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Ryan Bilby
  • Residential Loan Officer
  • Santa Rosa, CA
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Please critique our REI business plan

Ryan Bilby
  • Residential Loan Officer
  • Santa Rosa, CA
Posted Jul 19 2010, 11:49

My partner and I are in the beginning stages of our real estate business. We have flipped a couple properties and would like some constructive feedback on our newly created business plan.

Thanks for looking and we look forward to hearing some constructive criticism. This is only a rough draft and havn't put in an about us yet. We chose Sac and SD because we are from these areas and know them the best.

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Mission Statement: Our mission is to buy discounted properties in lower income neighborhoods, fully renovate them, and sell them for a profit to first time home buyers and real estate investors.

Objective: LLC purchases single family residences, duplexes, and four-plexes in the Greater Sacramento and San Diego regions. We target properties that can be purchased at 65% and below of the after rehab value (ARV). The properties we purchase will need light to medium renovations not to exceed 20% of the acquisition cost (case by case basis if more than 20%) in order to meet or exceed comparable condition of homes in the area. In the Sacramento area, the value of the house after repairs will be up to $170,000 and in the San Diego region the value will be up to $250,000 after repairs. Our objective is to sell these properties quickly with a timetable of 90 days and to receive a minimum of 15% profit. We also understand the benefit of working within the community and will be using local employment to complete the renovation work on the house.

Market Analysis: We will be focusing on investing in properties in the Greater Sacramento and San Diego regions. The properties that we will be targeting will be low-income single family residences as well as duplexes and four-plexes. By targeting these specific properties it will allow us to capture a larger portion of end buyers such as first time home buyers, real estate investors, and rentals; which will increase the amount of demand and ultimately allow us to sell the properties more quickly and at a more competitive price.

Criteria: We invest in residential real estate by purchasing homes from motivated sellers at or below 65% of the after rehab value. This strategy ensures that we secure the profit upon the time of purchase and we realize the profit upon the sale of the property. Because we will only purchase properties at 65% of after rehab value, our maximum purchase price will be $110,000 in the Sacramento area and $160,000 in the San Diego area. Rehab costs will be 20% of purchase price and anything above will be looked at on a case by case basis. In the beginning stages of the business we will target cash buyers by giving them a discount on the property in order to decrease the amount of time we hold the property. As the business grows it will allow us to hold the property longer and seek out more conventional buyers, giving us a greater return on our investment.

Finding Deals: There are many avenues in which to find deals and therefore do not want to limit the ways in which we find them. We utilize a network of agents in both the Sacramento and San Diego areas to bring us potential properties and we give them an incentive to do so by allowing them to double-end the deal on both the selling and buying side. We also contact people who are in default and are looking to short-sale their home.
In the event that this takes place and the property fits our criteria, we will then act as the selling and buying agent to purchase the property in order to net a higher profit be eliminating paid out commissions. We will also go to local auctions as another way of securing discounted properties.

Financing: We finance our properties through private money sources at terms which allow us to meet our target profit. As our business grows, we will attract private money sources that we can utilize on a continual basis, ultimately building relationships that benefit both us and the lenders. We will build our network by going to local real estate investment clubs, frequenting large real estate forums, and by using the internet as a tool to cultivate relationship with people who are looking to make an attractive return on their money.

Rehab Plan: Once we have secured the property and found financing, the next step is to rehab the property in order to meet and exceed comparable properties sold in the area to maximize profit and ensure a quick sale. We first focus on the exterior to give the property curb appeal and to make the property marketable immediately. This is accomplished by improving the landscape, exterior paint, windows, etc. We will then address the interior by updating the kitchen with new appliances, cabinets, and countertops where needed; updating the bathroom with new vanities and showers where needed; and the bedrooms and common areas with updated flooring or carpets and paint.

Marketing: We attract buyers by putting it on the MLS. We also send out an email blast to our network of agents, brokers, and investors at slightly below market value in order to attract buyers and to get the property sold quickly.

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