Business Plan Draft

[Carlton Francis]

So I created my business plan and I'm getting ready to start marketing to motivated sellers this upcoming month. I know that as I learn more and gain more experience, things are bound to change; this is what I've come up with just to have some sort of guide to keep me on track. Any honest critique would be greatly appreciated!

Business Plan (6/23/2016)

Mission Statement:

I strive to convert real estate properties that have become burdensome for current owners into blessings for new owners and tenants through various investing strategies such as wholesaling, fix-and-flipping, and buy-and-holding.

Goals:

• Short Term (Over the Next 5 Years)
  • Do my first wholesale deal
  • Form an LLC
  • Get my real estate license
  • Continue building a funnel of leads that brings in 1-2 wholesale deals per month
  • Start building a portfolio of buy and hold properties
  • Purchase our first primary residence
  • Establish a team and marketing machine so that I can start confidently and efficiently operating with other strategies such as fix-and-flipping and buy-and-holding to generate more monthly deals, and faster and continuous capital
• Long Term (Beyond the Next 5 Years)
  • Build a portfolio of rental homes that are cash flowing a combined passive income of at least $6,600 monthly (33 units bringing in $200 monthly or some other dollars per door equivalent); I believe then I will have achieved financial freedom.
  • No longer being restricted by HAVING to work full-time for someone else, I want to devote all my time and money to my family and using my God given gifts and talents to build relationships in which lives are transformed by the Gospel of Christ, and continue building passive income to fuel these endeavors until I die and the legacy is passed down to my children

Strategy:

Starting off, I plan to raise capital via wholesaling. I then plan to invest that capital into building a marketing machine that brings in more business and thus more capital for other strategies such as fix-and-flipping and buy-and-holding without me having to bear all of the work on my own shoulders (automation and possibly bringing on a small team). From there, I want to continue to build a portfolio of rental properties (ideally mostly multifamily homes) to bring in a continuous flow of passive income that frees me from having to work for other people on other people's terms.

Timeframe:

• Do my first wholesale deal - 6 Months or Less
• Form an LLC - 1 Year or Less
• Get my California Real Estate License - 1 Year or Less
• Establish a team and marketing machine - 1 Year or Less
• Establish enough capital for $5,000-$10,000 reserve savings and a 20% down payment on a fourplex (or another property cash flowing $800+ monthly) in a healthy market - 2 Years or Less
• Purchase our first personal residence - 3 Years or Less
• Purchase our second fourplex (rental portfolio cash flowing $1,600+ monthly) - 4 Years or Less
• Purchase our third fourplex (rental portfolio cash flowing $2,400+ monthly) - 5 Years or Less
• Sell all three fourplex’s and buy our first apartment building (at least 24 units —rental portfolio cash flowing $4,800+ monthly) - 6 Years or Less
• Sell the 24 units and buy at least 33 units (rental portfolio cash flowing $6,600+ monthly) - 8 Years or Less

Market:

• Wholesaling
  • Starting off, I plan to restrict my market to Orange County. I want to mainly focus on markets where my end buyers like to invest.
• Flipping
  • Starting off, I plan to restrict my market to Orange County.
• Buy and Hold
  • I plan to start off in Florida, maybe the Tampa and/or Miami areas since those markets seem to have a favorable rent to value ratio
  • Ultimately I plan on buy-and-holding in favorable markets all across the US where I can find good property managers

Criteria:

• Wholesaling
  • Ideally, I will search for wholesale deals that fit the criteria of my pre-established buyers list. In order for me to proceed with a deal that may not completely fit my buyers lists’ criteria, it will need to fit closely with the 70% rule.
• Flipping
  • Properties must be acquired at the 70% rule or less (at least until I’m more experienced and comfortable going a little higher)
  • The deal must also fit my buy and hold criteria (in case I have to hold onto it)
• Buy and Hold
  • The property must be purchased at a maximum of 80% ARV - repairs
  • The property must be in an area where people choose to move to and not where people ‘have’ to live (no war zones)
  • The property must be able to cash flow at least $200 per month per unit
  • The property must be likely to be appreciating at around 4% per year
  • The first three properties will must each be cash flowing $800 monthly

Flexibility:

I am willing to expand maybe an hour or so out (LA, San Diego, etc.) if deals are lacking in Orange County. I want to aim for middle to high income areas. When expanding, I want to try to first connect with buyers that are active in those markets before looking for deals. I am also willing to engage virtually in out of state markets where houses are cheaper, such as Florida.

For buy-and-hold properties, I am willing to engage in any market that has decent appreciation, good rent-to-value ratios, and good property managers.

Marketing Plan:

I plan to use a combination of:

• Direct Mail
  • I plan to send out a campaign once a month, roughly every 4-6 weeks.
  • I plan to start off by targeting lists of pre-foreclosures, and owners (absentee and owner occupant) that have 40-100% equity.
• Bandit Signs
  • Posting on Friday evenings and removing on Sunday nights
• Driving for Dollars
• Online Marketing
  • Craigslist
  • A Wordpress website and blog
  • Social Media (Facebook, Twitter, Quora, etc.)
  • Pay per click
• Newspaper Ads
• Searching the MLS
• Networking / Word of Mouth

Financing Deals:

• Wholesaling
  • The only costs that I will need financing for are Earnest Money Deposits, inspection fees, and reimbursements to contractors for help estimating repair costs. I will finance these costs either through cash capital or through the end buyer’s funds.
• Buy and Hold
  • The first three properties will ideally be financed via conventional loans with down payments of 20% —which will be my own capital

How Deals Will Be Done:

• Wholesaling
  1. I will make offers on leads that fit my end buyers’ criteria, or on leads that fit closely with the 70% rule. Ideally before I make my offers, I will have looked at the properties and gotten accurate repair estimates and ARVs via the help of trusted contractors and realtors (until I am able to gather accurate ARVs and repair estimates on my own).
  2. Once my offer is accepted, I will sign a contract with the seller and begin my inspection period and open escrow
  • During the inspection period, if something bad comes up with the property, or if I feel like I cannot secure a buyer for this deal, this will be my opportunity to pull out of this deal and not tie up the property any longer.
• I will then complete all paperwork and coordinate with my seller and buyer to meet for closing.
• At closing, I will attempt to double close if possible, if not, then I will assign the contract to the end buyer.
• Starting off, I will keep contact with the buyer throughout his/her renovation and selling process in order to learn what the exact repair costs and selling price were; this will help me to make more accurate calculations and estimates in the future.

I will perform my deals and operate my business with honesty and integrity. I will disclose to the sellers that they may be able to get more for their properties by posting on the MLS. I will also disclose that the end buyer of the properties will either be myself or another investor. As much as it is in my power to do so, I will ensure that every deal that I close on ends with each party (seller, buyer, myself, etc.) 'winning'.

• Buy and Hold
  • I plan to use two primary methods of doing Buy and Hold deals:
  • 10% Forced Appreciation First Year
  • The properties will be bought at a 20% discount with at least 20% down
  • I will then improve the properties to appreciate at least 10% their first year
  • I will then hire property management to maintain the properties and tenants
  • BRRRR
    • The properties will be bought at the 70% rule or better
    • The properties will then be repaired and rented out to bring in at least $200 monthly cash flow per unit
    • I will then hire property management to maintain the property and tenants
    • I will then attempt to refinance the properties after one year and use the money taken out by the refinance to buy more properties

Teams and Systems:

I am starting off as a one-man-team, with plans of building the team as I go. As money comes in I will consult with attorneys and accountants. I also plan to start consulting with local real estate agents and contractors for help with estimating ARVs and repair costs. My wife, Angel, may be willing to assist me with answering calls and handling leads. I will also need to hire property managers for all of the rental properties.

Exit Strategies and Backup Plans:

• Wholesaling
  • I will either be assigning contracts to end buyers or double closing. I want to double close every deal that permits it. If there are deals that I cannot wholesale, I plan to pass those on to real estate agents or other investors to build relationships. I will also make sure that when working directly with motivated owners, I will have a reasonable contingency clause (etc. inspection period) for backing out of the deal in case anything comes up.
• Flipping
  • The properties will be purchased at a good enough discount for me to either sell the properties for a profit or hold on to them and rent them out
• Buy and Hold
  • The properties will be purchased at a good enough discount for me to rent them out or sell them

Financials:

I currently have $350-$450 that I can budget monthly from my full-time job’s income to go toward the business. This will go toward direct-mail marketing. I also have a FICO Credit Score of 746.