Greetings Earthlings !
Just starting out in real estate investing, I am ON FIRE for this !
Want to start right, I'm very analytical ... Getting my team together, organizing my finances, starting up a business, talking to CPA, etc...
I went to SBA.gov to get some ideas about starting a business ... ran across the " Writing a Business Plan " section ...
Was curious about how you view having a business plan ?
It looked more focused on people having a business that sells a physical product ... I know a home IS a physical product but not
in the sense of selling widgets, shoes, iPhones, etc ...
What are you thoughts about taking the time to create a business plan ... I have my goals and vision for investing but this would be different ...
You must have a plan, but a REI plan isn't like a business plan you found the template for. The REI plan starts with your financial goals, then you break them down into parts of those goals (i.e...cash flow for car payments, profit from flip for paying off a credit card, etc...), then you establish the criteria from these "parts" ( I refer to them as "milestones"), then you match the "milestones" criterias to the Markets where the profiles of the properties in that/those market(s) match the criteria from the milestones (at that time in your plan's timeline). All of this must also be connected by applying specific strategies to the markets you found, that will bring you the profits/cash flow from those markets that match the criteria in your plan.
...<taking a pause for a breath here>...
Nothing to it.
Thank you Joe, for taking the time to reply and share your knowledge !
May I ask for one piece of advice you would pass onto a beginner ? (aside from your answer above)
Having figured out my current budget this week. I think my next move will be to look long term toward what I expect from REI. Then reverse engineer how I get there. As Joe said. Start with the end in mind and work backwards from there. I'll need to make milestones along the way as big goals, and make little stones(goals) along the way to make it to the milestones. I know on multiple BP podcasts Brandon Turner showed evidence for truth being in the old adage "Most people don't plan to fail, they fail to plan". So my next goal will be to plan the next 5 years out.
I work in SBA lending, and I do real estate. What Joe says is mostly right that business plans are traditionally for more complex businesses because real estate is brain dead simple, especially rental real estate.
THAT SAID, writing a business plan is always a good idea if for nothing else than to organize your strategy. Doing a SWOT analysis, market analysis, growth projections, and generally selling your ideas on paper is highly valuable. Look at this way, if you want to grow big, eventually you're going to need to sell your idea to someone else or a bank and you're going to do so on paper. It shows people you've thought of your business thoroughly, you've thought of the risks and addressed them, and it shows your competency/responsibility. Best to start practicing this skill set as soon as possible.
There is ZERO downside risk to working on business plans, and there is a lot potential missed opportunity in the future by being unprepared when you do need to provide one. Basically, you don't need one at all until you do, then you'll be kicking yourself for not having one.
Thank you all for your encouragement to sit down and think thru how I will run my business and most importantly, identifying and mitigating RISK, especially with someone else's money !
Meeting with a CPA on Tuesday to stand up my LLC and then step 2 !
Thanks again !