Planning your investment strategy: worth it?

Question

Hi BP-ers,Question: What does everyone think about planning out an investing strategy (meaning a business plan, roadmap etc..)? Is planning out a general idea of what you're going to buy, when you're going to buy it, how much it should cash flow etc... an activity that you think is worth the time? If yes, how has it helped you? If no, why not?Thanks and looking forward to seeing what everyone thinks about this.-James

Gino Barbaro · Answer

@James E.Hi JamesYou can't hit a target if you don't have one. Most of us know what we don't want, very few know what we DO want.I think you need to select a specific niche to start, concentrate and learn as much as possible, and then begin to develop an investment plan.For instance, I have chosen Multifamily apartments (niche). I have drilled it down further to "Mom and Pop" apartments, our term for distressed, motivated, sellers. We look for an actual 10% cash on cash, 8 cap rate and a DSCR of 1.2. We now try to focus on complexes 50 units or larger.I think this focus has allowed us not to waste time looking at other deals and has allowed our network to know what we want. Banks and brokers come to us with these deals because they know we have the business plan to attack and add value to the property.There is no niche better, they all have their pros and cons. Just focus on one and crush it.Hope that helpsGino

James E. · Answer

@Gino Barbaro@Josh Bursztyn@Joe Villeneuve@Mark Vejnar@Joseph CatalanoGreat stuff guys! Curious - what tools / system does everyone use to keep track of planned purchases, sales, refi's etc..? Do you track the full financial impact of each of those decisions?

Joe Villeneuve · Answer

Yes, yes, and YES. Dont leave home without it

Mark Vejnar · Answer

Having a step wise plan is invaluable. It gives you a frame from which to work. I'm an analyst and a dreamer. My wife is a planner and a do-er. My dreams intimidate her only slightly less than her planning intimidates me, but she's a physician and great at her job. We have a mountain of student loan debt and have faced some challenges that would have crippled us without my vision and her ability to plan. Now we consistently work a step wise plan towards our shared vision and the plan has had a tremendous impact on our lives. As Joseph Catalano observes, some things can't be planned, but having a goal and understanding the steps to achieving that goal are fundamental to a successful career. I wish I had met and married my wife 20 years ago - well wait that's creepy she's 30 so I'll say 10 years ago and stay off Catalano's radar ;)

Joseph Catalano · Answer

Having a plan is essential to having a successful business no matter what type. Having an idea of what you are going to buy is very important, we have as set criteria of what we look for when we are purchaseing a property. We look for things such as, cash flow, maintenance, rehab, tennant issues and the like. When you are going to buy is not a thing you can plan for the simple reason that you never know when a good deal will come along. We are always looking for a good deal, we keep a fund just for such deals. You have to have a strategy. If you do not have a roadmap you will get lost!!I am a Criminal Defense Attorney by trade to I try plan out as much as I can because I hate to be cause off guard.

Mark Vejnar · Answer

I use excel for income statements, balance sheets, and any financial modeling. Our plan is on a basic spreadsheet. It's pretty straightforward to determine whether or not an activity/opportunity impedes the plan or contributes to it.

Joe Villeneuve · Answer

I designed my own software to do this that's based on the system I developed and use. It does what I want it to do. It allows me to lay out a plan to execute, and then gives me the info I need to monitor progress...but that's just me. I figured this aspect of REI was so important, I didn't want to leave it to an offer the shelf option.

Josh Bursztyn · Answer

I think a plan/road-map is extremely important. Not just to help you plan to get where you want to go but also to prevent you from doing something stupid. For my investments (roth/taxable) I wrote a simple but effective plan that I worked passively on for a few months, this way when I'm tempted to go with a fad or get caught up in the latest fear/greed cycle I can look back to a plan I made with a cool head. If you have no plan WRITTEN down, it's way too easy to make a rash decision.

Joe Villeneuve · Answer

You are about to take a drive from a starting point, to and through areas you are unfamiliar with, having a specific destination in mind, and financial restrictions, as well as expected, but unknown obstacles in your path. Now, I just described your next trip to <pick a vacation spot>, and I would assume you wouldn't even consider doing this without a plan, so why would you even think about not taking the same logic into your "trip" to REI fortunes?