Success in the real estate investing industry won’t happen overnight, and it definitely won’t happen without property planning or implementation. For entrepreneurs, a real estate investment business plan can serve as a road map to all of your business operations. Simply put, a real estate business plan will serve an essential role in the formation of your investing career.
Investors will need to strategize several key elements to create a successful business plan. These include future goals, company values, financing strategies and more. Once complete, a business plan can create the foundation for smooth operations and outline a future with unlimited potential for your investing career. Keep reading to learn how to create a real estate investment business plan today.
What Is A Real Estate Investing Business Plan (& Why Do You Need One)
A real estate business plan is a living document that provides the framework for business operations and goals. A business plan will include future goals for the company and organized steps to get there. While business plans can vary from investor to investor, they will typically include planning for one to five years at a time.
Drafting a business plan for real estate investing purposes is, without a doubt, one of the single most important steps a new investor can take. An REI business plan will help you avoid potential obstacles while simultaneously placing you in a position to succeed. It is a blueprint to follow when things are going according to plan, and even when they veer off course. If for nothing else, a real estate company business plan will see to it that investors know which steps to follow to achieve their goals. In many ways nothing is more valuable to today’s investors. It is the plan, after all, to follow the most direct path to success.
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8 Must-Haves In A Real Estate Business Plan
As a whole, a real estate business plan should address a company’s short and long-term goals. Though in order to accurately portray a company’s vision, the right business plan will require more information than a future vision. A strong real estate business plan will provide a detailed look at the ins and outs of a company. This can include the organizational structure, financial information, marketing outline and more. When done right it will serve as a comprehensive overview anyone who interacts with your business, whether internally or externally.
That said, creating an REI business plan will require a persistent attention to detail. For new investors drafting a real estate company business plan may seem like a daunting task, and quite honestly it is. The secret is knowing which ingredients must be added (and when). Below are seven must-haves for a well executed business plan:
Outline the company values and mission statement.
Break down future goals into short and long term.
Strategize the strengths and weaknesses of the company.
Formulate the best investment strategy for each property and your respective goals.
Include potential marketing and branding efforts.
State how the company will be financed (and by whom).
Explain who is working for the business.
Answer any “what ifs” with backup plans and exit strategies.
These components are what matter the most, and a quality real estate business plan will delve into each category to ensure maximum optimization.
A company vision statement is essentially your mission statement and values. While these may not be the first step in planning your company, a vision will be crucial to the success of your business. Company values will not only guide you through investment decisions, but will also inspire others to work with your business time and time again. They should align potential employees, lenders and possible tenants with the motivations behind your company.
Before writing your company vision, think through examples you like both in and out of the real estate industry. Is there a company whose values you identify with? Or, are there mission statements you dislike? Use other companies as a starting point when creating your own set of values. Feel free to reach out to your mentor or other network connections for feedback as you plan. Most importantly, think about the qualities you personally value and how those can fit into your business plan.
Goals are one of the most important elements in a successful business plan. This is because not only do goals provide an end goal for your company, but they also outline the steps required to get there. It can be helpful to think about goals in two categories: short term and long term. Long term goals will typically outline your future plans for the company. These can include ideal investment types, profit numbers and company size. Short term goals are the smaller, actionable steps required to get there.
For example, one long term business goal could be to land four wholesale deals by the end of the year. Short term goals will make this more achievable by breaking it into smaller steps. A few short term goals that might help you land those four wholesale deals could be to create a direct mail campaign for your market area, establish a buyers list with 50 contacts, and secure your first property under contract. Breaking down long term goals is a great way to hold yourself accountable, create deadlines and accomplish what you set out to.
SWOT stands for strengths, weaknesses, opportunities, and threats. A SWOT analysis involves thinking through each of these areas as you evaluate your company and potential competitors. This framework allows business owners to better understand what is working for the company and identify potential areas for improvement. SWOT analyses are used across industries as a way to create more actionable solutions to potential issues.
To think through a SWOT analysis, first identify your company’s potential strengths and weaknesses. Do you have high quality tenants? Are you struggling to raise capital? Be honest with yourself as you write out each category. Then, take a step back and look at your market area and any competitors to identify threats and opportunities. A potential threat could be whether or not your rental prices are in line with comparable properties. On the other hand, a potential opportunity could be to boost the amenities offered at your property to be more competitive in the area.
Any good real estate investment business plan requires the ability to implement a sound investment strategy. If for nothing else, there are several exit strategies a business may execute to secure profits: rehabbing, wholesaling and renting — just to name a few. This is where investors will want to analyze their market and determine which strategy will best suit their goals. Those with long-term retirement goals may want to consider leaning heavily into rental properties. However, those without the funds to build a rental portfolio may want to consider getting started by wholesaling. Whatever the case may be, now is the time to figure out what you want to do with each property you come across. It is important to note, however, that this strategy will change from property to property. Therefore, investors need to be able to determine their exit strategy based on the asset and their current goals. The reason this section needs to be added to a real estate investment business plan is because it will come in handy once a prospective deal is found.
While marketing may seem like the cherry on top of a sound business plan, marketing efforts will actually play an integral role in the foundation of your business. A marketing plan should include your business logo, website, social media outlets and any advertising efforts. Together these elements can build a solid brand for your business, which will help you build a strong business reputation and ultimately build trust with investors, clients and more.
To plan your marketing, first think about the ways your brand can illustrate the company values and mission statement you have created. Consider the ways you can incorporate your vision into your logo or website. Remember, in addition to attracting new clients, marketing efforts can also help maintain relationships with existing connections. For a step by step guide to drafting a real estate marketing plan, be sure to read this guide.
Writing the financial portion of a business plan can be tricky, especially if you are just starting your business. As a general rule, a financial plan will include the income statement, cash flow, and balance sheet for a business. A financial plan should also include short and long term goals regarding the profits and losses of a company. Together, this information will help when making business decisions, raising capital and reporting on business performance.
Perhaps the most important factor when creating a financial plan is accuracy. While many investors want to report on high profits or low losses, manipulating data will not boost your business performance in any way. Come up with a system of organization that works for you and always ensure your financial statements are authentic. As a whole, a financial plan should help you identify what is and isn’t working for your business.
Teams & Small Business Systems
No successful business plan is complete without an outline of the operations and management. Think: how your business is being run and by whom. This information will include the organizational structure, office management (if any), and an outline of any ongoing projects or properties. Investors can even include future goals for team growth and operational changes when planning this information.
Even if you are just starting out, or have yet to launch your business, it is still necessary to plan your business structure. Start by planning what tasks you will be responsible for, and look for areas you will need help with. If you have a business partner, think through each of your strengths and weaknesses and look for areas you can best compliment each other. For additional guidance, set up a meeting with your real estate mentor. They can provide valuable insights to their own business structure, which can serve as a jumping off point for your planning.
Exit Strategies & Back Up Plans
Believe it or not, every successful company out there has a back up plan. Businesses fail every day, but by creating a back up plan investors can position themselves to survive even the worst case scenario. That’s why it’s crucial to strategize alternative exit strategies and back up plans for your investment business. These will not only help you create a plan of action if something does go wrong, but will also help you address any potential problems before they happen.
This section of a business plan should answer all of the “what if” questions a potential lender, employee, or client might have. What is a property remains on the market for longer than expected? What if a seller backs out before closing? What if a property has a higher than average vacancy rate? These questions (and many more) are worth thinking through as you create your business plan.
How To Write A Real Estate Investment Business Plan: Template
The impact of a truly great real estate business plan can last for the duration of your entire career, whereas a poor plan can get in the way of your future goals. The truth is: a real estate business plan is of the utmost importance, and as a new investor it deserves your undivided attention. Again, writing a business plan for real estate investing is no simple task, but it can be done correctly. Follow our real estate investment business plan template to ensure you get it right the first time around:
Write an executive summary that provides a birds eye view of the company.
Include a description of company goals and how you plan to achieve them.
Demonstrate your expertise with a thorough market analysis.
Specify who is working at your company and their qualifications.
Summarize what products and services your business has to offer.
Outline the intended marketing strategy for each aspect of your business.
The first step is to define your mission and vision. In a nutshell, your executive summary is a snapshot of your business as a whole, and it will generally include a mission statement, company description, growth data, products and services, financial strategy, and future aspirations. This is the “why” of your business plan, and it should be clearly defined.
The next step is to examine your business and provide a high-level review on the various elements, including goals and how you intend to achieve them. Investors should describe the nature of their business, as well as their targeted marketplace. Explain how services or products will meet said needs, address specific customers, organizations or businesses the company will serve, and explain the competitive advantage the business offers.
This section will identify and illustrate your knowledge of the industry. It will generally consist of information about your target market, including distinguishing characteristics, size, market shares, and pricing and gross margin targets. A thorough market outline will also include your SWOT analysis.
Organization & Management
This is where you explain who does what in your business. This section should include your company’s organizational structure, with details the ownership, profiles on the management team and their qualifications. While this may seem unnecessary as a real estate investor, the people reading your business plan may want to know who’s in charge. Make sure you leave no stone unturned.
Services Or Products
What are you selling? How will it benefit your customers? This is the part of your real estate business plan where you provide information on your product or service, including benefits it has over competitors. In essence, it will offer a description of your product/service, details on its life cycle, information on intellectual property, as well as research and development activities, which could include future R&D activities and efforts. Since real estate investment is more of a service, it’s critical for beginner investors to identify why their service is better than others in the industry. It could include experience.
The marketing strategy is essentially your exit strategy as a real estate investor. This section will encompass how you intend to market and sell your product and service. For marketing, it will address various levels of strategies, including the market penetration strategy; a growth strategy; channels of distribution strategy; and communication strategy. In terms of the sales strategy, this portion will essentially cover how you intend to sell the product or service.
Additional Real Estate Business Plan Tips
A successful business plan is no impossible to create; however, it will take time to get right. Here are a few extra tips to keep in mind as you develop a plan for your real estate investing business:
Tailor Your Executive Summary To Different Audiences: An executive summary will open your business plan and introduce the company. Though the bulk of your business plan will remain consistent, the executive summary should be tailored to the specific audience at hand. A business plan is not only for you, but potential investors, lenders and clients. Keep your intended audience in mind when drafting the executive summary and answer any potential questions they may have.
Articulate What You Want: Too often, investors working on their business plan will hide what they are looking for, whether it be funding or a joint venture. Do not bury the lede when trying to get your point across. Be clear about your goals upfront in a business plan, and get your point across early.
Prove You Know The Market: When you write the company description, it is crucial to include information about your market area. This could include average sale prices, median income, vacancy rates, and more. If you intend to acquire rental properties, you may even want to go a step further and answer questions about new developments and housing trends. Show that you have your finger on the pulse of a market and your business plan will be much more compelling for those who read it.
Do Homework On The Competition: Many real estate business plans fail to fully analyze the competition. This may be partially due to the fact that, unlike a business with tangible products, it can be difficult to see what your competitors are doing. While you won’t get a tour of a competitor’s company, you can play prospect and see what they offer. Subscribe to their newsletter, check out their website, or visit their open house. Getting a first hand look at what others are doing in your market can greatly help when creating a business plan.
Be Realistic With Your Operations & Management: It can be easy to over estimate your projections when creating a business plan, specifically when it comes to the organization and management section. Some investors will claim they do everything themselves, while others predict hiring a much larger team than they do. It is important to realistically think through how your business will operate on a regular basis. When writing your business plan, be realistic about what needs to be done and who will be doing it.
Create Example Deals: At this point, investors will want to find a way to illustrate their plans moving forward. Literally or figuratively, illustrate the steps involved in future deals: purchases, cash flow, appreciation, sales, trades, 1031 exchanges, cash-on-cash return, and more. Doing so should give investors a good idea of what their deals will look like in the future. While it’s not guaranteed to happen, envisioning things has a way of making them easier in the future.
Schedule Business Update Sessions: Your real estate business plan is not an ironclad document that you complete and then never look at again. It’s an evolving outline that should continually be reviewed and tweaked. One good technique is to schedule regular review sessions to go over your business plan. Look for ways to improve and streamline your business plan so it’s as clear and persuasive as you want it to be.
Above all else a real estate investing business plan will be inspiring and informative. It should reveal why your business is more than just a dream and include actionable steps to make your vision a reality. No matter where you are with your investing career, a detailed business plan can guide your future in more ways than one. After all, a thorough plan will anticipate the best path to success. Follow the template above as you plan your real estate business, and make sure its a good one.
Did the above business plan template help you get started? Share your process in the comments below.
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