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House Flippers Need a Business Plan

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Image from Pixabay

By Stephanie Mojica

One of the biggest mistakes many would-be house flippers make is operating without a business plan, according to a recent article published by millionacres.com (a Motley Fool service).

However, this blueprint should not focus on a specific rehab property; it needs to be a document that discusses the vision for the overall flipping business, according to the article.

Any solid business plan needs the following basic information:

Image from Pixabay

  • Specific goals for the company, with a realistic time frame set for each goal.
  • Details about the actions necessary to achieve those goals with the desired time frame.
  • An executive summary, which includes details about your experience and education (this is especially crucial for any would-be investors).

A complete business plan has multiple categories and is not a static document. It is a document that will change and evolve as your flipping business grows.

Other aspects of a solid business plan for house flipping include:

Information about the structure of your organization. For example, are you a corporation, LLC, or sole proprietor? Are there other people involved in your company? How and why was your company founded? A strong mission statement, which discusses the principles under which your business operates, is also important.

A market analysis. Basically, you need to identify and analyze the neighborhoods and communities of focus. Why are these neighborhoods good? Discuss schools, crime rates, and other information important to homebuyers. Are you focusing on specific types of properties, such as single-family homes or condos? What are your price points? Who is your ideal buyer?

Image from Pixabay

Financial details. Discuss, in detail, how your first few home purchases and rehabs will be financed. Also, what are your financial projections for the future of your company? Basic documents needed include an income statement, cash flow statement, and balance sheet.

Growth, leads, and acquisitions strategies. How do you plan to grow your house flipping business? How will you find the properties you want to flip? And how will you find homebuyers?

When creating a business plan, it’s important to stay realistic and back up any claims with third-party data, according to millionacres.com. Also, the business plan does not need to be a long document. While it should be thorough, most people nowadays don’t have the time or patience to read long, meandering documents.

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So… You Want to be a Real Estate Investor…

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By Lou Brown

If you have the intention to be successful in Real Estate, taking a look at what is working for others may be a good place to start…

Let’s understand what you want to accomplish. Do you want to have your own business in real estate?

Do you want to buy and sell, or buy and hold, or deal in mortgages, or buy and renovate, or build, or subdivide, or some derivation of these?

Frequently I meet individuals who just think about real estate investing in terms of a way to make money, without considering the direction to take. In my mind, that’s similar to a teenager saying, “I want to get a job, so I can earn some money.” Well, that’s great… but what kind of job?

With a general goal like “making money” or “being a real estate investor” people proceed based on what they think they should do next. Which may or may not be a smart move.

Think about the traditional process we go through to start earning a living…We start with over a decade of school.

Now, did they teach us a skill to go into business at school?

No, that is NOT what is taught at school… they teach you how to work for someone else! Even courses entitled Entrepreneurship, Business Management, and Business Applications don’t teach what you need to know about creating, and more importantly… sustaining, a viable business. You see, they don’t teach what you need to know about the process of owning and running your own business. They do teach much of what you need to know about how to work for someone else, but unfortunately they do not teach us how to work for ourselves.

Not only are you not taught how to start or maintain a business for yourself, they also don’t teach how you can get wealthy. That’s the process of how to create assets that work and create income for you, instead of you working for it.

So, what can you do to learn this?

1) You must learn from someone who has done it for themselves. 2) More importantly, you must learn and adopt a process to have that happen for you without all the expensive and time-consuming trial and error that comes with creating a business without a path to follow.

Michael Gerber, author of “The E Myth,” stated that 1,000,000 people go into business in the United States each year, but within 5 years, 96% of them are out of business. I don’t know of anyone who has that intent, but that’s what happens.

They, like you, are attracted to creating a business in hopes it will provide a good living and retirement income too. But for 96% of them, that promise, or vision does not come true and they lose the chance to get freedom from the shackles of working for someone else.

Gerber goes on to say that those with the dream of entrepreneurship thought business worked one way when in actual fact successful businesses work in quite a different way… hence, the title of the book, “The E Myth.” He reports that when the entrepreneur follows a different path, 75% are still in business AFTER five years.

What he found is that those who enter business with a franchise are able to build and sustain their business because they have a path to follow… a clear, direct, tested and proven path that leads them right to the money without the risks and pitfalls that so many others fall into.

Seems sorta obvious, right? Think of some franchises…McDonalds, for example, has a system that works. It works worldwide. Follow their system and it’s almost a guaranteed succeed.

Let me relate a story. Years ago, I invested in building a Holiday Inn, (funded using private money). We could have opened that hotel and called it “Lou’s Motel”. That would have saved us a ton of expense, but would it have been an uphill battle for us to find customers? You bet it would! Not only that, we would have had to create our own reservations system, housekeeping training, accounting software, resources for supplies, and all the rest.

Instead, we opted to go with a known brand – Holiday Inn. Now at the time, this was very expensive; tens of thousands to use their name; multiple thousands for their training and more for their software and 8% of every dollar that came in, for the entire length of the franchise agreement was theirs.

Whew! But we opened the doors to an immediate 100% occupancy and understanding of the proper way to manage the hotel, staff, marketing and lots of support. We were able to take their training, tools, technology and team and have an up and running business without having to make it up as we went. That made sense to me -Doesn’t that make sense to you?

So the question you may be asking is…” Does the Real Estate business have such a path?” You bet it does! And you can actually choose the path to follow.

Your real estate investing needs to be thought of as a business – not just buying and selling a house – and just like a business, you’ll want a business plan to follow; one that allows you to build a business that will generate a good income and a future of dependable continuous cash flow for you and your family.

Your business plan needs to cover all the aspects of this confusing real estate business…

  1. Provide for safety and allow for controlled expansion.
  2. It needs to include all the possible profit centers in Buying, Renovating, Managing, and Selling.
  3. The paperwork and processes need to support all the aspects, so profits and risks don’t get overlooked.
  4. It needs to provide a business model that can be easily duplicated regardless of the size or economic condition of the market you are in.
  5. It needs to have a training and support component to allow for adjustments as the market changes.
  6. It should provide branding to benefit from nationwide recognition and marketing.
  7. It should support building a sellable business, so you can exit when you want to without having to liquidate.

In order for this concept to work in your real estate business your business plan needs to include all the necessary Tools, Training, Technology and Team(tm). It needs to be a holistic approach rather than a concept from here, a form from there, a piece of marketing from someplace else all jumbled together like some untested recipe. In fact, that is the recipe for disaster that so many would be investors follow.

And this is why, as Gerber explained, 96% of businesses without a plan will be out of business in such a short period of time.

Does this make sense to you?

So how do you get a true, time tested business plan that works in all locations and takes advantage of the most compelling profit centers in the business – complete with support to be sure that occurs?

You have to look at people who have and have been using a plan that survives the test of time and still produces results. Fads come and go, and so do the cycles of the real estate market, so don’t base your future on a trendy investing “flash in the pan.”

In my 40+ years of running my successful real estate business, I’ve identified the component parts to make a real estate business work – for anyone – regardless of their current net worth or monthly marketing investment.

I developed a system that allows you, regardless of income or background, to build a business that will have all the benefits a franchise offers without nearly the typical investment. It includes Tools, Training, Technology and Team™ … all in one place AND with the component that is the most important – the wealth aspect and huge profit center of holding property.

Anyone who is serious about having control of their financial future should have holding income producing real estate as the center or at least as a component of their portfolio. You need assets that will work for you for the rest of your life.

This is where real WEALTH resides… assets and equity working for you instead of you working for it.

The combination of Income, Depreciation (tax benefits), Appreciation (growth), Equity Build-up (appreciation and mortgage pay-off) and Leverage (using O.P.M. – other people’s money) makes this the IDEAL unbeatable combination of investment benefits usable by anyone in any walk of life.

Because of your involvement with Realty411, you likely have the basic tools already. That is a good start. You may be someone who can see the value in the holistic approach including branding to allow you to take advantage of all the profit centers.

If you understand the benefit of the “franchise concept” (a proven model and system of success that can be duplicated by anyone) and would like to structure your business to run systematically, then you are welcome to take a look at how I’ve structured my business. It’s a model that has provided me with a lifestyle I love and has provided hundreds of other investors with the same.
You can access a free training on this system anytime, 24 hours a day, by going online to millionairejumpstart.com/dealw.

Equipped with the right holistic tools, training and support, you will achieve your goals. My mission and prayer for you, is success in this business that will benefit you and your family for many years and generations to come.

Warmly,

Lou

Certified Affordable Housing Provider