Business Plan- Do you need one?

Do you need a business plan?

Well we thought the same thing when getting started! To be honest my business plan has come in handy more times than I can count! It just keeps us organized and was a good way to get started. Since it is my girlfriend and I doing this together when we disagree on anything we can just go back to plan and use it as an impartial guide to what we are doing. I would say definitely draft one, but don't view it as a one and done. It is a living document that you can feel free to edit as you lpease. 

There is a great post in the BP getting started guide to drafting your own plan here: here: https://www.biggerpockets.com/real-estate-investing/business-plan 

Finally, make sure that every person you work with sees this! Your agent, contractors, new partners, lenders, etc. It will let them know who you are and that this isn't a hobby to you. ITS A BUSINESS

See below for the one I sent to agents when getting started. This has been changed substantially since I got started so if you're interested in seeing the current one feel free to reach out with a colleague request and I'll be happy to send it over and help out with your's where I can! At first the numbers were more of a shot in the dark, but now that I've learned more I can have much more meaningful numers. The plan also give an agent or someone else the opportunity to let you know that your thoughts are overly aggressive or if they are spot on.

Angotti Real Estate Business Plan for Agents

Mission Statement: Our purpose is to buy and hold multi-family cash flowing

property in the Pittsburgh, PA. We aim to own 25-50 multi-family properties with

positive cash flow. We aim to provide safe, well-maintained, and modern housing for

professional and respectful tenants in B neighborhoods.

What we are looking for in an agent

 Greater than 3 years experience in the South Hills of Pittsburgh

 Currently invests in buy and hold property or has experience doing so

 Ability to assist in evaluating deals and estimating rent

Goals:

1. Earn $25,000 per month in passive income.

2. Rent B class properties or C class that can be easily converted to B class.

3. Buy and hold multi-family 2 and 3 unit properties.

4. Greater than 15% Cash on Cash Return for Each Property

5. LLC The Business and avoid litigation after initial FHA deals

6. Minimize turnover of renters

7. Buy potential value add properties

Strategy

 Buy and hold multifamily properties.

 Purchase value-add properties and those where the rent can be easily

improved (carpet=> Laminate, modernize lighting, paint, etc.).

Time Frame

 3 Years – 4 Properties

 5 Years – 8 Properties

 7 Years – 15 Properties

 10 Years – 25 Properties

 Beyond – 50 Properties

Market

 Pittsburgh, PA

 B Class Properties or C class into B class easily

 Middle Income Renters

o Consistent Job History

o 3Times Income to Rent

o No derogatory references

 w/in 15 miles of Dormont

 1 and 2 bedroom units in duplex or triplex

Criteria

 Maximum Loan to Value: 75%

 Cash Flow Requirement: $300/mo +

 Cash on Cash Return: 20%

 Max Purchase Price: 10-20% below market value

 Max Rehab Amount: $7,000

 Max Timeframe: Indefinite

 Town: Pittsburgh

 Neighborhoods preferred: Dormont, Brookline, Green Tree, Castle Shannon,

Mt Lebanon, Brentwood, Along T Line, Reagent Square, Highland Park,

Aspinwall

 Property Size: 2 Unit, 3 Unit, 2Bed1bt, 1 Bed 1 Bt, 2 Bd 2 Bt

 Rent Price/sq ft $1.50/sq ft/mo

 Pay Price/sq ft $90/sq ft Maximum

 Lot Size: N/A

 Internal Rate of Return 15%

 Cap Rate 6%

 Net Present Value

 Gross rents multiplier 60-80

 Job Market: 1-3% Unemployment

 Schools: Top 40%

 Crime: Max Violent Crime 55% Max Property Crime 35%

 Amenities: None Required, but washer/dryer and dishwasher hookups

 Property Conditions: Good Bones, Poor Carpet, Paint, Cabinet, Etc.

 Number of Units: 2 or 3

 Appreciation Potential: 2-3%

 Hold six months cash reserves per property

 Income-Expense Ratio: 2

 Debt Coverage Ratio: 3

 ARV Based on Cap Rate: Average Repair Value, 70% rule

Flexibility: 10% Difference from established criteria

Financing: Currently, pre-approved through quicken loans for $200,000 at 3.25%

with 3.5% down.

How You’re Going to Do Your Deals

1. Evaluate on Internal Point System (Different Features provide different rent

scores)

2. Purchase 30% Below ARV

3. Increase Rent 10% or to Market Value

4. Take Good Pictures

5. Make sure that all expenses are paid by tenant

6. Paint

7. Replace all flooring with laminate

8. Replace appliances and washrooms (Clean and New-Looking) (Scratch and

Dent Deals)

9. Upgrade Bathroom, Bright and White

10. Modernize Lighting

11. Kitchen, Cabinet Doors, Counter tops slate

12. Show property on the same day to multiple people, have applications and

pens on site

Currently looking for connections with:

 Accountants with Experience in Real Estate

 Handyman

 All reputable contractors