How to Create a Real Estate Investment Business Plan
Starting a real estate investment business can be a great way to grow your wealth. However, it’s important to have a well-thought-out plan in place before you get started. In this article, we will discuss the steps you need to take to create a successful real estate investment business plan. We’ll talk about setting short-term and long-term goals, as well as how to financially plan for growing your real estate portfolio.
If you’re ready to start investing in real estate, let’s dive in!
Before creating your real estate investment plan, it’s important to know why you’re investing in the first place.
What is your motivation for wanting to invest? Are you getting in the market now to save up for retirement? Are you hoping to become a full-time real estate flipper?
Once you have a good understanding of why you’re doing this, it will be easier to come up with goals, strategies, and action plans that fit with what you want to achieve.
Why create a real estate investment plan?
There are a few key reasons why you should create a real estate investment plan:
- To set short-term and long-term goals for your business
Without having clear goals in place, you may be prone to making impulsive or impractical decisions as you begin your investment journey. Use your goals as a barometer.
- To figure out how much money you need to save up for your investments
Creating a business plan means getting crystal clear on what out-of-pocket expenses to expect as you grow your portfolio.
- To develop strategies for finding good deals and growing your portfolio
Your business plan should have a clear and repeatable strategy you can use to source, acquire, and manage your investments.
Now that we know why a plan is so important, here are the 10 steps you need to follow in order to create a real estate investment business plan.
Step 1: Define your short-term goals
What are your goals for the next 12-24 months? What do you hope to achieve in that time frame? Your short-term goals should be realistic and achievable, and they should help you move closer to your long-term goals.
Here are some ideas to help you get started:
- When do you want to buy your first property?
- How much do you need to save up for a down payment?
(If you think you need tens or hundreds of thousands to get your first investment, check out BuyProperly. They help investors get started for as little as $2,500 using a fractional ownership model.)
- What sort of returns (if any) are you looking for in your first 12-24 months?
- What other expenses are you saving up for?
Step 2: Define your long-term goals
Here’s where we get into the fun stuff! Your long-term goals should be even more ambitious than your short-term goals. What do you hope to achieve in the next five, ten, or 20 years? How will your real estate investment business help you reach these goals?
Are you hoping to build a nest egg so you have money for your child’s college tuition? Are you planning on saving up for retirement?
Remember, real estate is a long-term game that works best when you’re prepared to hold onto your properties. When setting financial goals, look at both the potential rental income and appreciation over time to get a better idea of your return.
Step 3: Assess your current financial situation
Before you can start investing in real estate, you need to know where you stand financially. How much money do you have to invest? What is your credit score? How much debt do you currently have? Answer these questions and more in order to get a clear picture of your current financial situation.
Once you know how much money you’re working with, assess whether it’s enough for you to get started (comfortably) in traditional real estate investing.
Make sure you have enough money to cover:
- The closing costs (lawyer’s fees, surveys, title search, realtors, etc.)
- One-time repairs
- Property management fees
- Utilities, mortgage costs, and taxes
- Ongoing maintenance and repairs
These expenses can really add up, so be sure to factor them into your financial plan. In fact, it’s often this step that makes many people rethink real estate investing altogether.
When new investors check out BuyProperly, they’re often shocked to learn that traditional real estate isn’t the only way to grow a lucrative portfolio. BuyProperly helps people get started in real estate for a small fraction of the cost of traditional investing.
Step 4: Create a solid financial plan
Now that you have an idea of what you need to begin investing in real estate, it’s time to build out a solid financial plan.
Investing in real estate can be a great way to grow your wealth, but it’s important to understand how to invest and what to expect before you get started.
Anticipate your monthly expenses
In your area, what are average management costs? What about heat, electricity, and water?
Look at potential rental income
What can you expect for a 1, 2, or 3-bedroom rental in your area?
What monthly net income can you expect?
After all expenses, work out what you expect to receive monthly.
What annual appreciation are you expecting?
Look at your local market to determine these rates.
How will you continue to invest?
Will you be able to leverage your current assets to continue growing your portfolio?
Step 5: Research the market
Before you invest in any property, it’s important to do your research and understand the current real estate market conditions.
First, decide on the area you want to invest in. Do you want to stay local or are you open to investing out of your city or province?
Next, take a close look at your chosen area. Are prices rising or falling? What are the current vacancy rates? How much competition is there for properties in your area?
Knowing this information will help you make smarter investment decisions.
Step 6: Choose your investment strategy
There are many different ways to invest in real estate, and each comes with its own set of risks and rewards.
First, do some research and decide which investment strategy is right for you. Maybe you want to buy and hold properties for the long term, or maybe you’re interested in flipping houses for a quick profit.
Next, decide on which type of real estate investment you’d like to start with. Are you looking for single-family dwellings with lower repair and maintenance costs, or multi-family buildings that can yield a higher return but are more expensive to get underway?
Are you hoping to quickly leverage your properties to grow your portfolio, or are you more interested in buying properties that have the potential to appreciate over time?
Having a clear strategy in place before you start investing is the best way to ensure you’ll meet your short and long-term goals.
Now it’s time to create your business plan
Even if you’re not raising funds or seeking outside investment, it’s always a good idea to have a business plan in place. This will help you stay organized and keep track of your progress over time. It can also be helpful when applying for loans or other financing.
Now that you know your goals and what you need to do to achieve them, it’s time to put together a real estate investment business plan. This will act as your roadmap for growing your portfolio and achieving success in real estate investing.
Your business plan should include the following:
– A description of your business
– The goals you hope to achieve with real estate investing
– How you plan to finance your investments
– Strategies for finding and evaluating deals
– Plans for managing your properties
– Marketing and sales strategies
– Projected income and expenses
– A risk management plan
Creating a business plan is not easy, but it is essential if you want to be successful in real estate investing. It will help you stay on track and make smart decisions as your business grows. So take the time to create a plan that is tailored to your specific goals and needs.
With a well-constructed business plan, you can confidently move forward with your real estate investment business and achieve the success you desire.
Real estate investing can be a great way to build wealth and create financial security for you and your family. But like any business, it takes planning, hard work, and dedication to succeed.
By following the steps outlined in this article, you can create a real estate investment business plan that will help you reach your goals. Stay focused on your goals, do your research, and take action to make your dreams a reality!
So what are you waiting for? Start planning today and see how real estate investing can change your life.
Learn how BuyProperly helps investors get 10-40% projected annual returns for a fraction of the cost of traditional real estate investing.