All Forum Posts by: Andrew Hofing

New Horizons REG Business Plan

Misson Statement: New Horizon Real Estate Group will be established to form a profitable and sustainable business model in Real Estate Investing. New Horizons REG will have 3 areas of main focus for driving profit. This will include the rehab of and resale of properties in our designated market with a pre-determined time frame and ROI. The other focus will be for cashflow thru a Supportive Housing program providing affordable housing to individuals and Vets with disabilities. Finally, we generate additional capital gains and cashflow from real estate note brokering and investing.

Strategies:

Rehab and Resale- The company will generate return on investment for it’s Partners and capital investors by making investment in distressed properties that are purchased below market value. New Horizons REG will accomplish this thru a focused and persistent effort to market to distressed homeowners and homes. We will rehab the property to it’s peak condition using quality materials bought @ huge discount thru established relationships with various vendors. All properties will be built of the highest standard of energy efficiency and green products wherever possible.

Supportive Housing- We will work to proliferate the company as a leader in affordable housing for individuals with disabilities through our Supportive Housing programs. The program will be developed in concert through relationships with various for profit and non-profit organizations in the Pittsburgh region that are service providers to Veterans and individuals with various disabilities. We preferably enter into an agreement with the organization to rent it to them on behalf of the disabled individual.

Note Brokering/Investing- We will locate seller financed real estate notes. We have a listing of current active note buyers and sellers and their note for sale will be directed to these buyers based on their buying criteria for a fee of $5,000 to $10,000.

The potential seller will be contacted and an intake sheet will be filled out to gather all pertinent information regarding the note/notes for sale. The sellers that call in based on our marketing efforts will call into our office line and the intake sheet will be filled out to uncover details of the note and motivation for selling. Initially the seller financed leads will be developed through various free online sources and our website.

Market- Greater Pittsburgh region within 35mi., Specific neighborhoods TBD, long term drivers of market; median household income, labor force participation, bank lending and household formation

Criteria- TBD, Define your LTV, cash flow, max purchase amount, max rehab amount, max timeframe, etc. Stick to your criteria, walk away from any deal that does not meet your criteria. If you are not finding enough deals to cherry pick from, change your market and/or strategy.

Marketing Plan- The marketing plan is going to be developed along 3 different marketing strategies. These strategies will be broken down to promote the brand and to market to specific target audiences to develop business for our key areas of focus for Real Estate Investing.

Branding and Marketing Strategies

• Online Branding
• -Website
• 1.Squeeze pages- lead capture sites
• -Social Media
• 1.Facebook
• 2.LinkedIn
• 3.Google+
• -SEO
• Direct Marketing
• -Clipper magazine ad
• -Small monthly circular mag/paper
• -We Buy Houses Signage on our building
• -Car magnet
• WOM Marketing
• -Pittsburgh REIA and ACRE

Strategies

• -Wholesaling
• -Rehab/Flip
• -Supportive Housing
• -Note Brokering/Investing

Target Markets

• -Greater Pittsburgh area in 35mi. radius
• -Where are our buyers buying, wholesale or otherwise

Costs

• -What is budget? Marketing?
• -How much can we get for that budget?

Implementing

• -Who is going to be responsible for what?
• -What is timeframe for execution?

Measuring and Tracking

• -Use Podio, create and use Campaigns to track and measure

Each person who receives or creates lead is responsible for tracking and updating

I signed up with a Score mentor and I emailed him my business plan.   This is what he replied: "What you sent me is not a business plan. At best it is a very rough outline of what you would like to do. After reading the outline I understand the problem you are having. It is very difficult to write a business plan for the business you envision. How does one write a good solid business plan for (1) a rehab and resale business when you don't know what properties will be available, what rehab will be required, what the costs will be, and what the property will bring on resale, (2) for a supportive housing business when you don't know what programs will be valuable, relationships you develop, and what income can be generated, (3) for a note brokering/investing business when you don't know what notes will be available and at what discount."

"If it were me I think I would use examples for each of the three business with the assumption that I were in business right now. For example, find a few properties for sale, determine what you would have to pay, what the rehab cost would be, how long from purchase to resale, what the holding costs and marketing costs would be, and what each property would get on resale. This would open the door for you to consider and fill in your operational plan, your marketing plan, your financing options, your profit and loss projects, and your cash flow projections. Treat the other two ideas the same way."

My issue is this: My business partners believe that we don't need an extensive business plan.  They think we just need a document outlining our experience and credentials.  The primary reason for putting this together @ this time is to get funding.  We are looking to talk with portfolio lenders and private lenders.  Do we need the all inclusive business plan?  My partners and I also differ on setting goals and including specific criteria for our investments.  They said that we don't know what we will invest in because it's hypothetical and we don't know what may come available.  I believe we need these things because we need to show we have a business sense and know how to project, plan and implement.  Do I share what this Score mentor has said and try to make my point?

Feedback and advise is greatly appreciated.

@Account Closed What did you use for maintenance n management expenses?  

Is this a good deal for a first Multi-unit?  I'm kinda caught up because of the balloon @ end of finance.  

Seller Financed Terms:

Sale price: $165,000

15% upfront cash deposit and $1538.27/month for 60 months with a balloon payment due at the end of the term.

Interest rate: 2%

The monthly payment of $1540 would encompass the principal, interest, taxes and insurance.

$553.35 would be applied to principal

$153.37 would be applied to interest

$831.55 would be applied to taxes and insurance

Total payment of $1538.27  or 

$165K for the building with 15% down and $1525/month for 48 months

Gross Annual Rental Income = $37800 or $3150/ month

Annual Operating Expenses

Taxes & Insurance $9978.60

Water/Sewage $3600

Waste Management- $1200

Gross Annual Operating Expenses = $14778.60

Net Operating Income = $23021.40

Or $1918.45/month in positive cash flow

Cap Rate = 14%

I'm thinking of trying to negotiate the purchase price down a bit as $165 is above market value.

A real estate attorney @ one my REI groups talked about the legalities of wholesaling in Pa and he said that negotiating the sale and simply assigning the contract via back to back closing for a fee is acting as a R.E. licensee, thus illegal for non-licensed investor. He said to get around this use a "Release Fee" in the contract to be received post closing. Anyone heard of this? The Attorney also said that when you do a back to back closing as middle man you are paying double transfer fees. So, do you have to do a simultaneous closing? I'm just not exactly sure how to put this all together.

Has anyone used "BestTransactionFunding.com"? If so what was your experience? Would you continue to use them or have you repeated business with them? Is this type of funding primarily used with REO, HUD, shortsale properties? Does this type of funding source make sense to use when wholesaling a property?

Has anyone used "BestTransactionFunding.com"? If so what was your experience? Would you continue to use them or have you repeated business with them? Also, a R.E. attorney @ one our REI networking groups talked about the legalities of wholesaling in Pa and he said that negotiating the sale and simply assigning the contract via back to back closing for a fee is acting as a R.E. licensee, thus illegal for non-licensed investor. What if I close using transactional funding? I would say that I have est. a monetary interest and thus a legal transaction, no? He said to get around this use a "Release Fee", anyone heard of this? The Attorney also said that when you do a back to back closing as middle man you are paying double transfer fees. So, do you have to do a simultaneous closing? That's all for now. Sorry, for going off in so many directions.

The "total ROI" is what I am referring to. A cash on cash basis from my understanding is more of a financial calculation for buy and hold.

@Chavel Diaz Jr I  have used my county recorder's site to pull probates, but it is very time consuming to sort out the ones with real estate.  What is the scraper application to use on my own? Is it difficult to setup?  What paid service's are available?

Thanks!

@Scott McCloy welcome to the site.  Are you primarily a buy and hold investor?

I am in the Pittsburgh, Pa market.  Is 10-15% return a good/feasible return on flip projects for the business plan and projecting for potential investors?  Any advice and input is appreciated.  Thanks in advance.