Real Estate Investing Basics

Outline of a Real Estate Business Plan, the first step to success

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Every business must start with a business plan.  No matter how simple, not having a plan is planning to fail.  The biggest mistake I see with investors is never creating a business plan with focus on one strategy.  They spread themselves too thin and never master their craft.  Here is an outline of a very simple business plan.  At minimum I recommend starting with this and building on it weekly. 

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  1. Mission Statement – When people ask you what you do, what do you tell them?  This is your purpose for existence and includes the benefit you provide.  Research and come up with a solid mission statement.
  2. Strategy – Pick one strategy and become a master.  Focus all of you efforts on perfection and automate a system that runs your strategy whether you are there or not.
  3. Market – Define your market.  Many are only comfortable with their local market.  Me on the other hand, I did tons of research to identify markets with great returns and ability to mitigate risk.  Now I focus on one state where I can cherry pick from incredible LTVs and rent to purchase ratios.
  4. Criteria – 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.
  5. How to find deals, marketing plan – How are you going to automate a system so motivated sellers come to you?  MLS, agents, online searches, direct mail to lists, other?  This is the 2nd biggest mistake, investors do not find good enough deals and it all comes down to marketing and persistence with their marketing plan.
  6. How to finance deals – Are you using conventional, hard money, private money, equity or JV partners, seller financing, lease options, other?  This is often a challenge in today’s market and private money is a tremendous solution.  Learn to generate private money!
  7. How to do deals – How are you going to turn a purchase of a property into profit?  Clearly define the steps.  Repairs, rent, management, implementation of exit strategies, etc.
  8. Exit strategies, Backup Plans – One of the most important sections, especially to investors.  How are you going to exit the deal?  What are your backup plans as it is wise to have multiple exit strategies?  Do you flip, lease option, wholesale, bird dog, sell the note, sell the entity holding title, rent and hold, other?
  9. Team & Systems – Clearly define your team and systems used to delegate and automate tasks.  A true entrepreneur will step away from the daily processes and the business will run whether you are there or not.
  10. Illustrate example deals – Illustrate LTV, cash flow numbers and cash on cash return for example deals.  Include images of properties and show your successful track record here if possible.
  11. Financials – Include financials for the timeframe of your strategy.

 Once you have completed the first version of your business plan, get feedback.  Have other investors and even consult a professional business plan writer.  Your business plan is the backbone of your business success and always your first step to success.

    Nick
    Replied about 10 years ago
    I love these kinds of posts! Businesses don’t plan to fail, they fail to plan
    Ryan Moeller
    Replied about 10 years ago
    Thanks Nick, glad you like it and hope it helps everyone who reads my post. Enjoy your week!
    Neil Uttamsingh
    Replied about 10 years ago
    Hi Ryan, A well thought out details description of how a business plan should look. A very organized article. Thank you for sharing. As a side note, not too long ago, I started to add a lot of graphics and drawings in my business plan. The reason for this is because I am a visual learner. As a result, I found that when I repeatedly was reviewing these graphics and drawings, it was more beneficial to me than if I was reading just plain text. I was able to retain the information a lot better when it was in graphic form. Regards, Neil.
    Ryan Moeller
    Replied about 10 years ago
    Thanks Neil, pictures, charts and graphs definitely help. Most people are visual and most investors will skim the business plan rather than read the detail word by word. The summary, pics, charts and graphs will stand out.
    Joshua Dorkin
    Replied about 10 years ago
    Great basic outline, Ryan . . . I’m going to point to it from the forums for all to see.
    Chad Bellanger Rental Property Investor from Thibodaux, LA
    Replied about 1 year ago
    Knock knock
    Cindy Wilson
    Replied about 10 years ago
    Ryan, one more thing that I would recommend, is implementing some form of technology into your business. With technology continually changing, people are turning to the internet more often than not to find what they are looking for. Google has implemented technology that allows users to view the house/ neighborhood without leaving their homes. This has a critical impact on the relationship between real estate agent and the buyer. Even in Anchorage, I have made most of my sales through the internet. It is a great driving force for a business if it is used correctly.
    Joshua Dorkin
    Replied about 10 years ago
    Wouldn’t that fall under the marketing section of the business plan, which Ryan talked about in the article, Cindy?
    Ryan Moeller
    Replied about 10 years ago
    Cindy, Technology is used in almost every aspect of your business whether it is communication, searching for deals, creating and sending your marketing, evaluating deals, creating systems, finding your team, finding investors/buyers, etc. It is everywhere.
    Eric
    Replied about 10 years ago
    Ryan, Thanks a lot for this post; it’s exactly the kind of thing I’ve been looking for. Would you happen to have any examples you could point us to that uses this outline or this format? What advice would you give for a business that isn’t really a going concern yet? In our case, we’re trying to put together a business plan in order to borrow money for a business entity, but we don’t have a specific strategy or specialty because, actually, it would depend on what kind of funding we might be able to get. For example, with access to more cash we might rehab and flip on our own. With access to less money we might pool money with other investors. On the one hand, we want to show that we’re flexible and open to whatever opportunities the market provides — depending on the opportunity, different acquisition and exit strategies might make the most sense. On the other hand, we don’t want to seem directionless? How do we cover both bases? On a related note, if we say we intend to pursue X, but don’t have a track record in X, how do we handle that? Thanks!
    Ryan Moeller
    Replied about 10 years ago
    Hey Eric, The biggest mistake I see investors make is not having a focus. Savvy investors will see the lack of a focused strategy and lack of track record as a red flag. I recommend focusing on one strategy and finding a partner that has a track record. You can implement different exit strategies, just don’t spread yourself too thin. I am planning to write a sample business plan in a future article. It will of course by simple and around 3 pages, not 30+ pages like the thorough plans get to. I hope this helps. I can give you feedback on your business plan if that would benefit you.
    Ryan Moeller
    Replied about 10 years ago
    Hey Eric, The biggest mistake I see investors make is not having a focus. Savvy investors will see the lack of a focused strategy and lack of track record as a red flag. I recommend focusing on one strategy and finding a partner that has a track record. You can implement different exit strategies, just don’t spread yourself too thin. I am planning to write a sample business plan in a future article. It will of course by simple and around 3 pages, not 30+ pages like the thorough plans get to. I hope this helps. I can give you feedback on your business plan if that would benefit you.
    Shabyna Stillman Investor from San Antonio, Texas
    Replied about 5 years ago
    Hi Ryan, I’d be interested in the sample business plan you plan to write. Thanks.
    Desiree Boston Investor from Hollywood, Florida
    Replied almost 5 years ago
    Hey Ryan, I am new to REI and is interesting in the sample businesses plan that you wrote can you please send it to [email protected]. Thanks
    Alvaro Soto from Jacksonville, North Carolina
    Replied almost 2 years ago
    Hi Ryan, Just read you article, and was reading your comments wanted to see if you have ever wrote the example business plan. thank you in advance. Al
    roger
    Replied almost 9 years ago
    Hey Ryan is that biz plan up yet b/c i have a great rental idea that i have seen work.
    Richard Viers
    Replied over 6 years ago
    I have always believed in using a business plan, but have never honestly written one for my real estate business, the author of this post has opened up my eyes to something that may have been holding me back in growing my real estate business from a few “4” rental properties that barely cash flow enough to pay all their own expenses and some of mine. Thanks for the extra insight.
    Paul Timmins
    Replied over 6 years ago
    Ryan Excellent article. A business plan can be a great document raising funds if it a good educational piece about why investing in real estate with your techniques is the best thing since sliced bread. The Small Business Administration provides a template to creating your business plan. http://www.score.org/template_gallery.html Your local SCORE chapter will help you produce and improve the plan.
    James Collver
    Replied about 2 years ago
    Website has changed: https://www.score.org/search/site/business%20plan%20template
    James Collver
    Replied about 2 years ago
    Website has changed: https://www.score.org/search/site/business%20plan%20template
    Maurice Hopkins
    Replied over 6 years ago
    This seems like a great strategy, do you have a sample business plan that you can post?
    Frank
    Replied almost 6 years ago
    Hey Ryan, Great guide…Just printed it out and will use it to start preparing my Business Plan. I noticed you wrote me the other day as well. I’ll get back to you soon on that as well. Thanks, Frank
    Frank
    Replied almost 6 years ago
    Hey Ryan, Great guide…Just printed it out and will use it to start preparing my Business Plan. I noticed you wrote me the other day as well. I’ll get back to you soon on that as well. Thanks, Frank Reply Report comment
    Lori Thedorff Caregiver/Housekeeper from Mukilteo, Washington
    Replied over 5 years ago
    WOW! what a great post! I’ve been looking for a simply-explained way to make a business plan. I copy and pasted it into Word and will be filling in my own plan soon!! Great Job!
    Joakim Esaiasson Wholesaler from Traverse city, Michigan
    Replied over 5 years ago
    Great Post, now we just need to put our own words on it…
    Gary
    Replied about 5 years ago
    I think that statement,( people don’t plan to fail, they fail to plan ), explains why I have such a hard time doing more than just seeing good opportunities and then seeing them done by other people. I guess all the questions and qualifying done by bankers and realtors on the few deals I have done didn’t register for me till now that a very in depth plan on my ability to complete had been done. Yes, I did get some choices rejected and though I wasn’t happy about that at the time, they were right to reject them. As a newbie I guess my question really is, now that I am going to present a better picture of my plans as to how properties are good choices, are the same people who rejected my unplanned wishes now good assets to consult in my future plans? Thanks for keeping me grounded
    Sayo Owoseni Real Estate Agent from Houston, TX
    Replied about 5 years ago
    Thanks for posting this article, it was a great way to fill out the areas and create a rough business plan for myself as I am getting ready to fully attack this real estate investment venture. The area that will be an interesting one for me to embark on is the example deals. That should get me thinking and really visualizing what I’ll actually be doing. What I plan to do is go look at some deals that I have seen around and use those to create the example deals section. I have been blessed with the opportunity to have a private lender so now I just need a good mentor to work with and solid power team to get my first deal on the road!
    Deshawn Jennings Real Estate Agent from Baltimore, MD
    Replied about 5 years ago
    This article was every helpful. I have been working on my REI business plan throughout the past few days and it has been providing me with much needed clarity regarding my path in this business! Thank you again
    Josh Buss Investor from Oklahoma City, Oklahoma
    Replied almost 5 years ago
    Great article!
    Baron Hicklin from Chester, South Carolina
    Replied over 4 years ago
    Thanks for the article Ryan. I have been looking for a business plan format that would allow me to narrow down my focus and let me see what I am leaving out.. This helps a lot. It gives me a cornerstone for the foundation. Ryan, you said in one of your replies: “I am planning to write a sample business plan in a future article. It will of course by simple and around 3 pages, not 30+ pages like the thorough plans get to.” Did you ever get the time to write the sample business plan? I really would like to get a copy if you did. Thanks again for taking the time to write this one! Have a successful day!
    Account Closed from Rocky Hill, Connecticut
    Replied almost 4 years ago
    Hi Ryan and BP, I am working on my business plan now but the one hurdle I’m running into is the market aspect. How/ what resources did you use to find the right market. I recently moved to Connecticut from MA and am not sure how to analyze a territory never mind a house and I want to try and maximize my investments as much as possible. Thank you for any insight!
    Kyle Murphy Rental Property Investor from San Ramon, CA
    Replied over 3 years ago
    Great read, definitely want to pick this one apart.
    Pierre Toussaint from Atlanta, Georgia
    Replied about 3 years ago
    Very helpful article. It is expanded upon in the BP Beginner’s guide. I’m new to investing so I’m looking forward to creating this road map. It was mentioned in the comments that there was a sample floating around. Is that the case? Ryan’s last post was in 2010. Happy investing everyone!!!
    Anthony Dominguez from Stafford, Virginia
    Replied almost 3 years ago
    Great article, thanks for sharing! I’ve started on my business plan using this. I have a question if you or someone can clarify though. What do you mean by a rent to purchase ratio? What defines a good rent-to-purchase ratio? Also, what defines a good LTV ratio in a specific market?
    Daniel Burke Contractor from San Diego
    Replied over 1 year ago
    When writing a business plan I like to look at what problem is there and how can I solve it and how can I show others that if they have me solve their problem then they are making a smart move on their behalf. If you Honestly believe you are the best choice for helping someone make one of the most important decisions they might make this year or in their life then making your plan on the “how” becomes easier. Thank you for the article!
    Nicholas Fazio from Little Rock Arkansas
    Replied 6 months ago
    Would love a sample plan, Following
    Matthew Begin Accountant from NY
    Replied 4 months ago
    1 and 10! awesome template to go with and set some ground work