In this section you will describe how your business is formed, who is involved in the business, basically what your business will do, and what separates your business from your competition. Be thourough, but to the point. Nothing is worse than reading a business plan that is redundant and boring. This section should be between one and three pages.
In this section you will set the stage for the reader as to the foundation of your company. Is your business an LLC, a c-corp, a partnership, etc? Is this a new start up or an existing business looking to expand? Explain who the owners are and what type of corporation your company is. Write a brief biography of each owner and also give a brief explanation of the experience that the ownership of the company (you) has that pertains to your new real estate investing business. Are you an expert marketer with 10 years experience in direct marketing and sales? Are you a contractor who has vast experience in rehabbing homes? Are you a small time real estate investor using your past experience to transform your investing business into a full time endeavor? Whatever your past experience is, emphasize your expertise that will help you in your real estate investing career!
Along with the ownership/management of the company, describe who else is on your team. By team I mean, your partners and professional advisors such as attorneys, Realtors, birddogs, CPA, etc. This helps to show the reader that you have a team of supporters helping you to succeed. If a lender sees that you are trying to run your real estate investing business alone, with no help from outside experts, they will see that as a weakness. If you do not have a team yet, start networking and build that team right away. Remember, you can always add and subtract team members in the future, so don't wait until you have compiled a "dream team" before you start your real estate investing business.
Once again, look at it from the perspective of a lender. Lenders want to see that your business is managed by competent people who are capable of running a successful and profitable company. Their main goal is to ensure that you will repay the money they lend you; so be sure to emphasize your strengths and build the lenders confidence in you as a good borrower.
This section should answer the following questions:
- What is your company history?
- When was it formed and why?
- Who owns the company?
- Where is it headquartered?
- What is your corporate objective?
- What has your company done in the past
- Is this a startup company?
- In addition to the members of your company, who else makes up your team?
- Do you evaluate team members on an ongoing basis
After you establish how your real estate investing business is formed and you have described the ownership of the company, it is time to establish your business model and what your unique selling proposition (USP) is.
Your Business Model
This part should consist of a few good paragraphs of text aimed at letting the reader know what it is your real estate investing business does. Are you focusing on going after foreclosures and flipping them to an end buyer as your main source of income with wholesaling as another profit stream? Will you concentrate on purchasing multi-unit residential properties for a buy and hold investment? Will you use various types of real estate investing strategies in unison with no specific focus?
Whatever it is that you plan on doing in real estate investing, write it down. Here is an example:
"XYZ Real Estate Solutions will initially focus on two primary models for generating a consistent stream of profitable business. We will concentrate on these two models exclusively for the first 6 to 12 months so se can develop a solid foudation of revenue to further build the business for the future.
Our two primary profit models will revolve around:
These two methods of real estate investing will help XYZ Real Estate Solutions to build a solid company which is focused on becoming the area's experts in rehabbing and wholesaling foreclosures and vacant properties. Our business model will expand to include other types of real estate investing activities to further broaden our revenue streams within 12 months of starting the business. As of now, our plan is to continue to focus on rahabbing and wholesaling foreclosures and vacant homes as our primary area of expertise and source of revenue for at least 24 months. During that time we will expand our revenue streams, but will keep our focus on our primary area of expertise......"
- Rehabbing distressed properties found from both foreclosures and vacant properties with an end goal of selling to retail buyers within 6 months of purchase.
- Wholesaling distressed properties found from foreclosures and vacant properties to our team of rehab partners for a small but consistent profit.
The above example is rather short, yet concise and very descriptive. You can feel free to make yours longer, but please remember that you are really writing your business plan to be read by lenders and your other business partners. Do not write so much as to bore the reader but write enough to be complete and thorough.
Be sure to write what your business model will look like both now and in the future. What will it look like in 6, 12, 18, 24, 48, etc. months? Basically what is your vision for the company in the future? This will give the reader a good picture of where your business is heading.
Your Unique Selling Proposition
Think about it from both your customers (both buyers and sellers) and your lenders perspective. Why should they choose you and your real estate investing company to do business with? What makes your company different from the thousands of other real estate investors out there? How will you set your self apart from the majority of your competition? Use your business plan to sell your lenders and business partners on the uniqueness of your real estate investing company.
If you have not thought of this as of yet...it is time to do so. Without a USP you will become just "one of the pack" and will have to work much much harder to get noticed. Your USP can be a number of things. I have listed a few examples.
- Extremely fast closings and high price offers
- A combined 25 years in the real estate industry
- You are a full service real estate company including financing, realtor services, property management, etc.
- 15 years in marketing expertise that will result in more qualified prospects and house offerings.
You get the idea. Think hard about why people should choose to do business with you rather than everyone else out there that owns a "no money down" course. If you can't think of anything...you need to concentrate on that and develop a USP before you proceed. Remember, you can always change your USP down the road, but be sure to start your business with something that sets you apart in some way.
Once you have developed your USP, describe it to the reader.
- How will your USP help to put you head and shoulders above most of your competition?
- Where in the market will your company be positioned as compared to your competitors? (i.e. positioned as the "most experienced and best quality serivce" or the "fastest decision and deal makers in the market".)
Whatever your USP is, convince the reader that you are not the run of the mill real estate investor. Everyday lenders hear people who have big dreams of being a real estate investor and want a $1,000,000 line of credit before they have ever proved that they can do it. Most of these people either don't even have a business plan or have not taken the time to write a sales plan that properly sells the lender.
The key to the business model and USP section of your real estate investing business plan is really to show the competence of your management team and the solid business model that you are developing. If you can convince the reader that management has enough experience and know how to run a successful real estate investing business you have already won half of the battle.
Click the link below to learn how to write the Market Analysis and Business Practices. .