business plan?

Question

Is a business plan necessary or even recommended when setting up a real estate business. I am concentrating on rentals mostly. Tell me your thoughts. Thanks!

Michael Sherwood · Answer

even if I am just doing rentals? Hmm... well I guess it would make sense to have a plan to follow. I appreciate the help, if anyone else has any thoughts I would like to hear them.

Michael Sherwood · Answer

I was thinking of targeting local college students and starter familes(midtwenties). I mean I would rent to other people obviously. On top of that, to give some background I live in NY. I have about 5-10 k starting cash. I can get more... I am working on that. Thanks for the input keep it coming guys.

Account Closed · Answer

I always find it helpful to build out a plan when determining next steps for anything really (REI, Financial Plan). It lets you think through the different components of your plan/strategy, and see what you are missing. Just in doing the exercise itself it helps you get down your ideas. It makes it more real. And you can always go back and update it as you learn more. I put together the following plan (cleaned up) - feel free to use whatever you want from it. If it helps you great! Reach out if you'd like the full non-PDF presentation and I can share that by email.

https://drive.google.com/open?...

Chris Jank · Answer

Hi Michael,

I found this post while trying to formulate my own business plan, and wanted to follow-up with you to see if you ever formed your plan? Where are you in your current plan, and has your plan changed since you originally created this post?

Michael Sherwood · Answer

I think these two markets are good based on growing trends. I just recently graduated from college and one things that students don't mind is spending money on college( because their parents usually pay it) Plus I also feel that 'new families' can't afford to rent or at the time are not sure where they want to settle down for sure.

For the starting cash, I am not sure I have about 8k .

comments appreciated.

Ken Hicks · Answer

I agree with this statment but usually a solid plan takes about 30-80 pages, and by no means is it completed over night. I have been working on mine for about 2 months, It changes often and things are added. I don't have partners. I just use it to help stay on track. I also agree I would have saved alot of time just buying a plan from another investor. I would try to locate one far away in another state. I say this because some guys think you will be stealing their deals and not give you it all. Of course you will have to edit and make adjustments in acordence to you area. Hope my opinion helps.

Tom McGiveron · Answer

i'll keep this short  :lol:

what makes you believe these two markets are good?

how will those targets drive your strategy?

how much starting cash do you think you'll need?

what is this based on?

from my own experience, i have done so much preparation to the point where i know, pretty much, down to the nearest couple 100 bucks either way, how much i need to begin my business strategy.  and, i know it's probably completely wrong... :lol:  but it's something i can look at, refer to and know where i'm at, especially when i look at properties.

develop hard questions for yourself to answer, then get the answers - you'll build a solid investment plan this way.

i agree with juzamjedi, that rehabbing residential sfh is "standard", but without an idea of your own personal financial and workmanship capabilities, you're just diving into a dark pool head first.  i'd like to know, or have an idea of the BOTTOM LINE.

Jason Barnett · Answer

If you're doing something that's been done a zillion times before, then just pay someone else for the plan.  No offense intended to you as I'm sure you could create your own plan.  However, it would take you a long time to figure out everything that experienced investors have already learned from years of experience.  There are some "gurus" that will even give you a plan for free if you agree to do a deal or two with them.

The only time you need to write out your own plan is if you're doing something more unusual; such as converting private residences into commercial property, rehabbing a vacant high-rise tower, or ...

Residential rehabs, rentals, bird dogs are all pretty standard business strategies and they work.

Tom McGiveron · Answer

for what it's worth...

it depends on what type of business plan you're talking about.  if you're talking about a full-blown b plan with an executive summary and all the catagories offered from professional software, then i'd say that would be very difficult.

it depends on your level of knowledge about rei.  are you just starting out?

i'll just guess and say that you are.

k, this means the best way to just get through it all is to have some long range goals and some short range goals in place, even before you start thinking about a "business plan".

you can't write one, if you don't understand the business.  rei is not a traditional business.  it's investing and relies alot on speculation.  if you're doing rentals, it's easy to say, okay, my customers are my tenants and my homes are my inventory.  okay, you've got 5 homes (inventory) and 5 tenants (customers).

now sell your "business"...you can't sell it, because there is no business, per se.  there are two types of business, a lifestyle business - being self-employed and a business with saleability - one that has a system of operations, trademarks, management or potential for it, and basically a system of controls, customers and market share that make it worth something to an outsider who wants in.

rei doesn't really offer these opportunities, at least NOT TO THE NEW INVESTOR.  the noob, really needs to learn about rei and then get that first investment property.

now, getting back to the long range goals and short range goals.  once you know where you're going and understand, for real, the costs, benefits and risks of rei, be it in your local market or across the country, in my opinion - a one to two page business plan will suffice.  it must lay out a simple plan, give you a sense of financial direction and be flexible enough to change when you run into problems down the road.

for instance, the terms "seasoning" doesn't often register loudly in the rei field, but it is something that you will face down the road. your business plan should take this into account so that you are prepared for it.

sorry for the long ramble - bottom line - just writing a business plan out of thin air ain't all that easy and something like:
buy
fix
refi
rent

won't cut the mustard.  at least not in my experience. i mean, it's not a whole lot more than that when you break it down, that's why i said 1 to 2 pages. and heck, alot of investors may tell you you don't need one at all, just go out and start buying!  your business plan will rely heavily on your strategy for buying property.  this is a definite. KISS method a must.

good luck.

Michael Sherwood · Answer

I don't believe I am going to look for partners. Maybe it would just be a good idea to understand my target market and what not. Thoughts?