Every Investment Needs a Plan B

One of the quiet disciplines that separates durable real estate investors from short-term operators is an almost obsessive focus on exits. Not just an exit, but multiple exits. Markets rarely cooperate with our timelines, our assumptions, or our preferred outcomes. Investors who build wealth over the long term accept that reality early and structure their investments so that no single path determines success.

Many investors only think about the exit at the end of the process. They buy a property, execute the business plan, and assume that selling will be straightforward when the time comes. That assumption tends to hold during rising markets, when liquidity is abundant and buyers are competing for assets. It breaks down quickly when credit tightens, transaction volume slows, or sentiment shifts. An investment with only one viable exit is not truly an investment, it is a bet that conditions will remain favourable long enough to get out. A Plan B forces honesty into the underwriting process. It asks a simple but uncomfortable question before capital is ever committed, what happens if the market does not deliver the exit you want, when you want it? If the answer is “wait and hope,” the risk profile of the deal is already higher than it appears. Defensive investing is not about pessimism or fear, it is about optionality. The more ways you can safely exit a deal, the less dependent you are on any single set of assumptions.

At a practical level, this begins with income. Cash flow is the most reliable exit strategy in real estate. An asset that produces steady, predictable cash flow gives you the ability to be patient. You are not forced to sell into a weak market, refinance at unfavorable terms, or accept pricing that does not reflect intrinsic value. Cash flow buys time, and time is one of the most powerful forms of risk management available to investors. Multiple exits also require thinking carefully about who might own the asset after you. A property that only works for a narrowly defined buyer, such as a highly leveraged investor relying on cap rate compression, is exposed to changes in capital markets. When rates rise or lending standards tighten, that buyer disappears. Assets that can appeal to multiple buyer profiles, long-term holders, owner-operators, or more conservative capital, retain liquidity across market cycles. Flexibility in unit mix, tenant profile, and operating strategy expands the universe of potential exits.

Refinancing is often discussed as an exit, but it should never be treated as a certainty. Refinancing depends on two things you cannot control, credit markets and valuations. Both can change quickly. A defensively structured investment assumes refinancing may be delayed or unavailable entirely. If refinancing is the only way to stabilize the deal or return capital, risk has not been eliminated, it has simply been deferred. Operational and regulatory flexibility are another layer of Plan B thinking that is frequently overlooked. Markets evolve, but so do rules. Changes to rent regulation, zoning, property taxes, or energy requirements can materially affect performance. Investors who assume today’s regulatory environment will persist indefinitely often find themselves reacting instead of adapting. Assets with operational flexibility, whether through different tenant profiles, expense controls, or alternative positioning strategies, are better equipped to absorb change without destroying value.

Perhaps the most underappreciated benefit of having multiple exit strategies is psychological. When you know you are not trapped by a single outcome, decision-making improves. You are less likely to force assumptions, stretch underwriting, or rationalize risks away. You negotiate more calmly and walk away more easily. Many bad investments are not the result of bad math, they are the result of needing a deal to work because there is no alternative plan.

In practice, the strongest investments are rarely the ones with the most aggressive upside projections. They are the ones where, even if the original thesis weakens, the downside remains protected and alternatives remain viable. A deal that can be held long term, sold to different buyer types, refinanced conservatively, or simply operated indefinitely may not be exciting, but it is resilient. Over time, resilience is what allows capital to compound. Markets will always surprise us. Interest rates move faster than expected. Liquidity disappears. Buyer sentiment shifts. None of that can be controlled. What can be controlled is whether an investment depends on a single version of the future. Having a Plan B is not a sign of uncertainty or lack of conviction. It is a recognition that real estate rewards preparation far more consistently than prediction.