Rough draft Business Plan

[AJ Felix]

So far I have been working on my business plan following the RE investing guide template on bigger pockets. This is my rough draft up to this point in time. Is this what it should be looking like and does this sound reasonable and achievable?

Mission Statement: We have all been taught that the three basic needs of human survival are food, clothing, and shelter. Unfortunately, not all individuals possess the resources needed to acquire these important needs. The purpose of this business is to focus on the latter, shelter. By investing in real estate affordable, quality, and safe housing will be provided to local residents. Investing in real estate provides: positive economic impact by creation of jobs, the ability to increase property values, support to local population growth, and revitalizes impoverished communities. Additionally, investing provides solutions to individuals needing a way out of difficult times, a means for housing when one does not have the resources to purchase on their own, or even a way to create a stable foundation. It is this businesses’ mission to provide shelter as a resource to those seeking affordable, quality and safe housing.

Goals: This business’s end goal is to achieve financial freedom through positive cashflow and to create sustainable wealth. In addition, the ultimate goal is not to be required to work our normal jobs. Financial freedom for this particular investment business will be fulfilled when the household income is replaced with rental income in the amount of $XX,000 cashflow per month. Each investment property must yield a minimum of $200-$250 cashflow per month. Ultimately, XX houses free and clear yielding at least $600 cashflow per month is most desirable. The initial short-term goal is to acquire one rental property within the first year. Over the long-term, a gradual increase will commence to exceed one acquisition annually. The limits are to be determined as the business continues to be active.

Strategy: Property acquisition will be achieved through the use of BRRRR strategy of investing. BRRRR= Buy, Rehab, Rent, Refinance, and Repeat. Particularly, single family homes will be the initial investment property pursued. Eventually, the business would like to participate in multi-family property investments.

Timeline: The timeline set to achieve the business’ goals is 10-15 years. Family household income from W-2 employment will be maintained until the goal is achieved. Once achieved, employment status will be revisited in order to maintain some income and benefits such as medical insurance, dental insurance, etc.

Market: The business will initially focus on residential zoned single-family homes that are located in class A and B locations that contain class B and C properties.

Class A locations are areas with the newest buildings, hottest restaurants, best schools, wealthiest people, and highest-cost real estate.

Class B locations are defined as ones with decent amounts of restaurants, schools, and people (ie “middle class areas”). Class B areas will attract more blue-collar workers.

Class B properties typically will be no greater than 15-30 years old (built 1990-2005), mostly upgraded.

Class C properties typically will be greater than 30 years old. Numerous repairs are likely needed. Systems in the property such as electrical and plumbing may be outdated.

The business will invest in relatively safe neighborhoods and in areas which are experiencing increasing population growth, job growth, and affordability of homes.

Criteria: The business will look to primarily pay cash for deals. It is required that the total expenses (acquisition and renovation costs) add up to no more than 75 percent of what the property will appraise for when completed. Ie: acquisition and renovation costs should not exceed 75 percent of the after-repair value of the property. The properties will be located in areas as described in the previous Market section. Initially, single family homes are desired followed by multi-family properties. It is required that the properties be located and classified to appropriate zoning areas. Properties governed by homeowners’ associations are not desirable. Single family homes offering 3-bedroom 2-bathroom configuration are most desirable. Square footage ranging from 1,200-1,700 is most desirable. The properties must contain no swimming pools or hot tubs situated on decent sized lots less than 0.5 acres.

Cash flow requirements will be at minimum $200 per single family residence on a monthly recurring basis. Multi-family properties will yield at least $100 per unit monthly. A total of $XX,000 monthly cash flow will satisfy this businesses’ financial criteria.

Renovation costs of the properties should not exceed $25,000 plus a 30% contingency budget which is equal to a total amount of $32,500. The condition of the properties can range from needing no repair to needing major cosmetic repairs. Structural and demolition prone properties are not desirable. The business is seeking properties with a maximum purchase price including holding costs and acquisition fees of $100,000 less the maximum renovation costs.