Why Real Estate Investors Need a Business Plan 


Real estate can make a great investment, but in order to be successful and to achieve your long- and short-term goals, it is necessary to treat it like any other business. This means that you need a solid business plan before you even begin looking at properties.

“A business plan allows real estate investors to not only identify objectives, but also determine a viable course of action towards their attainment,” states Jean Folger for Investopedia. “A business plan also allows investors to visualize the big picture, which helps maintain focus on the goals rather than on any minor setback. Real estate investing can be complicated and demanding, and a solid plan can keep investors organized and on task.”

Real estate can make a great investment, but in order to be successful and to achieve your long- and short-term goals, it is necessary to treat it like any other business. This means that you need a solid business plan before you even begin looking at properties.It is easy to get emotionally attached to a charming house with great potential or to a beautiful view from a plot of land. The risk of emotional complications with real estate is why it is especially important for real estate investors to make sure their business plan is complete before they embark on any new project and to make sure that they stick with it.

Working backward may work well in some types of businesses, but real estate isn’t one of them. You will save yourself a good deal of time, money and stress if you work along a specific timeline, completing your business plan first.

“First, you find the plan,” Andy Heller states. “Then you find the house to fit the plan. Pick your investment model, and then go find property to match that. Don’t find the strategy after you find the home.”

Waiting to look at properties until after you have a set strategy in mind is the best way to avoid letting emotions get in the way of getting a good deal. In your business plan you will set a specific target price that you shouldn’t go above in order to make the best profit, and you will be less likely to exceed your budget in a last-minute bidding war or while negotiating with the seller if you have a clear picture in mind of exactly how much you can spend.

Furthermore, it helps cast a wide net and find multiple properties that could suit your needs. There will be no temptation to go over budget if you know there are other suitable properties on the back burner.

After you have your business plan in place, it is a good idea to get people more experienced in the business to examine it. Finding a mentor who has been in the real estate investing world for several years is a great way to do this, and building a relationship with a mentor will continue to be helpful during the whole process and for many years to come.

“It’s rare that you can find somebody who can start up in real estate without some guidance,” states Heller. “My advice to a new investor would be to join an association, find seasoned investors, buy them lunch and present your plan. Ask them to poke holes in it.”

Then you can move on to the exciting part: touring properties and finding the best one to put your plan into action.

 

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