My Draft of a Business Plan

General Real Estate Investing
1

Please let me know if this is how a business plan should look. And then comment on feasibility. Thanks!

Continue education whilst following this plan.

  1. Join REIA
  2. Start getting my name out there
  3. Start out with 10 option deals, starting with single family homes, with the 8th as a duplex, 9th as a triplex/fourplex, and the 10th as a commercial property.
  4. Begin the 3 option/1 cashflow model, with the first two being single families, and the third being an duplex->multiplex, then for the first few cashflow properties, lower leverage, but as you get more, higher leveraged, and more residents
  5. As cashflow approaches cash gained from optioning, go to 2/2, with 1/1 on single family and commercial, respectively, and the second half on ever increasing apartment complexes
  6. As cashflow approaches double cash gained from optioning, go to 1/3, the 1 being a commercial property. Start training some people to act as your bird dogs/possibly form LLC/corp to start having others bring you options
  7. As cashflow approaches 5x cash gained from optioning, focus only on cash flow, doing options only as deals are presented, that are irresistable.
2

Reserved for updated BP with the changes suggested.

Continue education whilst following this plan.

  1. Join REIA
  2. Start getting my name out there
  3. Start out with 10 option deals, starting with single family homes, with the 8th as a duplex, 9th as a triplex/fourplex, and the 10th as a commercial property.
  4. Begin the 3 option/1 cashflow model, with the first two being single families, and the third being an duplex->multiplex, then for the first few cashflow properties, lower leverage, but as you get more, higher leveraged, and more residents
  5. As cashflow approaches cash gained from optioning, go to 2/2, with 1/1 on single family and commercial, respectively, and the second half on ever increasing apartment complexes
  6. As cashflow approaches double cash gained from optioning, go to 1/3, the 1 being a commercial property. Start training some people to act as your bird dogs/possibly form LLC/corp to start having others bring you options
  7. As cashflow approaches 5x cash gained from optioning, focus only on cash flow, doing options only as deals are presented, that are irresistable.
3

What is your goal? What are you trying to do with this business plan? Simply owning a bunch of properties is certainly not the goal. What specifically are you trying to do. Are you looking for a certain amount of cash flow? Or a certain net worth? How many properties will you need to meet your goal? What is your timeframe?

Mike

4

My goal is freedom from financial worries eventually. Also, I’m drawn to the allure of RE, and in a way my goal is to own lots of properties, one day some big building in Manhattan or something. I’m not gonna lie, the ego is there:(

As the value of the dollar is so unstable nowadays, I don’t think I can quote on a number, but 1 mil/year wouldn’t be too shabby (post tax). Net worth, I’d like to be rich enough to be able to enable me to take time to go to Africa and China and help develop those areas, and rid it of its AIDS pandemic and its starvation/malnutrition problems. (And pollution for China, and prevent that problem in Africa)

Property #, depends, no real round #. Timeframe, my life, preferably financially secure within 2-3 years.

How would I integrate that all into a busines plan? Anything else I’m missing?

5

Well, let’s start with the 2-3 years you mention. You need to figure out what your goal is at the end of 2-3 years and then work backwards. For example, if you wanted to have $500,000 net worth and $5,000 per month positive cash flow at the end of 3 years, how many rentals would you need to accomplish that goal? Without a specific timeframe and specific dollar amounts, you really don’t have a goal that you can measure.

Good Luck,

Mike

6

This is the part that I don’t think I’m experienced enough or qualified enough to answer. Was your number on the low or high end of what I might reasonably expect? I would say I’m a hard worker about what I care about and not so much on what I don’t. I’ve spent many a night for the past half dozen month unable to sleep planning and reviewing material, so yeah, I’m somewhat obsessed. IQ > 160, so hopefully understanding concepts won’t be/hasn’t been a problem. Rather stubborn, only tries harder when fails repeatedly. But no experience at all in this segment. I was rather thinking millionaire hopefully in 2-3 years, +5 figure monthly cashflow. I’ll be starting as soon as I return to my town (in the Big Apple atm), and start getting a feel for comps in different neighborhoods and where the selling and buying is happening.

7

Plan Outline
Emperor,

Because you asked, here is an outline of a typical business plan.

1.0 Executive Summary
Highlights
Objectives
Mission
Keys to Success

2.0 Company Summary
Company Ownership
Start-up Summary
Company Locations and Facilities

3.0 Services
Competitive Comparison
Sales Literature
Fulfillment
Technology
Future Services

4.0 Market Analysis Summary
Market Analysis
Market Segmentation
Target Market Segment Strategy (Market Needs, Market Trends,Market Growth

5.0 Strategy and Implementation Summary
Competitive Edge
Marketing Strategy
Sales Strategy
Strategic Alliances
Milestones

6.0 Management Summary
Organizational Structure
Management Team
Management Team Gaps
Personnel Plan
Personnel

7.0 Financial Plan
Important Assumptions
Key Financial Indicators
Break-even Analysis
Projected Profit and Loss
Projected Cash Flow
Projected Balance Sheet
Business Ratios

As a general rule, you need a business plan when you are soliciting backers to inject operating capital into your company. A great business plan is the best way to show bankers, venture capitalists, and other investors that you are worthy of financial support.

A business plan should prove that your business will generate enough revenue to cover your expenses, but a business plan may vary depending on your audience. If you are writing a plan for your colleagues and partners to expand an existing business, then the focus of that plan may be more operational than financial. If you are writing a plan for a bank, the most important aspect to the bank manager will be your financials. Are your assumptions realistic? Will the cash flow be enough that you can make the monthly payments for the loan you have requested? If you are writing a plan for a venture capitalist, the most important factor in a decision to invest in a company is the quality of the people. The venture capitalist will ask how experienced are the people that are going to run this business? Do they have knowledge of the industry? Have they started successful ventures in the past?

I suspect a Business Plan is a little too far ahead of the game for you at this point. Perhaps what you really need to get started and to organize your thinking are just a couple parts of the Business Plan. I suggest that you define your goals, keys to success, and then develop your investment strategy and implementation plan.

8

Emperor,

Dave T gave you an example of a formal business plan. This would certainly be appropriate for a major project, like when you take over NYC. However, I think a much simpler plan is adequate for starting your business. Personally, I use a 4-page business plan that just contains the basics and have always used that to get bank financing.

However, to answer your question about the numbers, a typical residential rental if bought at a BIG discount will generate about $100 per unit per month. To get that cash flow, you will be buying the property with at least a 30% discount to market value. ’

So, until you get better data for your local market, you could start with the assumption that you’ll get 30% equity at closing and $100 per unit per month cash flow. Using this data, you will have some idea of the number of rental units you need to generate the net worth and cash flow you desire. As you can see, it will be a fairly significant undertaking to meet your million dollar net worth and five figure income in 2-3 years!

Mike

9

The first thing you need to know is how much your life cost. Not how much you earn but how much you spend every month (unless you live paycheck to paycheck). Once you know that that is your nut. Until you have enough cashflow to cover your monthly nut you are working. As soon as your cash flow matches your expenses you are retired. Then you work on adding security and then rule the world rich. You can’t concentrate on long term wealth when you are worrying about getting your dry cleaning paid for. So you need to know what that number is.

10

Monthly expenses ~$20-50, depending on how much I drive that month, around 70% is gas cash. I’m in school on a full tuition scholarship + RA means free room + board, + some scholarships to help offset some stuff. I only pay for books + parking pass, this semester was bought last semester mostly, so should be ~100, parking pass is $150. I’m getting a 600+ refund for health insurance that I will get offset by via Medicaid.

On the previous posts, haven’t fully digested them yet, will go over them so I can reply to them with some clarity.

11

propertymanager

I’ll get back to you guys when I amass the few dozen trillion for that project:D (Or is is ~1.2 trill via 90% bank fi? Rofl. Just for perspective, gov income was ~5 trill ~10 years ago, last I checked:(

Thanks for the tip though.

Now as to your residential rental, x-plex, what is x? Du/Trip/Four? I’d imagine that as x → a sideways eight, cashflow would follow a bell curve to a sense, depending on what the market demands. Was your 500k/5k reasonable expectation for 1, 2 or 3 years? Or what is, assuming I’m not too boneheaded to listen to my more experienced peers? Don’t worry, I won’t be quoting you on this. (Besides, what does it matter if I do? You can just delete my posts>.<) I’ll be working in the Toledo “metro” area for quite a while. I hear you’re in OH, is that true?

12

Dave T

That model was definitely useful, I have it saved for future references, when RE becomes more of real estate than rich enterprise for me:D

13

Emperor,

I don’t think you are getting what propertymanager and the rest of us have been trying to tell you.

YOU have to set your own goals. Good goals are specific, measurable, and have a finite timeline for accomplishment.

It does not matter how many x’s are in an x-plex. Each X is a single dwelling unit that generates a specific monthly cash flow. If two x’s are under one roof, and on a single deed, we call that a duplex. Put 150 x’s on one piece of property and on a single deed, you have an apartment complex. For cash flow purposes, we expect each X we purchase to generate a certain amount of positive cash flow. If you don’t know your financial goal how will you know how many x’s you need to meet your goal?

Bell curve? I don’t think so. Aggregate cash flow is linear, the more x’s the higher the aggregate cash flow.

14
Was your 500k/5k reasonable expectation for 1, 2 or 3 years?

I don’t know. How hard are you willing to work? How long will it take you to learn the basics of the business so that you can get started? How is your credit? How many people do you know?

If you’re a broke college student without a solid source of income, I’d say the chances are about zero. (sorry to be blunt, but that’s the truth) However, that doesn’t mean that you couldn’t get started and make a good start in the next 1, 2, or 3 years.

Mike

15

Dave T

I fully comprehend that I need to set my own goals. I was merely commenting on the typical propensity for beginners to set unreachable goals due to their unflappable optimism. I was merely requesting for the help of the veterans here to help keep me grounded in realism:D

As for the bell curve for the x plex, I was commenting on how many units the locality could support. What good is a 4000 unit complex if the area only needs 200? Hence I was relating to what tends to be the “sweet” spot per person (population-wise) of x. You can argue that profits would scale linearly but I would regardless argue otherwise, even in the case that the locality could support x as x->infinity (-> for approaches) simply by accounting for economies of scale.

Please do correct me if I’m wrong. I realize I’m still new at this:( Thanks.

Edit: Clarity

16

So, what is your goal?

Mike

17

Here is my interpretation of goals, objectives, etc…

Goals need to be simple and straight forward. To meet these goals, you need to have specific measurable objectives defined for each goal. To meet these objectives, you need to have tasks/actions defined for each objective.

Quote: “My goal is simple. It is complete understanding of the universe.” — Stephen Hawking (1936)

Question: Can someone please come up with specific measurable objectives for the Stephen Hawking’s goal?

Cheers :smile

18

If you believe in an afterlife, and if you believe that everything will be revealed to you in the afterlife, then Hawkings objective might be to die and go to Heaven.

19

Dave T:

I am not sure if Hawking is believing in an afterlife and everything will be revealed in the afterlife, but he has spent over 40 yrs of researching the universe and space, and very famous for his “No-Hair” theorem (Black Hole). To me, he is purely a genius and can be ranked the same as Albert Einstein or even higher.

Others:

Please ignore this reply since it is not in the context of the discussion.

Regards!

20

[[[…Can someone please come up with specific measurable objectives for the Stephen Hawking’s goal?..]]]

I am sure that anyone functioning at or near his level in mathmatics and physics could do so, or at least a decent start at-- enough to keep him busy for a lifetime.

Just because I can’t do it or you can’t do it, doesn’t mean no one can. But hey… if you need a grocery shopping list, just let me know, because I am good at that. If you need quantum physics past the first year of university, I am stopped dead in my tracks. I don’t even have any dea of what they know at that level.

Hawking certainly had a goal. You don’t get to that level of knowledge by wandering around amlessly.