Investor Business Plan


I have a question. When you are seeking investors, do you prepare a business plan for each separate property or do you just share your business plan with the investor? Is there such a thing as a property report?

I know that each investor will have their own specifics, however, I am looking for a simple template that I could prepare ahead of time for the investor and then provide more information as requested.

What kind of report or plan do you share with investors?

Any advice is greatly appreciated.

Thank you!

Attracting ‘investors’ for a real estate deal, and attracting ‘partners’ to a business plan, are two different things, or should be.

You don’t need a business plan to attract investors. You need a deal.

Otherwise, this is all bizzy-work people get mixed up in, to justify their procrastination, and alleviate their fears. Forget all that.

Work to find a deal. Did I mention you need a deal first?

Get the deal; then attract the partners/cash/expertise.

Of course, if you plan to go full-on SEC-style REIT, then you’ll need a business plan. However, even then, it’s first about having a deal to show prospects. The deal comes first, the plan comes later, if at all.

When I first found partners for my first multi-family deal, I had already negotiated and purchased the deal. Then I went looking for ‘rehab’ partners. [This is where creative ‘no down payment’ financing techniques come in handy.]

If I had waited to find partners interested in partnering with me on a deal like this, I would have lost the deal, and never found anyone interested.

I mean here’s the honest description of my first deal that would have attracted exactly no partners:

"This is a 30-unit project with seven paying tenants, and the rest are dealing drugs out of the building. It’s across the street from the largest park in the area, with the largest drug trafficking activity in the city. Not to mention the largest welfare community in the state. It’s on a dirty corner with an extra large amount of trash flowing from the park.

The vacancy factor sucks drain water at more than 11%, and so we’ll depend on marketing to “credit challenged” tenants exclusively to get profitable rents, as even Section 8 is not adequate to cover our basic costs of operation.

All the units have appliances and equipment that are either over-sized, or odd-sized, and roughly 30% more expensive to replace than otherwise.

The roof is flat, and is in need of approximately $11,000 in repairs, and will require $2,000 in repairs during every year of ownership. None of the units have been updated since the building was built in 1965. Updating costs will range between $5K to $7K per unit or $150,000 to $210,000.

The paying tenants will stay and the rest will be evicted. There is a chance of long term eviction delays as a result of “habitibility” issues, bankruptcies, system-gaming, and the like.

Also there are some non-paying black tenants, who believe the current management treats them differently, and consequently in a discriminatory manner, and are likely to be a problem to evict.

The current manager is accommodating drug traffickers and accepting kick-backs. The building is under surveillance by the DEA.

It will take approximately 12 months to completely stabilize the property, if the evictions go smoothly.

After an infusion of approximately $250,000 in cash, and the GSI is stabilized at $250,000, the cashflow will be approximately $100,000, or a 40% COC."

What I actually did:

I asked prospective partners if they “wanted to split a quarter of a million dollars profit with me, over three years? Yes, or no?” “What’s it gonna cost us?” they asked. “$50,000 up front, and another $200,000 over twelve months.”

I found partners for my deal within three phone calls. I showed them the property, the current operating data, and the potential, and it was an easy sell. We wrote up a partnership agreement, signed it, and I got the operating capital two days later.

We did have a problem with a black tenant over discrimination, and I did get to become a witness against three drug dealers, who all claimed mistaken identities, until I showed up in court …and then they caved.

And I split more than a quarter million dollars with my partners in three years.

No business plan. Nothing, but a phone call and a tour of the dump, and I got what I needed.

Frankly, I think it’s more profitable to borrow the money you need, than use partners. But you do what you have to do, when you have to do it. FWIW

So, the moral of my story?

Find a deal, offer to split the profits, and ask, “Deal? Or No deal?”

Anything more makes you look like a nervous amateur. This assumes you actually have a deal.