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The Art of Creating a Real Estate Investment Business Plan

Gavin Finch
Written by Gavin Finch 

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Businesses don’t stumble into success. They slowly make their way there by following a path or forging their own if one doesn’t already exist. Luckily for you, thousands of real estate investors have walked this path before you, so there are well-established steps you can follow to create a real estate investment business plan that will guide you to success.

It involves a number of steps and a serious focus on education, research, and identifying a specific niche. But if you can figure out what you want to focus on, you can build a strong real estate investment business plan that will carry you throughout your journey and create a very profitable business. Here are the steps you need to follow.

Understand what’s possible in your market

The first step to success in real estate is figuring out what’s available in the area you want to work. It functions somewhat like a SWOT analysis, but instead of focusing on strengths, weaknesses, opportunities, and threats, you’ll spend most of your time focusing on opportunities in your market.

This step involves evaluating what’s happening around you and which of the available property types are the most profitable. It’s important for two reasons: it helps you organize your thinking by giving you a list of possibilities and it helps you discover opportunities you had no idea existed. 

For example, you may not have known that there’s a thriving townhouse community in your city unless you do the research and ask around. At the same time, you may think that there’s a great market for college apartment rentals. But when you start researching, you may find that most students live in on-campus housing. 

The best way to uncover market information is to get involved with local real estate agents and investors. You can find them at real estate meetups or by introducing yourself and asking for help learning about the local market. Another great way to conduct this informal market analysis is driving for dollars. By picking areas where you think there will be opportunities, you can confirm your hunches and even uncover new opportunities. 

Understand your goals and limitations

We put this step in second place for a reason. If you start with your goals and limitations, you’re naturally going to limit what you can achieve. You won’t look at options that seem unrealistic, and you could miss out on the most profitable opportunities of your career. But once you’ve had a chance to evaluate your market’s potential and you know what’s available, you can establish realistic expectations.

Being realistic is important because it’s the only way to create an actual plan. For example, don’t set out to buy a multi-million dollar high-rise when you’re a new wholesaler with no money. Setting that as your real estate investment business plan isn’t going to take you anywhere. 

But if you’re realistic about your budget, you may realize that there are a lot of townhouses that could make great rental properties or that local increases in businesses and job opportunities will make single-family homes a great long-term investment. However, you should also make sure that your real estate investment business plan aligns with your goals

Don’t start buying long-term rental investments just because you can when your real plan is to build a wholesaling business. And don’t start scaling a wholesaling business if you plan on investing in rental real estate long-term. This is called shiny object syndrome and it can throw your investment strategy off-track. If you have a long-term goal and it’s realistic in your market, stick to it. You’ll have a chance to expand to other strategies once you’ve established your business.

Choose your target properties and find your niche

Once you’ve aligned your realistic goals with what your market has to offer, you’re ready to commit to a niche. A niche is a segment of the market that you specialize in, and establishing it early will keep you from getting distracted by all the opportunities swirling around you. 

To construct your niche, first choose the type of real estate investing you want to do. If you’re new to the industry and you don’t have much money, wholesaling is a great place to start. If you have money to invest and are willing to embrace risk, you can start looking for rentals or fixer uppers

Once you make that decision, you can choose the kind of property you want to focus on. If you’re going to wholesale, you’ll probably spend your time pursuing single-family homes, since they’re the easiest to sell to cash buyers, but you can also target townhouses and multiplexes, too. 

If you’re going to fix and flip, you’ll specifically look for damaged or neglected single-family houses, since your ideal buyer will likely be a homebuyer. And if you’re going to establish cash flow by renting, pretty much anything is fair game: multiplexes, apartment buildings, single-family homes, townhouses, and even condos!

Once you’ve made these two decisions, you’ll have a very specific idea of what you want to focus on. This might seem counterproductive since it will keep you from focusing on other opportunities, but being focused is a winning strategy, especially if you’re new to the industry. Focusing means you’ll develop your skill set and get really good at investing in a specific type of property. That might be all you need to make millions of dollars, but once you understand the industry, it will also help you branch out and take on new challenges.

Grow your network

Once you know what to focus on, the next most important part of a real estate investment business is your business connections. Having people you can rely on to get you early access to information and connect you with opportunities will make you more money than any skill you can develop on your own. So take every professional interaction seriously. You won’t want to work with everyone you meet, but the more people you’re in good standing with, the more business will come your way. 

This is especially true if you’re wholesaling. Without cash buyer connections, you’re going to scramble to figure out your exit strategy every time you get a deal under contract. But when you have well-established relationships with other investors, finding someone to buy your deals will be far easier. You can even start reverse wholesaling, so you won’t need to focus your time on executing an advanced marketing plan.

So how do you build these relationships? Start by going to local events and introducing yourself to everyone you can. You can also enroll in a mentorship program, which will give you instant access to joint venture opportunities and experienced teachers. Another great option is local foreclosure auctions, which are both a great way to meet cash buyers and an excellent way to find discounted investment property. 

The bottom line is that there are numerous ways to connect with other real estate professionals. The most important thing you can do is take these opportunities seriously, even when the other person is new to the industry. The person who’s new today may be a market leader in a few years. If you’ve cultivated a good relationship with them while they were learning and growing, they may turn out to be your most profitable ally.

Prioritize education

There’s nothing in life that you should try to figure out completely on your own. Despite the idea that some people are entirely self-made, successful business people take lessons and knowledge from anywhere they can find it. There’s a reason the saying “don’t reinvent the wheel” has stood the test of time.

So place a serious emphasis on educating yourself and understanding how real estate works. You should also remember that there are a variety of ways to get educated. Find the people who have gotten good at a skill you want to learn and study their processes. If they have a course, consider buying it. If you can snag a mentorship with them, jump on the opportunity. 

However, we understand that there are some people you’ll never meet in person. That’s why we created a free resource to give you an inside look into their processes and experiences. In our free ebook Decoding Real Estate Investing, you’ll find exclusive interviews with 16 of the top entrepreneurs in real estate. Their word-for-word responses on their strategies, mindsets, and advice for newer investors are invaluable and will give you unique insights into the real estate industry. 

Build a process you can replicate and then scale it

The final step to building your real estate investment business plan is establishing processes that can run themselves. Unless you plan on letting your real estate career become another job, you need a way to build a business that can operate without constantly requiring you to solve problems. 

The good news is that building this process is simple. Once you understand how real estate investing works, you just have to figure out which steps work consistently and which ones don’t. Then you can make standard operating procedures that detail how your investing process should work every time

These SOPs will include which niche your business focuses on, your real estate marketing plans, when you make offers, how you comp, and how you connect with cash buyers (if applicable). The beauty of SOPs is that they make a business scalable. Once they’re established, you can hire people, train them on the SOPs, and automate portions of your business. 

Key takeaways

Crafting a real estate investment business plan that will get you where you want to go is an art. Thankfully, thousands of real estate investors have come before you, so there are time-tested steps you can take to establish and execute your plan.

First, you need to understand what’s possible in your market. Doing so will open doors you didn’t even know existed and help you take stock of your market. Then you need to understand what you can realistically achieve without chasing every opportunity you discover. After that, you’ll be ready to set specific goals and choose the properties you want to target. 

After you finish these strategic steps, you’ll be ready to get to work. But you should also expand your network and learn everything you can while you’re getting started. These two steps will be crucial, especially as you start making money and growing. Finally, if you plan on bringing it all together and building a business that will last, you need processes that you and your future employees can follow to consistently create desirable outcomes.

When you start a business, it’s natural to want to play it by ear. But if you want to grow reliably, you need a plan you can follow from the beginning. Figuring out how to create that plan can be difficult, but with the steps we laid out in this article, establishing the direction for your business should be very simple.

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