Your Ultimate Exit Strategy…
By Vena Jones-Cox

…is, of course that you will die.

The problem is, no matter what your age or health, that (or something short of death but still incapacitating) could happen to you at any moment.

Wait, wait, don’t stop reading yet—this is unpleasant, but important.

‘Cause the problem with dropping dead or becoming unable to function WHEN YOU’RE A REAL ESTATE INVESTOR doubles the burden on your family, unless you’ve carefully documented your deals and created an easy succession plan for your stuff.

I’ve seen this happen over and over—families who can’t even figure out what dad or uncle Joe or cousin Selma owned, much less how to manage it, dispose of it, or otherwise profit from it.

One extremely successful and wealthy note buyer I knew died very suddenly of a heart attack in his late 40s; although his estate was in the 8-figure range, it took his family (none of whom were in real estate) nearly 2 years (and a 6-figure legal bill) to untangle what loans he owned on what properties (which were in all 50 states and 2 foreign countries), which borrowers were current and which in default, which loans had balloons due, and when—in fact, when the dust settled, they still weren’t sure they’d found it all.

In another case, I got a call from a local investor’s daughter who wanted to know if I could help her understand what was going on with 127 separate rental properties owned by her father, who was still alive but who for years had been slowly losing his mind to dementia. During this time, he had transferred a number of his titles to trustees, but had no land trusts showing who the beneficiaries were; he had apparently sold a number of properties on contracts for deed, but had no actual records of this; he had lost several properties to city demolition after ignoring (or, more likely, forgetting) about multiple building code violation notices.

And my own father, God bless him, continued to try to run his own business—including purchasing new properties and refinancing his existing properties—for several years after his Alzheimer’s diagnosis. The result? When he was unable to work the business on a daily basis, my mother was left to deal with over 100 leveraged properties, with no idea how to manage or maintain them. Today, she’s still dealing with trying to get rid of non-performing, run down houses in a soft market AND dealing with the emotional trauma of taking care of my once-brilliant, now-helpless dad.

Your real estate holdings and business are meant to support you through crises like these, and ultimately to make your family’s life easier, not more difficult. But unless you plan for both succession and retirement, they could easily end up being a financial burden, not a financial blessing, to you and your loved ones. I’ve never met an investor who said, “My end strategy is to leave my family with a mess of worthless, over-financed, boarded-up properties to untangle after I’m gone.” And yet, so many are on the path to doing exactly that.


I understand wanting to retain control of your business. I also understand the desire to continue to work in the business that you’ve built, even beyond the point when you really can. But at some point, it may become the case that you simply can’t make decisions anymore, either due to extreme illness, or because of failing mental health. So please, please do yourself and your family the favor of setting up your entities in such a way that someone else can step in and take over your business if necessary!

At a bare minimum, you should have:

A will, or better yet, a trust. Have you ever thought about what would happen to your properties if you were incapacitated in such a way as to be unable to sign documents? How would your family rent your units? How would they sell them, with no one legally entitled to sign the deed? How would they do something as simple as writing checks from the company bank account to pay contractors to do repairs? A trust, with successor trustees in place in case you are, say, in a temporary coma, will allow you to maintain complete control of your assets now, but give your family the ability to deal with the day to day operations of your company until you miraculously wake from your coma.
Good paperwork for all of your deals. The main problem with the estate of my friend who died so young was that he often lent money on a handshake, or signed paperwork but didn’t file it, or never got around to signing releases on mortgages that were paid off. Obviously, clean paperwork is important ALL the time, but after you’re gone or disabled, it’s critical. And by the way, your family needs to know exactly where that paperwork is kept. And bank account numbers.

A succession plan—or an exit plan. Maybe your spouse and kids aren’t a bit interested in real estate, or in running your business when you’re gone. Or maybe you don’t have a spouse or kids, and the charity/distant relative you plan to leave your stuff to want cash, not properties.

If that’s the case, I’d suggest that you do 2 things: create a plan for paying off as many of your properties as possible before you die (even if that means selling some to pay off others), and specifying in your will (or better yet, trust) that the trustee is to sell all the properties for as much money as they can get and distribute the cash, not the properties, to the heirs.

When investors do otherwise—specify that the properties are to be left to uninterested heirs—the heirs do stupid things, like empty a cash-flowing apartment building of tenants before trying to sell it. thus lowering its value by tens of thousands of dollars—and that’s assuming that it doesn’t get vandalized!

You owe it to your family to sit down with them NOW and discuss the circumstances under which you’d like them to take over your business—and to set up appropriate trusts, LLCs, and so on to allow that to happen smoothly and easily. Tell your loved ones what you want them to do if you become too ill to manage your business, and assign someone the role of stepping in for you if this happens. And most importantly, consult with an experienced estate attorney to draw up the appropriate documents so that this can and will happen when the time comes.

It’s tragic to watch (and even more tragic to be involved in) a situation where everything that an entrepreneur has built comes crashing down in slow motion. Don’t let the fact that you don’t think it will ever happen to you become a burden to your loved ones if it does.


Reprinted with permission of Vena Jones-Cox. To get more free articles and tips, subscribe at www.TheRealEstateGoddess.com