Do You Need a Real Estate Plan?

In entrepreneurship lingo, there’s and old but wise cliche that reads: “Treat it like a business and it’ll pay you like a business. Treat it like a hobby, and it will pay the same.”

In this same breath, ask yourself whether you’ll need a business plan for your commercial real estate ventures. Experts agree that this is a necessary evil, even if you plan to fund the venture with your own capital. A business plan gives clear cut directives that will likely make the business succeed. A business plan should also project growth for at least five years, and map out the steps required for start up to success.

In the plan, research and create:

The Target Market: Whether this is a certain age group, income pool, or otherwise.

The Types of Commercial Properties: Will you be investing in one type of property or multiple buildings.

Operations: Will you need a team under your belt, or be a one man show? For those who plan to expand investments in the future, now’s the time to determine how it will all be played out. Calculate employment costs, business overheads, and streamline these into the most effective cash flow system.

Marketing: How do you plan to acquire new leads? Will you engage in a marketing campaign, or simply post to the classifieds? If you’ve been doing this for awhile, you may know by now which advertising vehicle is the most effective. For commercial investors who are just starting out, some trial and error may be necessary. Or, you could simply tune in to proven tips for marketing real estate with Jason Hartman.

Financing: Will you go with a mortgage lender or pay out of pocket? Investors who choose the prior will need a plan to present and convince lenders to shell out the cash.

These are just some of the inclusions for your real estate business plan if you don’t already have one. It takes your vision and solidifies practical ways to realize the dream.

Spend time going over how you want the business to evolve. For help with financial aspects of the plan, hiring a financial expert may be necessary. However, this can sometimes be done on your own with standard templates.

In conclusion, the business plan will be useful to investors as it provides a sense of direction. If set up properly, lenders will be able to determine if repayments will be feasible at a low interest rate. (Top image: Flickr | nikoretro)

The Commercial Investing Center Team