Business Plan Basics

[Richard Salazar]

Hello

My name is Richard and I am just getting started as a Real Estate Investor. I am in the process of writing a business plan. I want to build a rental portfolio of investment properties. After I finished writing my business plan I have a experienced investor/partner that I am going to pitch to raise money for my business. I am going to take him out for lunch. I have three questions first is how long should my business plan be? My second question is how do I know and tell the difference between a great deal and a bad one? My last question is when I am pitching my plan to this experienced potential investor/partner should I focus on ROI or the deal it self? Can anyone help me answer my questions and give me some direction please?

[Michael Evans]

Don't focus on developing a full blown business plan.  Instead develop a business plan outline that is presented in an Executive Summary form (2-3 pages).  Cover these main points:

• Business Overview
• The Business Model
• Products and Services Descriptions
• Marketing Strategy
• Operations
• Finances

As far as knowing the difference between a great deal and a bad deal, and please don't take my constructive criticism wrong, but if you really have to ask that question, then you aren't ready to be a successful real estate investor. A great deal meets the investors minimum profit requirements, expressed as either cash-on-cash ROI, annualized ROI or cash profit. A good investor will set their requirements that a deal has to meet all three requirements. A bad deal by definition is one that loses money and doesn't return a profit. Just because a deal doesn't meet an investor's requirements doesn't make it a bad deal, it just isn't a good deal for that investor. Everyone recognizes a bad deal, because it loses money.

As far as the pitch to the investor, you need to understand that matters to him.  Most investors invest in businesses because of the person running the business, not because of the product or service being delivered.  You have to have confidence without being arrogant.  Hope this helps.