Even if it is likely that no one will ever see it, it is essential to create a business plan for your real estate business. You treat your real estate investment as a business, is not it? The process of developing the plan is extremely valuable. You will be required to ask yourself questions and find solutions to problems that you do not even know. At the very least, this will expose some threats to your business or identify potential opportunities, so you know what&39;s around you.
Here are four reasons why you need a business plan:
Evaluate your strategy
No process tells you more about your business. Once you are done with the plan, you will have a clear understanding of your SWOT analysis (strengths, weaknesses, opportunities and threats.) With this information, you will be able to accurately plan for success. The development of the business plan should take a long time and you will focus on some key areas. These include your product, your competitors, the market and of course your numbers.
I like the numbers, so moving to the financial section is one of the most important elements of the business plan in my opinion. You&39;ll want to link your financial goals to your plan to limit your margins and the number of transactions you need to make. Of course, these are projections and a business plan is a working document that needs to be updated throughout the year.
Several times a year, you must manage your financial statements and update your business plan. Read about your industry and check your competition. Stay informed about what&39;s going on. It&39;s easy to ignore this issue and get caught up in daily business activities, but without staying up to date, you will not be able to make the changes necessary to stay or succeed.
Let&39;s say you are really focusing on turning properties in Thornton. Thornton is saturated with investors and wholesale prices are starting to rise. Materials prices are also rising, but resale prices are not higher. Your plan provides a profit of $ 15,000 per property, but you now earn $ 5,000 or $ 10,000. The sooner you recognize this and look for other neighborhoods, the closer you will be to the end of year forecasts.
Locate your target market
Most of the successful investors we work with are concentrating their activities. With real estate, one focuses most often on the location. Yesterday I met an investor who buys only homes in Washington Park. It never adds surface in square feet, but does complete renovations. He does it again and again and earns a few hundred thousand dollars a year. This is great because he knows the area and offers on almost all properties that come to the market. He buys houses that nobody else knows because he sells his business in this area. He knows the market and the competition.
Other investors really focus on one type of seller and the market for them. Some of my best offers were when I was advertising for probate services. Direct mail for certification was an integral part of my business plan. The consideration of different opportunities should be part of the business planning process so that you are required to research your target market.
Attract partners and investors
It&39;s rarer than what you might read on the Internet, but it&39;s a real benefit of your business plan. My banker or salesman never asked me to provide a business plan and I borrowed millions of dollars. What is really helpful is when you are dealing directly with individuals for funding. This could include private lenders or partners. Investors need to know how we manage our business and how they will benefit. For this reason, we communicate to them the entirety of our business plan when they consider us as an investment option. This proves that we have done our research and that we have a solid growth strategy.
Our business is a little different from that of an individual investor, but anyone investing in your business has the right and will probably ask you to share your plan.