Please Critique My Plan

23 Replies

Mission
(insert business name) is a company comprised of industry professionals and capital-backed investors. With over five years of experience in brokerage, our in depth knowledge of the markets and ability to adapt to the changing environment has allowed us to successfully navigate the terrain to grow and or preserve the wealth of our clients.

Our mission is to create passive income through the purchase, hold, and eventual resale of commercial real estate. We will judge investment properties solely on their ability to generate positive cash flow, but will take into consideration the ability to add value through rehab or repositioning for any property in a value add scenario. The target asset will be multi-tenant retail, office, or multi-family property in areas ranging from small suburbs to major metropolitans. The multi-tenant aspect will provide an added level of security and ability to protect the investments of all parties involved.

Short-Term Goals
In the first few years (insert business name) plans to aggressively pursue opportunities that meet minimum of our requirements in cash on cash returns and value positioning opportunities. The goal is to purchase one building every six months for the first two years, allowing for a secure base of income. In the first two years we plan to pursue deals ranging in size from $500,000 to $2,000,000 with special attention given to any property that may be distressed.

At the same time we understand, to really succeed is to build long term quality relationships with industry professionals. Therefore, we plan to market (insert business name) as a professional investment company who “does what they say,� and provides all parties in a transaction with the most favorable results, to create and sustain long term personal relationships. Doing so will position us in a spot where the best opportunities come to us.

Long-Term Goals
(insert business name) s time horizon is significantly long term. We plan to preserve and create wealth for our investors and capital backers for the next fifty years. With the goal of long term, stable cash on cash returns and well positioned value increasing purchases, we plan to successfully operate in any area of the business cycle. With goal oriented purchases and “know how� to stay away from herd mentality, we will be able to operate at a maximum leverage, while at the same time still meeting high returns on investment. Ideally within the next 10 years we’ll like to have built an investor, client, property portfolio large enough to positioning ourselves as a publicly traded company and becoming an R.E.I.T.

Like Buffet is to stocks, (insert business name) will be to real estate. Long-term value investing, quality cash-flow and the occasional homerun.

Ownership & Employees
(insert business name) plans to be a highly leveraged organization with One employee, that being the principle and owner Robert A. Jenkins. All tasks to be performed by the enterprise that can not be performed by said employee shall be contracted out.

Target Market
(insert business name) will focus on Los Angeles and Orange county markets for our income properties. However, positioning ourselves in emerging markets where the value of a long-term hold is substantially evident is our secondary focus. Initially our primary focus will be on the San Fernando Valley submarket of Los Angeles. The reason being, the location is desirable among the top earning professional all the way to the underpaid low income individuals. This will create opportunities to add value and having a steady demand for occupancy and thus generating steady income. Eventually, the long term area of focus will be West L.A. and Santa Monica districts.

Our knowledge and expertise will allow us to position ourselves in emerging markets all across the nation.

Deal Selection
Fundamentals, Fundamentals, Fundamentals. Being able to stick to a method based on numbers that actually exist, and aren’t pro forma, will be the cornerstone of all investments made by (insert business name) If the deal does not secure the capital of our investors, it will not be one we move forward on. Although there is risk in all real estate investments and can't guarantee anything.

The main instruments to measure a deal will be; cap rate, cash on cash, value positioning, and stability. (insert business name) will purchase deals ONLY on actual numbers and sell at highest amount of profitability. All properties bought by (insert business name) will be self managed and upon the sale shall be negotiated to remain the management company.

Numbers:
Min. Cap rate: 8% Min. C.O.C.: 9%
Min. Deal Size: $500,000 Min. Value Add: 30%
Min. Occupancy: 80% Target Occupancy: 95%

Exit Strategy
(insert business name) has a plan to hold our investments for a minimum of three years on all properties that meet or exceed requirements of the deal. For all nonperforming or troubled assets they will be “flipped� if the value extracted can exceed 110% of the current “all in� investment or if the initial loss from the sale is less then the projected loss from a long term (3-5 year) hold.

What is the purpose of this plan? Is this to keep you on track and accountable? Is this to try to help you attract financing? Is this to try to help you attract partners/investors?

A lot depends on what the plan is trying to accomplish, and while the above might be good enough to get you started, it's definitely not detailed enough to help you attract financing or investors.

First, you would want to have more detailed criteria for determining target investments. Next, you say nothing about the team you have put together to actually procure and manage these investments. These two things will be very important to an investors or lender.

You also don't state how you will generate returns. Are you shooting for creating passive income or will you be actively managing these investments to increase NOI, and to build equity that way?

Again, once it's clear who your target readership is, then we can give better feedback on the content.

Next, you say nothing about the team you have put together to actually procure and manage these investments.

Yes, he does.

(insert business name) plans to be a highly leveraged organization with One employee, that being the principle and owner Robert A. Jenkins. All tasks to be performed by the enterprise that can not be performed by said employee shall be contracted out.

J i agree with you on it's lack of specifics and thos are definately good ideas. I was wondering how specific do you want to get with investors and how detailed with numbers and expectations should i be?

I don't want to put myself into a bind by saying one thing and handcuffing myself.

Oh and to answer your question. The purpose is to procure investors.


Originally posted by Robert Jenkins:
Our mission is to create passive income through the purchase, hold, and eventual resale of commercial real estate. We will judge investment properties solely on their ability to generate positive cash flow, but will take into consideration the ability to add value through rehab or repositioning for any property in a scenario that can generate a large return on the resale. The target asset will be multi-tenant retail, office, or multi-family property in areas ranging from small suburbs to major metropolitans. The multi-tenant aspect will provide an added level of security and ability to protect the investments of all parties involved.

To me that seems clear on what we want to do and how we plan to make money, but that's why i'm asking for outside opinions. Should i get specific?

Problem:

Your plan is too long. I don't have that kind of attention span. I need pictures or something if it’s over a couple paragraphs. I'm just kidding.

To be honest, it is very generic. Anybody can say they will buy one property every six months. I would give a little more detail as to how you will purchase the properties. Everybody wants to know if you have money or at least assets. If you have money in the bank from these investors and partners it might be nice to mention that and how it will be allocated. I assume the business plan will be for lenders, investors, and sellers. These people want to know they are not dealing with dreamers. Besides money you can list other assets, connections, experience, etc.

Your mission statement should say who you want to be, doesn’t have to be who you are now. It can be lofty. It should try to set you apart from the competition. Make it your, "I have a dream speech."

I don't really like the Buffet of real estate thing. I think most people will roll their eyes about that. You can outline a plan to show how intend to grow quickly by bringing in investors, partners, JV’s and through savvy acquisitions or something.

A real breath of honesty and a demonstration of your market savvy would to be to add a SWOT analysis. Simply state your Strengths, Weaknesses, Opportunities, and Threats. Investors want to see that you are looking at the dark side as well.

Good job, the vast majority of investors don’t have a written business plan.

Originally posted by Ralph Scott:
Next, you say nothing about the team you have put together to actually procure and manage these investments.


Yes, he does.

(insert business name) plans to be a highly leveraged organization with One employee, that being the principle and owner Robert A. Jenkins. All tasks to be performed by the enterprise that can not be performed by said employee shall be contracted out.



That tells me nothing.

Does Robert Jenkins have real estate experience? Does he have finance experience? Does he have management experience? Does he have property management experience? Is he full-time or part-time?

If I'm going to invest in a company, I want to know about the experience of the management team and what they bring to the table, even if "they" is only "he"...

Originally posted by Robert Jenkins:
J i agree with you on it's lack of specifics and thos are definately good ideas. I was wondering how specific do you want to get with investors and how detailed with numbers and expectations should i be?


Robert -

I sell a copy of my apartment investing business plan on my website...shoot me a PM and I'll send you a free copy...

That tells me nothing.


Tells me everything. (insert business name) is one individual, Robert, someone with very high aspirations.


So, you would invest your money in someone without knowing their qualifications to take that money and grow it???

You don't want to know what their experience is, what their experience level is, what they have done previously, etc?

When I started in real estate, I had no real estate experience, but I was able to get loans because I did have the experience of managing tens of million dollar P&Ls and billion dollar M&A deals. Had I not disclosed any information about my business experience, do you think any investor or lender would have taken me seriously?

When used to generate investment, a Business Plan is a marketing document. If you can't successfully market *yourself*, there's no way you'll be able to successfully market your business or investment idea.

So, you would invest your money in someone without knowing their qualifications to take that money and grow it???

You don't want to know what their experience is, what their experience level is, what they have done previously, etc?


Did I say that? Don't believe I've come out for or against. This is a rough draft, and probably not proofed as well as it could have been, which is why he's sharing with us.

And, I'm not going to challenge or question his qualifications in a highly public forum for a rough draft on a business plan as you've now challenged him to defend himself. My comments were to invoke thought. So, maybe I need to spell it out....

I think that his first paragraph, when compared to his section on Ownership & Employees, is in contrast between plural and past tense, and singular and pre-tense. It suggests a group with past successes, and then, an organization of one not yet begun. Any investment in his "company" is an investment in Robert, period, and that very important, quite possibly the most important, point is not evident or supported. He is not only not promoting himself, he leads with "a company comprised of industry professionals." Everything else in between serves as smoke to keep those two dots from being connected, intended or not.

I find it contradictory and misleading, and like I said, it tells me everything I need to know. I don't go any further. Seems it meant more than nothing to you, J, as well.

Robert, hope all this violent agreement helps. Every R.E.I.T. starts somewhere, maybe not so publicly, tho.

Originally posted by Ralph Scott:

Every R.E.I.T. starts somewhere, maybe not so publicly, tho.


While maybe not for everyone, just from personal experience, there are a lot of benefits to starting publicly, especially for the things that need improvement. Take your response above (which was great, btw!) -- if the O.P. wasn't looking for that type of feedback, he shouldn't have been posting his plan publicly. If he's going to do that, the least we can do is be honest with him!

I've been posting every detail of my success and failure (along with most details of my financials) on my blog since the day I quit my career to start in real estate. While occasionally embarrassing, it's kept me accountable, provided me with tremendous feedback from my readers, kept me on track, and made me really think through the details of what I was doing (my readers were a lot more critical of my plans than my friends/family).

Any success I've had so far (I just purchased my 13th house in 8 months) is primarily due to the fact that the publicness of my efforts has kept me accountable to making progress...if not for that, I'd probably be relaxing a lot more... :)

Again, though, it's certainly not for everyone...

Both of you are correct. As that was about my thrid draft i've put together originally with a partner then it changed and changed again which is why there are some contradictions with "us" or "they." I've been reading it over and over and haven't been able to catch a lot of the small details because i'm not that great of a writer.

But yes the reason i posted it because i know there are contradictions and wanted someone who's a littler better at writing structure, to have some input.

What is the purpose of this plan? Is this to keep you on track and accountable? Is this to try to help you attract financing? Is this to try to help you attract partners/investors?

J,
Can you tell us what the purpose of your plan is? I am trying to start to write a plan to keep myself accountable and set guidelines/specific responsibilities for my two partners

Hey Robert -

The purpose of my plan was four-fold:

1) To get input on my plan. When I first started, I had no idea whether what I intended to do made any sense, or whether the numbers I was assuming were accurate. While I could sit down and try to explain my plan to other investors, friends, and family to get their feedback, it was much easier to just hand them my business plan, and let them critique it on their own schedule. I got a lot of great advice that allowed me to revise my plan before I started, and helped me be successful pretty much from day one.

2) To keep me focused and on-track. My plan lays out a clear set of goals and criteria that I use to find and analyze properties that I consider for purchase. By documenting my criteria and my plan, it has helped keep me from straying from my original plan and keeps me on-track to achieve my goals.

3) To get financing. It's nice to have a clear, concise plan that I can hand to lenders when they ask. In fact, my plan helped me get the funding I needed to quickly scale my business.

4) To find investors/partners. Just like getting financing, I could hand the plan (along with my investor prospectus) to potential partners and investors, and they could review it on their own before sitting down with me. By the time we were ready to chat, they already knew what I was doing and where I was heading, so it made these discussions a lot more productive.

So, for me, there were a lot of uses for my plan. Had it just been for me, it likely would have been much shorter (just a couple pages), but still would have been tremendously valuable.

J!

that plan was pretty much awesome. It helped clear up some things and helped me find a structure to my ideas.

I appreciate it, and i'll attribute my future success to you. It's all your "fault" =)

I'd be interested to see some business plans from some RE Investors. I had a wonderful opportunity to shadow and intern for my best friends father and grandfather at their private equity firm right out of college.

Almost every day we we're having entrepreneurs and businesses come in with their business plans searching for backing. It was very interesting and enlightening to be in the shoes of the investor and see the deals that we're actually done and the ones that we're passed on. You can imagine that most deals are passed on. They had very strict guidelines as investors and we're NOT passive with their fund.

So in short, if you guys wouldn't mind posting some plans or sending them via e-mail, I'd be interested in looking them over. The SBA (Small Buiness Administration) can be a great resource and area to start.

Originally posted by Robert Jenkins:
J!

that plan was pretty much awesome. It helped clear up some things and helped me find a structure to my ideas.

I appreciate it, and i'll attribute my future success to you. It's all your "fault" =)

Thanks Robert -

I spent a good couple months putting both those plans together (the flipping SFH plan and the multi-unit investing plan).

Any questions, don't hesitate to shoot me an email...good luck!

Originally posted by J Scott:
Originally posted by Robert Jenkins:
J!

that plan was pretty much awesome. It helped clear up some things and helped me find a structure to my ideas.

I appreciate it, and i'll attribute my future success to you. It's all your "fault" =)


Thanks Robert -

I spent a good couple months putting both those plans together (the flipping SFH plan and the multi-unit investing plan).

Any questions, don't hesitate to shoot me an email...good luck!


This is a really good conversation. Can I get a copy of you business plan J?

Robert, as an investor drawing up my own BP this is critical to selling anyone on the vision.

My own plan focuses on leveraging capital there is a need to do the same with another resource - time.

A theme with my successful business contacts is they know how to delegate and create processes which can be easily replicated. Employees then begin doing the mundane tasks which lead to deals and the main players operate in key stages of deals/business pitches.

A theme with my successful business contacts is they know how to delegate and create processes which can be easily replicated. Employees then begin doing the mundane tasks which lead to deals and the main players operate in key stages of deals/business pitches.

That sure sounds nice, but in the real world......

Originally posted by MikeOH:
A theme with my successful business contacts is they know how to delegate and create processes which can be easily replicated. Employees then begin doing the mundane tasks which lead to deals and the main players operate in key stages of deals/business pitches.


That sure sounds nice, but in the real world......


It certainly works in the real world...

I flip about 15 houses a year (plus do some mobile homes), and only put in about 10-15 hours/week. As David says, I do it by creating processes and systems, and hiring out any work that is worth less than about $200/hour (which is basically everything other than finding the deals)...

Too many investors don't know how to run their activities like a business, and spend their lives working their investments just like a job...

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