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Did you know that the impact of a great real estate investment business plan can last your business for your entire career? A real estate business plan is the most crucial aspect of starting your business and needs your full attention. Keep in mind that real estate is one of the fastest-growing industries globally. Hence, if you are planning to venture into this business, you need a road map. A business plan acts as a road map to a successful venture. It helps you lay out your growth plan, business goals and strategies to help you improve your chances of success. It will also help you raise funds or gain partners to contribute to the initial start-up cost. Hence, if you didn’t plan for a business plan, get started! Here is the step-by-step guide to developing a real estate investing plan.
Key Pointers for Developing a Successful Real Estate Investing Business Plan
Before we go to the steps of writing a real estate business plan, it is crucial to comprehend the following tips to put into consideration while writing your plan.
- Customize your executive summary to appeal to different audiences. Remember, a business plan is not just to help grow your business but also for investors, lenders, or clients. Though the main points of your summary will remain consistent, ensure your call to action is tailored to the specific audience at hand. You can even call in investors to invest and provide reasons at the end of the summary.
- Be specific about what you want; don’t bite around the bush if it’s a partnership you wish to or investors; be clear on it. Also, be clear about your goals and the values of the company. Also, if you want to start out with rental units, here are the start up costs.
- Show that you know your market. Ensure that you provide information about your market area, such as average sales price, vacancy rates, and detailed target information, among others. Showcase your know-how in the industry.
- Thoroughly research on competitors. Many people downplay their competitors’ efforts, and hence, it becomes difficult to compete. Ensure you understand what your competitors are offering. Check out their website and visit any of their pen houses. Knowing what others are doing will help you plan.
- Be realistic with operations. You can easily give the wrong structure either by stating you will manage everything alone or by providing a huge management team. It is crucial to think of how your business will operate on a regular basis.
- Plan for regular updates. Your business plan is not final, and you can change it. It would help if you planned for times you can review it, for instance, yearly or biannual. It’s an evolving document that should continually be reviewed and altered if the need arises. Always look for ways to improve your business operations and marketing strategies with the aim of growth.
Step By Step Guide to Developing A Real Estate Investing Plan
Sector 1: Brief Summary
The first step is to provide a summary of your business as a whole. The executive summary should be well elaborated to prompt the investor to invest; hence, it should be well-defined.
It should provide the following:-
- Overview of the real estate investing business
- Name your properties and locations.
- Description of your business, including product line history and management
- The type of real estate, including target market, competitors, competitive edge and how your company intends to maintain a competitive edge
- Marketing strategies
- Financial projections
You can write it as the last part, to be able to give a summary of the other segments.
Sector 2: Company Description
In this sector of a real estate business plan, you need to provide an overview of your business. Mention the products or services you will be offering in detail, indicate your business goals and show how you plan to achieve them. Additionally, explain the nature of the target marketplace and indicate the competitive advantage that you offer. What you should focus on-:
- Company Summary: Briefly describe the type of real estate you will be operating; for instance, selling three-bedroom houses to the middle class, selling apartment suites, land, etc. Also, indicate who your target market will be, your mission statement, and your future goals.
- Company history: Indicate why you want to venture into the Real Estate business and when you intend to launch it.
- Location: Indicate the location and why you choose that area. Also, indicate whether you will take it online.
- A detailed business name and concept depends on what your business offers.
- Legal structure: Indicate if you have a company structure to show whether it’s a partnership, sole proprietorship, or anything else.
- Management: who will run the business? Mention the significant roles and shares per person.
Sector 3: Market Analysis
It is time to show you have researched your competitors. Here, provide knowledge about your competitors, their strengths and weaknesses and how you plan to be better than them. Also, describe your target audience, including the age group, their characteristics and geographic location.
It is great to showcase that you have an idea of the people you are targeting. In addition, conduct a Swot analysis and indicate your strengths, weaknesses, opportunities and threats and show how you plan to maximize your strengths and how you will work to better your weaknesses and overcome potential threats.
Sector 4: Organization & Management
Every successful business needs to have an organizational structure. Provide details of the ownership of the company. Is it solopreneurship, or do you have partners? In the case of partners, indicate the roles every partner plays. Also, if you have a management team, include them here and mention their qualifications and roles. Remember, the people interested in investing in your company need to know the people in charge and provide all the necessary details.
Sector 5: Services Or Products
In this sector, it is crucial to describe what you are selling to the people. Indicate the properties you want to sell, i.e., land, apartments or houses (define the houses/property). Also, provide the locations of the property you are selling.
To conclude this section, ensure every product or service is well-detailed; this section should be informative. You can help readers or potential investors comprehend your Airbnb’s value.
Sector 6: Marketing Strategy
You are new in the market, and you need to be known or heard. Hence, it would help if you had a well-defined marketing strategy to penetrate the market. We have different forms of marketing, such as traditional and digital marketing. Traditional marketing includes billboards, television ads or newspaper ads. To be more diverse, you should pick at least one conventional means of advertising to introduce your product, like a billboard or TV commercial targeting your target audience. You could also focus all your marketing efforts on digital marketing, where you utilize social media platforms, Google Ads, websites, or even paid-per-click advertising. For the first month, the aim is to increase brand awareness. In that way, you get people to know that you exist and that you are a legitimate real estate company.
You could also invest in influencers in the lifestyle industry who will attract a large audience to your firm. When looking for marketing techniques to implement, first think of your brand and how you can illustrate your values and mission statement when marketing. In addition, think of ways your vision can be incorporated into your logo to ensure your brand passes the same message across. The aim is to build trust, increase awareness and make sales. Hence, ensure each strategy showcases you as a trustworthy brand.
Sector 7: Financial plan
In a business plan, you need to provide an overview of the financial projections. Indicate where you plan to obtain your finances, as starting a real estate company can be quite expensive.
You should include all your financial projections, i.e., profit and loss, startup cost, breaking even, etc. Your financial plan should have the cash flow, income statement and a balance sheet. It should also include short- and long-term goals concerning the company’s losses and profits. Don’t be tempted to impress investors; ensure your figures are very accurate.
- Sales projections for the first five years – Foremost, identify the prices you will charge for each property. Then, estimate how many properties you can sell in a year. You can go the extra mile and use barcode projections.
- Expenses budget – Note down areas you will be spending your money, like rent and salary. Then, do a five-year projection.
- Profit and loss margins – Estimate sales projections and budget analysis to get the profits or losses. Be as realistic as possible to avoid projecting over.
- Cash flow statement – Show the cash flow in and out for a month and then a year. Include cash flow from clients, loans, taxes, personal funds, or even loan repayments used in the real estate business.
- Break-even analysis- Show when you foresee your business breaking even in the first five years. Notably, this happens when all your expenses are covered, and all your sales surpass the expenditure of the costs. After breaking even, your real estate business starts making profits throughout.
Sector 8: Exit Strategies & Back-Up Plans
Well, every successful company has a backup plan. It doesn’t mean you plan to fail; it means you are prepared for the best-case scenario and also for the worst-case scenario. Many investors are well equipped to survive even in worst-case scenarios by creating a backup plan. Hence, it would help if you prepared exist strategies for your investment. Notably, this will help you have a plan if business goes wrong, and it will aid you to address any potential issues before they occur. In addition, this section should help answer all the what-if questions. For instance, what if the property takes longer than expected to sell? What if a buyer backs out at the last minute? What if a property is flooded and damaged?
Think through the what-if questions and provide what you plan to do in those scenarios. Notably, this will help you to always be prepared.
Conclusion
A real estate business plan is more like a living document. It should be updated on a regular basis as the company changes and grows. You need to have a robust business plan to ensure your business succeeds. Remember, a business plan should showcase why your business is not just a dream but a well-thought business with actionable steps to make it a reality. Don’t just dream; start actualizing your dream by developing a plan; we have provided you with the most crucial segments to include in your plan to ensure it succeeds. Start writing now.
