How Do I Write A Business Plan For Real Estate?

How Do I Write A Business Plan For Real Estate?

Joe: “Hey, Joe, how do I write a business plan for my real estate investing business?” You don’t really need one. Business plans are great in school, business school, where they teach you how to build it and try to predict what’s going to happen. But I find it’s really hard to predict what’s going to happen. It’s really hard to predict where it’s going to go until you’ve done this for a while. So, what you need to do is look at well, how much do I actually need to survive? You know, how am I going to go through this?

Joe: And most of the time I would suggest that if you currently have a job, you don’t quit that job. You stay in that job until you make enough money three months in a row that equals or exceeds the amount that you need to live on every month. Once you’ve done that three months in a row, you can probably do it for the rest of your life. So, you don’t really need to make that happen.

Joe: A business plan is all about predicting the future and trying to figure out what’s going to happen in the future. How am I going to get to this point? And if you’ve been listening to what I’ve been teaching, this whole system is a business plan. It’s a business system. And this system will give you and idea of how much is possible to make based upon the amount of money that you can make on each transaction.

Joe: So, if you look at a transaction and you say, well, I’m going to be able to make $5,000 per transaction that I flip. How many of those transactions can I do in a month? How many do I need to do in a month in order to survive? Most people can live on $5,000 a month. Most of us want to live on more than that. So, let’s say you could do two transactions a month. That gives you $10,000 a month. That’s $120K a year. And that’s if you’re only getting $5,000 per transaction.

Joe: You can also get more money per transaction and make it a little bit more profitable and have to do less deals. So, let’s say you do one deal that makes you $10,000 a month, only $5,000 in cash and maybe $5,000 as a promissory note that brings in $200 a month. So, you do that, you have $5,000 a month, plus $200. The second month, you have another $5,000 a month plus you get another $5,000, that’s $400 that month. The following month, it’s $600 on top of the $5,000. The following month it’s $800 on top of the $5,000. And then by then maybe you’ve gotten good enough so that you can do two transactions, or one-and-a-half transactions or three transactions or five transactions or ten transactions in a month and then things start getting really interesting because it doesn’t take long before you’re making $200K, or $300K, or $400K or $500K a year doing this.

Joe: The other thing that you’re going to start thinking about is not just flipping the properties but actually keeping them for the long term. Once you reach the point where you don’t need any more money to live on and you’re not just wasting that money, you want to invest it back into real estate. So, you take your capital and you start buying little houses, little houses that you can rent. So you go out and spend $40K or $50K in a lower income area. Rural area, or urban area, and buy a property, and maybe put five grand or ten grand fixing up that property. And maybe after that it’s going to be worth $60K or $80K.

Joe: One of the things that I’ve been doing a lot of lately is buying these little properties in these little towns in a rural area in southern Illinois. It’s a fairly large area. There’s maybe two hours across. And we’ve been buying a bunch of these little things. And we’ll buy them for, you know, $10,000, $15,000, $20,000 and we’ll make payments on them that are 100% principal payments – no interest on them. And we make maybe $200 or $300 a month payments on them. They’ll have $600 or $700 a month of income. We’ll have some taxes on there, so we’ll have some income. Maybe a couple hundred dollars a month of income on that property. So, that money comes in plus the money that goes toward the principal, buys it down and pays that property off in four to seven years, typically. Plus we get lease option fees on them so we’ll get a few thousand dollars, $3,000 to $5,000 in cash, plus another $3,000 to $5,000 as promissory note which adds another $150 or $200 a month to that income.

Joe: And then of course we get the equity in the property because we’ll put a little bit of money into it and, so, we bought that property for maybe $20K, maybe we put $10K of cash into that property. And now that property is worth $60K because we fixed it up and it’s looking really nice and we’ve got income from that property that’s going to feed us for the rest of our life. Give me all my capital back, probably within the first year or two with the investment that I put in and then the payment on the mortgage is going to be paid off in, you know, five to seven years.

Joe: Those types of deals are amazing. And it’s hard to predict when you’re going to get them and how you’re going to get them, but if you set up these deals and you constantly market into these deals, you’re going to get a lot of them that you can build a really nice portfolio in a pretty short period of time.

Joe: So stop focusing on creating and writing a business plan. Just get to work. And the best way to start making money is to start making offers. If you’re not making offers, if you’re not learning how to do that effectively, you’re not going to make any money at all. So you want to spend the time. And I tell my mentor students give yourself eight to ten hours a week to make offers. Nothing but on the phone talking to sellers making offers. And I make them commit to that before they can sign up for my program because I really don’t want anybody to come in the program that’s not going to make money.

Joe: So, if they’ll commit to that time then I can pretty much guarantee that they’re going to go through here and they’re going to make money in this process.

Joe: Anyway. Forget business plans. Get to work. Do that. Put that effort in and you’ll start making money.

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Joe: All right. Take care.