Business Plan for Real Estate Investing

I created my business plan after completing my first rehab deal in November 2011. I knew that if I wanted to take real estate investing seriously and create a successful business, I needed to have a plan. It can seem like a pretty daunting task if you have never written one, but luckily I had some experience from my college days and some help from other real estate investors. A business plan can be as brief or as detailed you choose. The most important items to get across are: 1) who you are, 2) what you want to do, and 3) how you are going to do it.

I personally feel that a business plan is well worth the time and effort because if it does nothing else, it will absolutely get you to think about real estate investing in a different, more in-depth way. Even if you’ve done some deals, I bet you haven’t thought about how market trends and interest rates will affect your business in the long term or how to forecast the number of deals and the amount of capital you need to turn this into a full time business. How about the types of tax strategies you should employ to reduce your tax exposure? All of these are important aspects of the business. And until you actually sit down and really think about them, you’ll never be as efficient, profitable or effective as you can be.

Ok, so you may be wondering what else can a business plan do for you besides provide a path for your business? Well, for one, it will help you get financing. When I was starting out and lending was super tight, I was able to get funding quite easily because I handed the commercial lending officer a professionally bound business plan. I loved the reaction that I got when they opened up the 3-ring binder with their name and company printed on the front of it with the following inside:

• My contact information
• My business plan
• My tax returns for the last 2 years
• A personal financial statement

Essentially, this was everything that they needed to evaluate if they were able provide financing or not. Not only that, but they knew that I was organized, professional and took real estate investing seriously. Out of the five regional banks that I met with, every single one of them wanted to provide me with financing. I don’t want you to think that I’m bragging, but I want you to understand what a business plan can do for you. It is much more than just a plan.

Some other reasons a business plan is a useful tool for your company:

• You can project how long it will take before you can go full time
• It will keep you accountable
• It can act as a benchmark for your deals (i.e., # per year, profit per deal, etc.)
• You can use it as a tool to obtain private money

So did I get you excited about creating a business plan? I hope so!

While there are many different ways to structure a business plan, here is an example of what my outline looks like:

In my opinion, the most important part of the whole business plan is the Executive Summary. This summary is a 1-page synopsis of everything that you have written about in the subsequent pages. Because of this, it’s usually the last page that you write. Here is the first Executive Summary that I wrote for my business in 2011. It’s evolved since then…

I want to know what you think….is a business plan worth it? If you don’t have one already, will you create one for your business?