5 Steps to Choosing the Right Exit Strategy for Sellers of Highly Appreciated Assets

While choosing the right exit strategy from highly appreciated real estate or a business, many sellers begin pulling their hair out when it comes to narrow down the choices to that one or two strategies that will help you meet your goals.

Think about it, sellers today have as many choices as they can stand. Everything from the 1031 exchange, installment sales, Charitable Remainder Trusts, and UPREIT’s…. to Structured Sales, Installment Sales through a Foundation, and 1031 TIC’s. And those are not even a fraction of the available exit strategy choices for today’s appreciated asset sellers.

So, how do you wade through the exit planning, capital gains deferral, and estate planning choices to find the mixture that is right for you? Well, here’s a simple 5 step process that almost guarantees that you find the right exit strategy for your needs.

Now, we have a very in-depth mini-manual that is no cost for you to download… but in this article I’ll briefly review the 5 steps. For the in-depth mini-manual that takes you by the hand and walks you through the process of choosing the right exit strategy, go to the bottom of this article and click the link for the “5 Steps” manual.

Step 1: Your Goals

Discover what your goals are. Yes, I mean all of your important goals. Why? Simply because this sale and the proceeds from the sale should be planned in a way that helps you to move toward your most important goals… not away from them.

When evaluating your goals from an exit strategy standpoint, you need to look at both your short and long-term goals including:

  • Financial
  • Lifestyle
  • Charitable
  • Succession
  • etc.

Without knowing where you ultimately want to end up… it is very difficult to choose the right exit strategy.

Step 2: Your Comfort Zone

People with the same goals may not necessarily want to use the same exit strategies for their real estate or business sale. Why? Because each person has their own risk tolerance which heavily dictates the exit strategies that they can choose from.

For instance, maybe you are nearing retirement and do not want to gamble with your money… but rather want a guaranteed stream of income. The exit strategies that you should be looking at are far different from ones that a person who wants a 10% return will look at.

So, gauge how much risk you want to take when planning your exit. No risk will usually mean you utilize a strategy with a guaranteed stream of income or return… higher risk may mean that the strategy transfers your assets into an investment that utilizes stocks or mutual funds.

Step 3: Your Tax Objectives

What are you trying to achieve from a tax perspective? Do you want to:

  • Defer capital gains taxes
  • Reduce capital gains taxes
  • Reduce estate taxes
  • Reduce income taxes
  • Have a charitable write off
  • all of the above…

Basically, what are your main tax objectives (other than to pay no tax… ever :)? Each exit strategy has different benefits and drawbacks. Usually with a combination of strategies you can ultimately reach most of your tax objectives.

Step 4: Evaluate the Exit Strategy Choices

Now you’re ready to begin looking at exit strategies. Really you shouldn’t even be seriously considering any exit strategy until you have fully completed steps 1-3.

This is where you do your research to find a highly qualified exit planning specialist. More often than not your normal CPA or financial planner is not truly an exit planning specialist… so you should find a professional that works specifically on creating solid exit plans and capital gains/estate planning strategies every day.

A qualified expert will also take you through a decision system similar to the 5 steps in this article. If they do not… RUN! After they walk you through the discovery process… they should show you several options (most likely you have not heard of many o fthe strategies they will present) and help you choose the right mix to reach your goals.

What are the most effective exit strategies? Well, it would take hours to go over some of them… but you can get a comprehensive manual on the Top 9 Ways to Sell by following the links at the bottom of this article.

Step 5: Choose a mix of strategies

Often times it is best to utilize 2 or 3 different strategies to help you reach your goals. Sometimes it may be a cash sale component mixed with a Structured Sale… or a Charitable Remainder Trust mixed with an installment sale… you get the idea.

By this point you should have a very good idea of what you are ultimately looking for… and your professional advisor should be able to provide you with some great options.

I know the descriptions are very brief in this article… if you want to grab the full “5 Steps to Choosing the Right Exit Strategy” mini-manual for free… or the “Top 9 Ways to Sell” comprehensive exit strategy manual… follow the links below for more information.

Good luck in your sale!

Click to get the “5 Steps… ” mini-manual free >> Exit Planning Manual


Get Access to Our Free Exit Planning Tips >> Exit Planning Tips

Source by Trevor Mauch

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