While that deal is in progress, you come across another one. This time the vendor doesn't want to move out for 12 months, and given that the bulk of your money is still tied up in the first deal, you can't just buy the property outright at the start. That's where you need to get a little more resourceful in your acquisition strategy.
Maybe you can talk to the vendor about buying their property with a delayed settlement and early access. The vendor gets to stay on for sometime suiting the needs they have, and by the time settlement is due, you'll have the funds back from your first deal and hopefully by then you can also have all your necessary development approvals in place, all before settlement. And, that’s what I like to call a ‘WIN-WIN’, where it works for everyone!
So your Acquisition Strategy is tactical, and can include things like:
- standard contract of sale
- delayed settlement with early access
- vendor finance
- joint venture with the landowner
- joint venture with a 3rd party
- option contract
Now add in the vendor's point of view, which generally falls into three main categories:
- the certainty of the sale
- how long before it settles
- what price you're willing to pay
- their appetite for risk may also come into play...
- Add together your Development Strategy, the resources you have and the vendor's needs, and most times the Acquisition Strategy becomes crystal clear.
Exit StrategyYour Exit Strategy is essentially what you're going to do with the final product, and is the strategic piece of the triangle.
There are a lot of potential choices you can make once you've acquired a property. Here's some of the more common ones:
- Pass it on for a Finder's Fee
- Sell as a site with development approval in place
- Sell as vacant blocks of land
- Sell existing house as is
- Renovate and sell existing house
- House and Land Packages
- Sell off the plan
- Construct and sell as finished product
- Hold some of the finished product
- Develop and sell in stages over a number of years if it's a big project
A common mistake is that people think they'll decide their exit strategy when they get to the end, but the reason for it being one point of the triangle is that knowing your exit strategy in advance is crucial to determining the other two strategies. It's key to ensuring profitability.
For example, if your exit strategy is to construct and sell townhouses, then your development strategy needs to take that into account in terms of making sure that outcome is profitable for the property you're looking at acquiring.
