Successful Investing Requires A Business PlanBy Paul Esajian on October 18, 2013
Investing in real estate is a business and every investor needs to treat it as such. Similar to that of any other business you may get into; you must come up with a business plan, marketing strategy, budget and more. Too many investors think that they can just call a local realtor, get in their car, make an offer on the first property they see and close in two weeks. That only happens on reality shows and is far from the truth. To succeed as an investor, or any other businessman, you need to map out a plan well before you ever get started.
What is your goal for your business? This seems like an easy enough question, but most people can’t answer it. Are you looking for short or long term income? Would you rather make $10,000 on ten deals a year or try to make $100,000 on two? Would you entertain the possibility of taking on a partner? What do you intend to do with any profits? Having a business plan is like following a road map, it will tell you where to go and how to get there. Where you end up may be completely different than what you expected, but if you don’t have anything resembling a plan, you will likely end up lost.
One of the best parts about investing in real estate is that anyone can do it. You do not need a license or any other prerequisites. What you do need is knowledge of the market you intend to invest in. You need to know everything about the demographics, market trends, projects in development and pending and recent sales in your area. This will shape how and where you invest. No good businessperson would think of opening a restaurant without knowing about prospective clientele. The same theory should apply to knowing everything about the area that you will be investing in.
After you map out your goals and scout out where you are going to concentrate on, the next thing you need to do is think about getting actual deals. Networking is always the best way to get your name out there, but that won’t get you deals if you are just starting out. You will need some kind of marketing plan and a respective budget. You can mail letters, email realtors, hang bandit signs, track pre-foreclosures or have your realtor scour the MLS for deals. Whatever your strategy is, assign a dollar figure next to it and then add ten percent. Finding your first deal will not happen overnight, but if you stick with your marketing plan it will eventually happen.
While you think about how you are going to get deals, you should be thinking about how you are going to finance them as well. Perhaps you are fortunate enough have cash on hand that can finance deals. If not, you will need a firm mortgage pre-approval or have private financing in place. Over time you will develop more contacts and more options, but you may need to lean on your realtor or attorney for help in the beginning.
Closing deals is not as easy as it may appear. You may get lucky and jump right in and find a deal in your first 30 days. The odds are that will not happen. If your goal is to be in the business for the long haul, you need to come into it with a solid plan and vision for where you want it to go. Things can and probably will change over time, but without a plan you are doomed to fail.