Why the Exit Strategy Matters Most
Private capital is typically short-term or transitional. Repayment depends on the exit. The strongest deals have exits that are realistic, supported, and time-bound.
Primary Exit Types
- Sale: repay from disposition
- Refinance: repay by moving into permanent debt (bank/DSCR)
- Stabilize then refinance: transitional period before permanent debt
How Lenders Verify a Sale Exit
- Comparable sales and market liquidity
- Price realism (not best-case optimism)
- Timeline realism (days on market, absorption)
- Condition and positioning
How Lenders Verify a Refinance Exit
- Projected DSCR and rent assumptions
- Stabilization plan and timeline
- Leverage targets that permanent debt can support
- Borrower profile (varies by takeout lender)
The Value of a Backup Exit
Professional transactions include a secondary path: alternative refinance, partial payoff, capital injection, or extended marketing plan. Backup exits reduce perceived risk and often improve terms.
Common Red Flags
- Exit timing that ignores market cycles or lease-up realities
- Assumptions unsupported by comps or credible data
- No plan for delays
Quiet conclusion: The best exit strategies are not persuasive; they are verifiable.
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