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You could just start making offers on houses and hope it all goes well. But a good real estate investing business plan makes your success in fixing and flipping houses more likely. A good plan keeps you moving forward, and lets you know if you are on track.
Updating the plan as you learn more keeps you from getting discouraged. So change it as necessary, but put it in writing in some form from the start. This is to get you thinking like a businessman. Your plan doesn't need to have to be formatted like a traditional business plan, but it should answer these questions:
1. What type of investing are you going to do? You might write "Flipper LLC invests in two and three bedroom fixer-uppers that have a profit potential of $15,000 or more." Or maybe you will specialize in mobile homes on land, or in flipping contracts without taking possession of the houses.
2. What are you projections? How long will it likely take to turn (flip) each property? What do you expect your average profit to be? How many houses do you plan to fix and flip each year? How many offers will you have to write to buy that many properties, and how many will you have to look at to write that man offers? Of course you'll guess at these things, but the idea is to start with something and adjust as you go. If you want to do three houses this year, and you find you have to see 100 properties to buy one good one, then you better plan on seeing six properties per week.
3. How much cash do you have to invest? If you have nothing, you of course have to make a plan based on nothing-down deals, at least to start. This is possible, especially if you start by just flipping contracts (more on that in a coming lesson). But it will always be easier to make money if you have some. Consider selling anything that you don't need to raise capital. Save a portion of your paychecks for investing.
4. What other "fast money" resources do you have? What can you have in your hands in a few days? For example, do you have credit cards you can use for short-term financing of repair costs? Family or friends that will loan you money? Can you borrow against a retirement plan?
5. What about primary financing? You need to know if you can borrow from banks and other lenders, so talk to a few. What kind of real estate are they lending on? At what interest rates? What percentage of the purchase price or value will they lend?
6. What people resources do you have available? Who will answer your tax questions? Who will head the repair projects? I'll have more on making this real estate investing "team " part of your business plan in a coming lesson.
7. How much time will you have to invest? Will you have the time to do what needs to be done? Will you work on your real estate business mostly on weekends, or can you put in some hours during the week? Plan ahead for things like closings, to be sure that you can take time off work for them.
The bottom line is that if you want your real estate investing to have a bottom line that looks good, a good business plan will help, so get that pen and paper out.
Steve
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Fix And Flip
Real Estate Investing Course.
Tips For Flipping A House | Real Estate Investing Business Plan