Investing in real estate properties can be a very lucrative business. However, since most new investors do not readily have the startup capital needed to launch a company and immediately buy a few properties, getting supplemental financing is in order – and that requires a business plan.
What types of real estate do you plan on buying?
Banks, lenders, and financiers want to know your specialty. Do you flip residential properties? Do you buy real estate to be developed into office space? Health care facilities? Restaurants? Apartment complexes? Having a niche shows that you understand that particular market, and that you are focused on the ins and outs of the zoning regulations and building codes that come with specific property types.
Where are you investing?
That old cliche about location being the key to good real estate investments holds true, and your business plan should show where you are looking to buy property. Your business plan should have a map, detailing property values, current prices, and projections to show what they will be worth one, three, and even five years from now. Showing how the surrounding area is being developed, and what currently exists is also important information to include in your plan.
Who is working with you and who is your target?
Most real estate investors do not work alone, simply because the entire operation requires accounting, legal expertise, contracting (in the case of construction and rehabilitation), and more. Your real estate investment business plan should detail who these people are, and include an overview of their companies so that lenders can be reassured that you are working with the right people.
Profits and Projections
The bottom line numbers are just as important as the methods you use to reach them. People who are just getting into real estate investment need to show how much it costs to run the business (detailed monthly expenses), and how much money is needed to buy the first few properties. In addition to those figures, the business plan needs to have projections of how long it will take to start making money off of property investments, and what the revenues will look like after the first year, on up to three, five, and ten years down the line.
It’s a Guide, Not a Rule Book
Having a business plan for real estate investments goes a long way in reassuring potential lenders and partners that you are on the right track, but it also becomes a handy guidebook in case you hit a few speed bumps along your journey. If something occurs that isn’t detailed in your own business plan, then you can always figure out a Plan B, C, D etc. as needed. Your business plan lays out the guidelines for running your business, but you are not obligated to follow it to the letter.