Please review and critique this newbie's business plan!!

[Johnathan Butler]

If you made it this far, then I already owe you thanks for taking the time to read my post. I've been working on this business plan for about a week now. The process has helped me tremendously. I have so much to learn and so much experience to gain. However, I'd like to mitigate the discovery learning as much as possible. Please take a look at this initial draft and provide whatever feedback you feel necessary. Again, I thank you. V/R, John.

Mission Statement: No later than March 2015, we will begin to buy real estate below market value; provide affordable and well maintained housing to renters; and create wealth and financial freedom for our family.

Investment Strategy: Buy and Hold.

Investment Vehicle: Du/Tri/Quadplexes.

Goals: Consistently and constantly work to build and improve upon relationships with ‘The Team,’ fellow investors, brokers, business owners, and the community at large. People first, always.

I have specific financial goals but will keep those close hold.

Market: Class B multi-family units in middle class areas (median income is $30-$60K) within a 30 minute drive from my house. Properties will be close to a highway, public transportation, retail/shopping, and large employment centers. I will also research and take into consideration the area’s present and future employment opportunities, demographics, and historical rental market rates (increasing vs. decreasing). I currently serve in the US Army so the exact location of my market will be determined by where Uncle Sam sees fit to send me next.

Criteria: A GOI of 3% or better of the purchase + renovation price. I know that the rule of thumb is 2%, but the extra 1% is a buffer for my inexperience and property management fees. The purchase price is $150,000 or less. Property is less than 15 years old; preferably a brick structure vs. a wood frame; with a pitched roof. I will look for properties that I can instantly add value to. Target rental rate is $650 - $900 a month depending on the median income of my market.

Finding Deals/Marketing plan:

1. We will work with a broker until my wife gets her real estate license.

2. We will utilize Craigslist.com, Realtor.com, Loopnet.com, the classifieds, and the tax collector’s office to find properties that meet our criteria.

3. We will drive for dollars.

4. We will use direct mail in the case of absentee owners and abandoned properties that look like promising investments.

5. Through our business transactions and getting involved in local REIGs, we will consistently and constantly work to build and improve upon relationships with ‘The Team,’ fellow investors, brokers, business owners, and the community at large.

6. Through our relationships we will be able to find win – win situations with assets that are off- market.

7. To sustain our momentum, we will continue to utilize and improve upon a continued mix of networking and leveraging relationships, advertising campaigns (using Google and setting up a website), and the internet.

Financing: We will utilize the following financing options as they are available to us:

1. Owner Financing.

2. HomePath Mortgages (10% down) for bank repos owned by Fannie Mae

3. VA (zero down), FHA (3.5% down), or 203K Loan (3.5% down). Not preferred because we have to live in the property.

4. Conventional Financing. Not preferred because we have to live in the property and put 20% down.

5. Partnership. Only on a commercial deal.

The Deal: These are very generic steps, but I will utilize more detailed steps and checklists when executing each step described below.

1. Find potential deals utilizing the means previously described in the target market previously described.
2. Screen those deals by doing some internet reconnaissance and running the numbers to see if they give me a GOI of 3% or better on the purchase price.

3. Do a physical reconnaissance on the property.

A. Get a rough estimate for repairs. Take someone with rehab experience and utilize a checklist.

B. Look for opportunities to add value to the property.

C. Check the comps. Is the rent below, at, or above market value?

D. Talk to the seller and check their motivation level.

E. Create a property profile.

4. Run the numbers again and see if it makes sense to continue pursuing the purchase of the property.

5. Determine what I am willing to pay for the property and get pre-approved.
6. Send the broker/owner a Letter of Intent.

7. Execute due diligence.

A. Do I need a property manager or lawyer at this point to check out the leases?

8. Get the team to move in to make the property rent ready as soon as possible.

A. Hire a property manager and rent out the property as soon as possible

B. Immediately begin marketing the property

Exit Strategy:

1. Sell with a broker.

2. FSBO.

2. Lease to Own. If we are not able to sell the property in a reasonable amount of time, we will consider the option of ‘Lease to Own”.

4. Sell to another Investor. This is worst case scenario and will only be used if we suddenly run out of funding.

Building a Team and Systems:

1. Learn how to utilize Google to automate as many processes as possible.

2. Create a LLC.

3. Get involved in the local REIG and BP and start looking out for:

Mentor(s)

Real Estate Agent(s)

Real Estate Attorney

CPA

General Contractor(s)

Mortgage Broker

Inspector

Title Company

Insurance Agent

Property Manager

Handyman