As a real estate investor, I've learned that you absolutely 100% need to have multiple exit strategies planned when buying a property. If your property doesn't appreciate like you hope, what then?
Can you talk a little more about what you mean by multiple exit strategies? We are also considering a purchase with thin (although not negative, and with vacancy, taxes and expenses factored in) margins -- not as a vacation rental, as a primary home for house hacking and peace of mind as expats -- and I haven't considered the issue of exit strategies. I thought we'd hold it until the kids were done with college and then consider. What other options should I investigate?
Maybe "exit strategies" isn't the best way of putting what I'm talking about, but give yourself options. My current house I live in (bought a year ago) is a good example. When buying it, we gave ourselves three options for the future: staying in the house, moving out within a few years and selling (slow live-in flip), and moving out within a few years and renting it out.
So:
Option 1: We continue living in this house for the foreseeable future. Reasoning: We like the house, it's a reasonable size, reasonable taxes, good location, and I'm content with the cashflow needed to live here and the holding cost of the asset.
Option 2: Within a couple years, we move out and sell. Reasoning: We bought under market value as a "cosmetic fixer-upper" (everything works but is dated) to the point where we'd net a decent amount after we're done doing everything we want to it. IRR wouldn't be amazing but we would definitely come out substantially ahead.
Option 3: Within a couple years, we move out and make it a rental. Reasoning: The numbers pencil out that I'd net a reasonable return based on local rental rates and expected expenses.
This builds a few contingency plans into everything. If we decide we want to do option 2, and the market tanks so we wouldn't get what we want from a sale, we could do option 3. If we get into a situation where we definitely don't want to move, we're "stuck" in a reasonable house that we like. Etc. You have to paint yourself worst case scenarios and be able to bail yourself out from them. If you have one plan and one plan only, and things go south, you don't want to be left holding the bag.