Real estate investing is a business proposition, even if you’re only buying one small rental property. Property owners need a business plan with some features specific to real estate. Remember to speak to your lender, and include market research and an outline for when to sell.
Consider Your Target Audience
Your business plan is a sales pitch, and what you’re selling is profit. Your audience is a bank lending agent, so highlight your own experience and introduce your team. List your partner(s), legal representation, financial, contracting and real estate resources, along with brief bios that tell a lender that your team has the experience and dedication to make this investment plan turn a profit.
Expand Your Guiding Principles
Among your guiding principles should be step-by-step instructions for pre-purchase property research. Think of it as a “how-to” guide for when you or someone on your team might want to cut corners. Set up a system that outlines exactly what due diligence looks like to make sure each and every property you buy is a great investment that meets your current needs. The biggest mistake an investor makes usually comes with a mortgage, so get detailed enough to avoid buying properties that will cost you in the long run.
When you buy a property, you usually know up front if you’ll buy and hold, rehab, or wholesale for more immediate returns. Your business plan exit strategy is a great place to detail some “if, then” scenarios in which you would have no doubt about when it’s time to cut a property loose. The most important thing to remember with exit strategies is to keep emotion out of the decisions that impact the bottom line—and that’s all of them.
Writing a thorough business plan takes time and effort, but real estate investing is a big-money proposition that requires lots of prep work to ensure success. Just as in every stage of property management, investing of yourself and your time before any money changes hands will pay handsomely down the road.