My REI Biz Plan - Please review and give feedback!

2 Replies

Below is the first draft of the business plan I created for REI.

The final product will be created using liveplan.com to create a polished and professional looking plan.

The only thing that I'm still working on and is missing from this version is the financials at the end.

Any and all feedback is greatly appreciated!

Thanks in advance!

___________________________

Real Estate Investing Business Plan

Created by Johann Kleisch on 8/11/15

Mission Statement

Provide a way for Private Investors to generate high rates of return through Real Estate without having to buy, sell, or manage any property.

Executive Summary

Company Description:

Better Way Properties, LLC is a Limited Liability Company created in WI, and additional LLC's will be formed as necessary to help protect assets and limit risk.We buy and hold Multifamily Real Estate that provides strong cash flow in stable and emerging markets.

Members:

The 50/50 members are Johann and Carolyn Kleisch. Johann will serve as the President and Manager. His experience includes over two years as a Realtor and over fifteen years as a rental property owner and landlord. Carolyn will serve as the Vice President and Secretary. Her experience includes over ten years as a manager and bookkeeper including the bookwork for an employer who owned multiple rental properties.

Our Team:

Our team of professional includes: Real Estate Investing Consultant, Realtors, Accountant, Insurance Agent, Banker, and Real Estate Attorney. All of whom have numerous years of experience with Real Estate Investors, and many of them personally own Rental Real Estate.

Five Year Purchase Plan:

We plan to buy one to three properties per year, starting with 2-4 unit properties and eventually 50+ unit properties by the fifth year.Totaling a minimum of 126 units within five years.

Property Criteria

Properties will be purchased at least 10% below appraised value.The target price is $25,000.00 per unit with average rents of $550.00, and a minimum of $100.00 monthly cash flow per unit.

Market Trends:

There is currently an unprecedented nationwide shift happening where more people are moving into rental property than ever before.The “Boomers” are not buying homes anymore and neither are today’s younger generations. Many industry experts agree that because of this nationwide shift, right now represents one of the best times in history to invest in Multi Family Real Estate.

How to Find Deals/Marketing

Great deals will be found by: Working closely with Realtors, online ads and marketing through Social Media, Driving for Dollars, and targeted Direct Mail.

How to Fund Deals

The Kleisch’s are approved for up to 100% financing, and they currently have a $20,000 home equity line of credit available. Seller financing will be utilized when terms are acceptable, and additional funds will be generated from Private Investors.

Private Investor Funding Information

The minimum loan is $10,000.Loan options are 1-10 years with a 6%-13% return.Interest will be paid monthly or annually with a full principal repayment at the end of the loan term.

*Disclaimer: There are no guarantees of return on investment as there are some risks involved with all investments.

Exit Strategies/ How To Repay Private Investors Principal:

Refinance or sell the property and cash out.Another option is to exchange the first Private Investors mortgage position with a second Private Investor.In the unlikely scenario one of these options are not available, Private Investors will receive an additional 4% rate of return until one of the options listed above is available.

Examples and Financials

  • Examples of a 2, 8, and 50 unit property are located towards the end of this Business Plan.
  • The (5) five year financial information is found at the end of this Business Plan.

Business Legal Structure

Legal Structure

Better Way Properties, LLC is a Limited Liability Company established in Wisconsin.Additional LLC's will be created as necessary ensuring there are no more than (2) two properties per LLC to help protect assets and limit risk.

Ownership/Management

Principal Members

Johann Kleisch – 50% Member & Manager

Carolyn Kleisch – 50% Member & Secretary

The Kleisch’s have been together over seventeen years.They live in Evansville Wisconsin with four of their five children and look forward to continuing their journey of Real Estate Investing together.

Mr. Kleisch

Mr. Kleisch is currently an Engineering Technician at VP Buildings in Evansville WI.He also holds a Culinary Arts Degree and has much experience working with people to overcome challenges and solve problems.Mr. Kleisch sold Real Estate for over two years so he understands the various parts and stages of buying and selling Real Estate.Mr. and Mrs. Kleisch have owned and successfully managed a duplex for over fifteen years, learning many valuable lessons throughout the years that will assist them moving forward.

Management responsibilities for Mr. Kleisch include but are not limited to:

  1. Finding, analyzing, buying, and selling rental properties.
  2. Coordinating rehab and repairs required before and after tenants occupancy.
  3. Most areas of property management including: Finding and screening tenants, singing leases, coordinating repairs and maintenance, and evictions (for the first 10-12 units).
  4. Some bookkeeping such as data entry into their Buildium property management software program (for the first 10-12 units).

Mrs. Kleisch

Mrs. Kleisch is currently a CNA (Certified Nursing Assistant) at St. Marry’s Hospital in Madison WI.She has also been an EMT (Emergency Medical Technician) in Evansville WI for over fifteen years.Mrs. Kleisch managed a restaurant for many years including all the daily, weekly, and monthly accounting activities.Plus she was responsible for the monthly bookwork required for the restaurant owner’s rental properties.Mrs. Kleisch assists with the management of their duplex too.

Management responsibilities for Mrs. Kleisch include but are not limited to:

  1. Assist with the coordination of rehab and repairs.
  2. Help find and screen tenants.
  3. Help with finding good deals through various types of marketing.
  4. Secretary duties including:Accounts Payable & Receivable, creation & distribution of invoices/contracts, filling, data entry into their Buildium property management software program.

The Better Way Properties Team

Real Estate Investing Consultant/Mentor

Shane Fiest

  • Currently owns more than ??? rental units.
  • Founder and owner of XYZ Property Management company which currently manages over ?? rental units.
  • Founder and owner of Another Way LLC, a Real Estate Investing consulting company.

Realtors

Lori and Doug Davis, Centry 21

  • Over 41 years combined experience selling Real Estate.
  • Sold hundreds of rental units throughout Wisconsin.
  • Actively working with many other residential Real Estate Investors.
  • Work as a team so much more flexible with scheduling.

Accountant

Rachel Lindemann, MBA

  • Owner of HQ Accounting & Tax Serices, LLC
  • Accountant since 2008
  • Currently works with multiple Real Estate Investors
  • Experienced with creating and maintaining LLC's

Real Estate Attorney

Jonathan W. Groessl, Carney Thorpe, LLC

Insurance Agent

Jeff Farnsworth

  • 30 years as an Insurance Agent
  • Currently working with multiple Real Estate Investors insuring hundreds of rental units
  • Over 40 years as a Real Estate Investor himself with a passion for historic preservation

Banker

Jeremy Cosson

Experience & Advantages:

  • Over 15 years as a banker
  • Over 10 years specializing in Residential Real Estate
  • Has worked with and helped grow the portfolios of many Real Estate Investors throughout Wisconsin.

    Property Management Companies

    Rock County:

    Milwaukee County:

Investment Strategy

Purchase Strategy:

Buy and hold, multi-unit residential properties with low to no cash out of pocket.

Five year Purchase Plan:

  • Year One:purchase 2-3 properties each consisting of 2-4 units.
  • Year Two:purchase 2-3 properties each consisting of 4-16 units.
  • Year Three:purchase 2-3 properties each consisting of 8-24 units.
  • Year Four:purchase 2-3 properties each consisting of 24-50 units.
  • Year Five:purchase 1-2 properties each consisting of 50-200 units.
  • Totaling at least 126 units within five years.

Property Criteria

  • Purchase price of at least 10% less than appraised value.
  • Target price is $25,000.00 or less, per unit.
  • Average rents of $550.00 per unit.
  • Minimum cash flow of $100.00 per unit.
  • Targeting “Value Added” type properties, meaning, properties where expenses can be reduced and income can be increased.

Markets & Trends

The markets we will focus on are as follows:

  • Years One & Two:Rock County, WI
  • Years Three & Four:Rock & Milwaukee Counties, WI
  • Year Five:Emerging markets throughout the USA, to be determined at that time.

Important Points and Trends:

  • More wealth has been created through Real Estate than any other means.
  • There is currently an unprecedented nationwide shift happening where there are more people moving into rental property than ever before.The “Boomers” are not buying homes and neither are today’s younger generations.
  • Many industry experts agree that right now represents one of the best times in history to invest in Multi Family Real Estate.

How to Find Deals/Marketing

  • Working closely with Realtors to get real time updates of properties on the MLS (Multiple Listing Service).
  • Craigs List adds.
  • Marketing on Social Media sites like Facebook and Bigger Pockets (Social Media site for Real Estate Investors).
  • “Driving for Dollars”:Driving through neighborhoods of interest, and contacting owners of potential properties.
  • Direct Mail targeting multi-unit property owners (one of the best ways to find off market deals).

How to Fund Deals

  • 80%-100% of the purchase price will be funded through banks.Mr. and Mrs. Kleisch are currently approved for financing through Greenwood State Bank in Evansville WI.The creation and building of Business Credit is also a priority.
  • Seller Financing of 5%-100% will be utilized when available and if the terms are acceptable, in addition to other creative financing options.
  • Private Investors:Private Investor funds will be utilized as necessary.
  • The Kleisch's currently have $20,000 available from a HELOC (Home Equity Line Of Credit) to use as necessary.
  • Repair costs required prior to occupancy will be funded by one of the resources above.

Private Investor Funding Information

General Information:

  • Funds will be held by a Title Company and withdrawals can only be made with the Private Investors approval.
  • Funds must be available to Better Way Properties LLC for a minimum of(1) one year.
  • Rate of return does not apply until the funds have been used towards a property.
  • 3% Interest will be paid on the balance of funds held by the Title Company for more than (60) days.

    *Example: If $100,000 is made available but only $90,000 is used after (60) sixty days, 3% interest will be paid on the extra $10,000 until it gets utilized for a property.

  • Monthly (or annual) payments will be interest only with the principal paid in full by the last day of the loan term.
  • Better Way Properties, LLC reserves the right to repay principal at any time prior to the last day of the loan term, ending the obligation to pay interest.

*Disclaimer* There are no guarantees of return on investment, as there is some risk involved with all investments

Planned Rates of Return:

  • (1) One year loans, interest paid monthly:
  • $10,000 = 6%
  • $25,000 = 7%
  • $50,000 = 8%
  • $100,000 = 9%
  • *Notice: If you must have principal repayment prior to (1) one year,

    your rate of return will be reduced by (½) half andrepayment may take up to (60) sixty days from the date of request.

  • (3) Three year loan, add 1%.
  • (5) Five year loan, add 2%.
  • (10) Ten year loan, add 3%.
  • (1) One annual interest payment rather than monthly, add 1%.

*Example: $100,000 loan for (3) three years with (1) one annual interest payment

equals an 11% return.

*Disclaimer* There are no guarantees of return on investment, as there is some risk involved with all investments.

Forms/Paperwork:

  • A Commitment Letter will be completed after an agreement to lend has been confirmed verbally.
  • A Mortgage and Deed of Trust will be given to Private Investors once a property has been purchase, securing their position in the property.
  • Tax form 1099-INT will be provided by January 15th each year for the interest paid to Private Investors.
  • After all principal and interest has been repaid in full, a Satisfaction of Mortgage will be completed to release the Private Investors position on the property.

Property Management

  • The first 10-12 units will be managed by Mr. and Mrs. Kleisch to gain more experience in property management.
  • All additional units will be managed by professional property management companies local to the subject property.
  • All property management companies with be overseen by Mr. Kleisch.

Exit Strategies

Our Options To Repay Private Investors Principal:

  • Refinance the property up to 90% LTV (Loan To Value) and use proceeds.With buying at a minimum of 10% discount, this will work in most cases.
  • Sell the property and use the proceeds.
  • Exchange the first Private Investors mortgage position with a second Private Investor.
  • Worst Case Scenario (if one of the above options are not available), while very unlikely, there is a plan.Continue renting the property and making payments to Private Investors until one of the options listed above is available.In this unlikely situation, the Private Investor will receive an additional 4% rate of return until the principal is paid in full.

What if one or both of the Kleisch’s passed away?:

  • If Mrs. Kleisch passed away, Better Way Properties, LLC will continue on as planned but expect a break from purchasing more properties.
  • If Mr. Kleisch passed away, Better Way Properties, LLC will keep it's current property inventory, but most likely will not purchase additional properties.
  • If both of the Kleisch's passed away simultaneously, Better Way Properties, LLC will be owned equally by the Kleisch's (5) five children.All properties may or may not be sold, but all Private Investors will be paid in full within (180) one hundred eighty days from the Kleisch's passing.Paying Private Investors in full will be achieved by selling properties if necessary.

Example Of A Duplex Deal

$50,000.00 All In w/ 20% Down Payment:

Purchase Price$44,000.00

Closing Costs$1,000.00

Repair Costs$5,000.00

Total Costs$50,000.00

Income:

1 Bedroom upper$525.00

2 Bedroom lower$625.00

Total Monthly Income$1150.00

Expenses:

1st Mortgage, 80% ($35,200.00 at 6% interest over 25 years)$227.00

2nd Mortgage, Private Investor Funds ($14,800.00 @ 11%)$136.00

Taxes$150.00

Insurance$70.00

Utilities (water & sewer) $40.00

Vacancy Rate (10%)$115.00

Repairs and Maintenance (5%)$58.00

Capital Expense (3%)$35.00

Property Management Fee (10%)$115.00

Total Monthly Expenses$946.00

Cash Flow:

Income$1150.00

- Expenses-$946.00

Monthly Cash Flow$204.00

Example Of An 8 Unit w/ 10% Seller Financing

8 Units at $224,000.00 all in:

Purchase Price$208,000.00

Closing Costs$1,000.00

Repair Costs$15,000.00

Total Costs$224,000.00

Income:

8 units at $600.00 each$4800.00

Coin operated laundry on site$100.00

Total Monthly Income$4900.00

Expenses:

1st Mortgage, 80% ($166,400.00 at 6% interest over 25 years)$1073.00

2nd Mortgage, 10% Seller Financing ($20,800.00 @ 10%)$174.00

3rd Mortgage, Private Investor Funds ($36,800.00 @ 11%)$338.00

Taxes$450.00

Insurance$150.00

Vacancy Rate (10%)$490.00

Repairs and Maintenance (5%)$245.00

Capital Expense (3%) $147.00

Utilities (water & sewer) $300.00

Property Management Fee (10%)$490.00

Total Monthly Expenses$3857.00

Cash Flow:

Income$4900.00

- Expenses$3857.00

Monthly Cash Flow$1043.00

Example Of A 50 Unit Deal

50 Units at $1,350,000.00 all in:

Purchase Price$1,150,000.00

Closing Costs$2,000.00

Repair Costs$198,000.00

Total Costs$1,350,000.00

Income:

50 units averaging $610.00 each$30,500.00

On site coin operated laundry$500.00

On site vending machines $100.00

Total Monthly Income$31,100.00

Expenses:

1st Mortgage, 85% ($977,500.00 at 6% interest over 25 years)$6,298.00

2rd Mortgage, Private Investor Funds ($372,500.00 @ 12%)$3,725.00

Taxes$3,000.00

Insurance$1,000.00

Vacancy Rate (10%) $3,110.00

Repairs and Maintenance (5%)$1,555.00

Capital Expense (3%)$933.00

Utilities (water & sewer) $2000.00

Property Management Fee (10%)$3,110.00

Total Monthly Expenses$24,731.00

Cash Flow:

Income$31,100.00

- Expenses$24,731.00

Monthly Cash Flow$6,369.00

Financials

That is a well thought through plan. I believe you will be very successful. As we discussed,  I will pass along any properties I see that fit you criteria.  Best of luck! 

Johann,

This is absolutely amazing.  I'm really impressed.  There is a lot to read, so I need to look at it more carefully.  You have definitely put in a lot of time and detail in your plan, and no doubt it will pay off in the future.  Great job!

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