New York, NY · Member since 2013 · 54 posts · 7 votes
I have been trying to write a business plan and because we are just starting by doing small investments, it is difficult to find/create a plan that is so basic.
Do I need a business plan before I start investing in to real estate? We plan to start small with buy and hold property and rent them out. Our plan is to start with 2.
Should I wait until we have acquired more investments, obtained cash flow from properties?
Investor · Saint Paul, MN · Member since 2012 · 128 posts · 56 votes
12y
Hi Dana, business planning is a process, not just a document. I would start a plan and not worry too much about initial format. You can even use a brief one-pager at first. I would include:
-Strategy: the high level goal you plan to accomplish
-3-5 goals/tasks to work toward that support your strategy
-Dates and milestones, both short- and long-term
-Measures of success: how you know your plan is working
-Next steps: what you'll do immediately to get started and keep momentum
In my humble opinion, focus and discipline are two of the most important characteristics of a successful buy and hold investor. You'll need to keep and manage written documents, especially if you form an LLC or similar and purchase properties.
I have been trying to write a business plan and because we are just starting by doing small investments, it is difficult to find/create a plan that is so basic.
If you're starting small, it should be EASIER to create your plan. What part of creating your plan are you finding to be difficult?
Real Estate Investor · Lincoln, NE · Member since 2013 · 584 posts · 353 votes
12y
I wouldn't spend too much time on a biz plan. No one but you will ever read it. It is only useful for making you think through your business. I would spend more time on your deal analysis to make sure you are making your money going in like all good real estate investors do.
Certainly, @J Scott would be one of, if not the best examples of putting plans into action.
What I've observed is successful people starting with smaller goals and surprising themselves when they surpass them to a large extent.
It seems to me it should alive and growing as you do. There are so many variables that keep changing that a rigid long-term plan with super high expectations might be fun but might be something to fall short of, but what do I know. Ask someone like @Rich Weese about plans and goals. He would really know how they work.
Real Estate Investor · Member since 2013 · 866 posts · 487 votes
12y
You should create an overall business plan for your business. It may be very basic as you are starting. For example, if you are looking to buy and hold rentals, what are the market conditions in the area you want to buy? What are economic fundamentals that make investing in that are a sound decision?
Then as you consider each property, you need to figure out how that property fits into your plan.
I know many prefer to fly by the seat of their pants, we bought lots of properties over the years from them at steep discounts. :)
Real Estate Investor · Sioux Falls, SD · Member since 2013 · 415 posts · 84 votes
12y
I totally think you should spend a little time writing down a business plan!! Do I think it needs to be formal and lengthy? no. But you need to know a direction to travel and a path on how to reach your objectives.
It can be something as simple as:
I want to wholesale 2 properties a year that profit $3000 minimum each. In order to take my family on a nice vacation every year.
You would want a little more details on how you plan to achieve those deals but to know what you are trying to do and why will be way more beneficial than thinking 6 months down the road oh man I dont have $6,000 sitting here for the family vacation next month.
Written down goals are huge and that is what a business plan is . Whats the big deal if you spend a Saturday thinking and going into details on how your going to get each step done? Then you will have a guide to fall back to whenever you have a question on what your trying to do. :)
I totally think you should spend a little time writing down a business plan!! Do I think it needs to be formal and lengthy? no. But you need to know a direction to travel and a path on how to reach your objectives.
It can be something as simple as:
I want to wholesale 2 properties a year that profit $3000 minimum each. In order to take my family on a nice vacation every year.
You would want a little more details on how you plan to achieve those deals but to know what you are trying to do and why will be way more beneficial than thinking 6 months down the road oh man I dont have $6,000 sitting here for the family vacation next month.
Written down goals are huge and that is what a business plan is . Whats the big deal if you spend a Saturday thinking and going into details on how your going to get each step done? Then you will have a guide to fall back to whenever you have a question on what your trying to do. :)
Just my 2 cents
Best of luck!!
That's not a business plan, it is a written goal. Which is a good thing. But, a business plan would explore and document the market potential for the homes you intend to wholesale. It would explore how you will market to acquire the properties and the ultimate buyers. The same for your funding sources, and so much more.
Investor · Saint Paul, MN · Member since 2012 · 128 posts · 56 votes
12y
Hi Dana, business planning is a process, not just a document. I would start a plan and not worry too much about initial format. You can even use a brief one-pager at first. I would include:
-Strategy: the high level goal you plan to accomplish
-3-5 goals/tasks to work toward that support your strategy
-Dates and milestones, both short- and long-term
-Measures of success: how you know your plan is working
-Next steps: what you'll do immediately to get started and keep momentum
In my humble opinion, focus and discipline are two of the most important characteristics of a successful buy and hold investor. You'll need to keep and manage written documents, especially if you form an LLC or similar and purchase properties.
Real Estate Investor · Sioux Falls, SD · Member since 2013 · 415 posts · 84 votes
12y
@Duncan Taylor Im not sure if you didn't read my entire post or not...
Any legitimate business has an objective or you may say a purpose/goal.
In my post :
Written down goals are huge and that is what a business plan is . Whats the big deal if you spend a Saturday thinking and going into details on how your going to get each step done? Then you will have a guide to fall back to whenever you have a question on what your trying to do. :)
Is this not the same thing on what your saying?
But, a business plan would explore and document the market potential for the homes you intend to wholesale. It would explore how you will market to acquire the properties and the ultimate buyers. The same for your funding sources, and so much more.
Unless I am misunderstanding what your saying, it sounds like your saying a business plan is not a goal? Most business plans start with a mission statement in which it tells the purpose of a business. It then goes into telling how the business will achieve its mission by going into detail everything from day to day operations to marketing to advertising to legal structure etc...
I would 100% agree with you by saying if you don't plan then you plan to fail!
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
12y
I think it's safe to say that a good business plan should answer (at a very minimum):
- Who?
- What?
- When?
- Where?
- Why?
- How?
In other words, a business plan should absolutely contain goals, but in addition, it should contain action steps to achieve those goals (MILESTONES), discussion of how you'll afford to work towards those goals (FINANCING), an overview of who is involved in achieving those goals and their specific roles in the operation (BUSINESS STRUCTURE, BREAKDOWN OF RESPONSIBILITIES), substantiation for why those goals are achievable (MARKET ANALYSIS, COMPETITIVE ANALYSIS, CUSTOMER ANALYSIS), a discussion of the obstacles/risks standing between you and those goals (RISK ASSESSMENT), and how to mitigate/circumvent those obstacles/risks (RISK MITIGATION, ALTERNATE EXIT STRATEGIES).
Do you need to write all of it down? Nope, but by writing it down, you'll be forced to really think critically about all these things and not just gloss over them in your mind. Additionally, by writing your plan down, you can hand it over to others to critique.
And having others critique your plan is the best way to ensure that it's reasonable. I gave my original business plan away to over 15,000 people to review and use as a template. In retrospect, the plan was horrible. Luckily, I didn't have to figure that out all on my own...I had others tell me...and saved me lots of time and money...
I wouldn't spend too much time on a biz plan. .... It is only useful for making you think through your business.
How do you have a successful business if you don't spend a lot of time thinking it through?
I didn't say not to think it through, I said not to fret over a formal written plan. I've written many business plans for companies seeking venture investments and learned along the way that no one reads them. Writing a business plan can force you to think it through, but it's not the only way.
Absolutely think through your business and what you intend to do, but don't expend a bunch of effort on a formal document expecting people to read it or for that document to help you attract investors.
Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes
12y
I think that the "written business plan" thing is similar to what the success gurus (or life coaches) push. Such as, "goals are not goals unless they're written", "everyone should have a budget", "if you don't have written goals....", etc etc etc. These types of sayings sell a lot of books, but who says that everyone has to do things the same way? Everyone has different skills and personalities. I've been very successful without written goals and business plans (I think I did write one out for 2008, but I can't remember doing any others). Anyway, different strokes for different folks. If you need a plan, if you have that type of personality, then do a plan. Otherwise, don't do one just for the sake of doing one.
New York, NY · Member since 2013 · 54 posts · 7 votes
12y
I appreciate everyone's advice. You have helped me to realize that I just need to write down our business goals and as the business grows, our biz plan will expand/change.
I agree with @Aaron Junck that I need a plan or I'm planning to fail. I am a person who likes to have a step by step plan laid out and if I need to find a detour a long the way so be it. At lease I have a road to follow.
I was wondering how to start one because the ones I find on the internet are for large corporations and it was too much for a start up business.
Also, I am partnering with my husband and since we both have ideas and goals I feel we need a plan for both of us to follow to keep us both on same page.
Thanks to all of you I feel less stress writing a plan.
Keep your advice coming!!
Dana
Can you make a cake for me? Probably not without a set of directions. You might get lucky and pull it off, but only after you had to throw the first few batches in the trash until you got all the steps in the right order.
So if we tell you...
House, paint, 2x4s, mortgage, shingles, 5/4 deck boards, toilet, real estate agent, taxes, title insurance, llc, income tax, 1031, $1250 mo rent, backup exit strategies.
Can you flip a house? Probably not without a set of directions.You might get lucky and pull it off, but only after you had to throw the first few batches in the trash until you got all the steps in the right order. When the "batches" cost you $20,000 instead of $20, it's not really worth the risk to try.
I understand that you are looking at a couple of "buy and holds" and the plan will be different then flipping, but you still need a set of directions. Some things I'd include...
Are you going through a wholesaler? If so, have you contacted them to tell them exactly what you're looking for? Are you going to auctions? If so, where are they? When? Are you just searching the MLS? Then who's your Realtor? Why that person? How are you going to obtain financing? Down payment? How much can you rent for if you buy in this neighborhood? How much in that one? Who's your property inspector? How much do they charge? Who's going to do the maintenance? Who's a good local plumber? Electrician? What's the income tax requirements on rentals? What can I write off? Who's a good tax attorney? Who's a good accountant that can prepare my tax returns in January? What will they charge? Etc, etc, etc...
There are a boatload of questions that should be answered before you buy your first property. Do they have to be? No. You can still make a cake without directions, but I wouldn't eat it.
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
12y
Again, the best reason to write down your plan is to allow for others to review, critique, tear apart, and help make it worthwhile. As an example, I worked at Microsoft for a long time...we had a lot of really smart people and we were all working towards common goals.
But, every year, my team spent hundreds of hours putting together a business plan for our business unit and our product lines (as did every business unit). The reason? So that Steve Ballmer could read it and ask us REALLY HARD questions about our plan, force us to justify our milestones, force us to substantiate our assumptions, force us to validate our competition, and ask us to prove that we really knew our market.
Ballmer didn't know the technology, the product, the market or the competition like we did...but that didn't mean he couldn't read the plan and find holes in it -- and he did. So we re-wrote it until it made perfect sense. Did we always achieve our goals and hit our targets? Of course not. But, we had a plan that gave us the greatest opportunity to accomplish what we were setting out to accomplish.
My main point is, we had people who knew more about their business than anyone in the world, and yet our plans were easily ripped apart by others, who weren't experts and weren't blinded by our belief that we were perfect. If experts have trouble putting together a bullet-proof plan without outside critique, imagine how hard it is for someone who isn't an expert in their business.
Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
12y
Hey @Dana N. welcome to the site! Feel free to jump right in the forums to ask your questions. If you haven't yet- be sure to setup some "Keyword Alerts."
Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
12y
@Dana N. , a business plan is good but keep it simple. A 1 to 2 page business plan is all you need. When you're starting out in any business, you really don't know much so part of your plan is to acquire the know-how you need to be successful. And when I say "know-how", not just knowledge from a book but talk to people who have succeeded in what you want to do.
If you want to acquire more properties, talk to people who have 50-100 rental properties. Work for them for free if you have to. What you will learn working for them for a few months will be way more valuable and useful than what you will learn reading books and attending seminars.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
I definitely wouldn't write a business plan. I would only write out enough to cover your goals and how you plan to accomplish them, solely for your own reference.