST

·       WHICH MILESTONES MAKE THE MOST SENSE FOR YOU

·       A ROADMAP TO YOUR WEALTH PLAN

We look forward to speaking with you!