You have been thinking about joining the real estate business and are finally ready to make the plunge. You have read some books, watched some shows and are officially inspired to become a real estate investor. Before you get too far with looking for properties and making offers you should take a minute and prepare a business plan. A business plan is simply a written description of how you want your business to go. It provides you with a structure and a vision of what you plan on doing and how you are going to do it. A good business plan can serve as a blueprint for the first few months of your business and beyond. Here are five basic items that every business plan should have.
- Goals. What exactly do you want out of the business? Are you looking to quit your day job and invest full time or are you ok with only closing a few deals a year? Do you want short term rehab and flips deals or are you looking strictly for buy and hold rental properties? Your business goals are unique and individual to you and shouldn’t be based on anyone else’s perception of the business. Your business strategy can and will change over time but your goals should remain fairly consistent. Almost everything you do in your business should revolve around your goals from the properties you look at to the amount of capital you are willing to spend. Without a clear vision of exactly what you want you will bounce around the business and never truly fulfill your potential.
- Resources. Anyone can list some things they want to do but without action they won’t get very far. Prior to making an action plan you should map out what resources you have and which you will need to succeed. Without even realizing it you probably have more local contacts than you think. Your cousin may know someone who has purchased an investment property in the past few months. A parent at your children’s school is a mortgage broker and struck up a conversation about investing at the last event. Sit down and make a list of everyone you know whether they are involved in real estate or not. Next to it make a list of what your business needs to get off the ground. The first item on your list should be access to capital. Without financing your business will not get very far. Find out what you will need to use lender financing in addition to what hard money lending options are available. Spend some time researching local real estate agents and reach out to those that appear to be a good fit. You don’t need to have everything in place as you are just getting started but you should have a core of resources at your disposal.
- Action. Which actions are you going to take that will make you stand out from your competition? It is no secret that interest in real estate investing has grown over the past few years. It is not enough to say you want to buy real estate you need to take the necessary action to do so. On your business plan next to your goals you should write down the action needed to make it happen. Closing ten deals a year means you need to find a significant referral base as well as implementing a strong marketing campaign. Which means of networking do you plan on doing? Are you going to join any investment clubs or find some networking groups? Are you going to lean on social media and the internet and if so do you have a specific plan of attack? For your marketing do you know which options work best for your market? Knowing and doing are often two completely different things. The action you plan on taking will make all the difference.
- Location. Your action plan must be narrowed down to only a handful of markets. If your investing net is too large you will have a difficult time finding deals you really like. In a perfect world your investing location will be in or near the town where you work or live. If your current location isn’t the best market you need to look elsewhere. A good market is one with improving demographics, high demand and an active core of buyers. You need to look at each market on an individual basis and once you find a few you like focus your property search on those alone. Knowing where to invest allows you to become more familiar with the area which leads to quicker decisions on your end.
- Team. The final piece of your business plan should be who is needed on your team. Behind every successful real estate investor is a solid team. Your investing team when you are starting out should consist of a real estate agent, lender, attorney and contractor. Your team will grow over time but these are the core member you will need. With your list you should note where you will find them and which qualities are important to you. Your team should not simply be thrown together by necessity. The stronger your team is the easier your career as an investor will be.
A good business plan will help settle internal debates and steer your business in the right direction. Before getting too far in your career you need to create a strong business plan.
