The real estate market has long been one of the best ways to make a living, provided that you are willing to put in the work and make the extra effort to properly educate yourself. Whether you’ve seen Fix-and-flip homes on your favorite reality television station or you’ve merely read about the potential profits online, you’ll need a proper business plan to accommodate your aspirations in the industry.
If you are ready to take that fix-and-flip reality show and turn it into your new reality, you should start by setting up a good business plan. With a professional business plan in your back pocket, you’ll be ready to dive into the field with profit as your priority.
As we approach our guide for developing a successful fix-and-flip business plan, you are going to have to remember that your goals will impact your outcomes. A business plan is a living document that should be revisited, modified, and judged whenever necessary. Assumptions and experience can change your approach and your business plan should grow alongside it.
Let’s break down how you can approach writing a business plan for a fix and flip real estate company.
The Executive Summary
Before you can lay down even a dollar on your first investment property, you are going to take some time to outline your executive summary. An executive summary will detail an overview of your real estate business, your plans, and your desired outcomes.
Investors will utilize your executive summary as something to skim when deciding whether or not they are ready to spend their time reading the rest of your (hopefully) fantastic plan. Even though the summary is brief, it must be punchy and it requires some real effort.
Note – An Executive Summary should not last longer than two pages as it is simply a miniature version of your overall plan. Consider your Executive Summary as something akin to the plot outline of your favorite film: some details are there on the bones but the flesh must be added later.
Additional Note – Set aside one day each month or so to revisit your business plan. Use this time to assess what has worked and what has not worked and adjust as necessary.
Key Items to Include
- Business Information – Your executive summary should be easy to skim for your business name, its location, and any important contact information.
- Services and Offerings – What is it that your business is going to offer? What problems will you solve and how will you approach those solutions? Create your value proposition and pitch yourself to those investors.
- Financial Summary – Progress cannot happen without financing and a financial summary is necessary to acquire said funding. This financial summary will be a short description of your costs, revenues, liabilities, and funding needs. You can also take time to explain your business model.
- Demonstrated Need – Now you need to prove to your potential investors that there is an actual need for your business in the location that you plan on establishing. In order to do this, you will need to look at market demographics as well as other businesses in the area. If you can prove the need for your company then your potential investors will be more than willing to oblige.
Find Problems; Provide Solutions
Alright, so we have laid out our Executive Summary. We’ve gotten an idea of what we want to do through our key points, so now it is time to expand.
The opportunity section of your Business Plan will detail what your company can offer and the problems that it seeks to solve. During this period of your Business Plan, make sure to detail your average customer as well as the competition that you think you will be facing.
By doing your diligence and thoroughly exploring potential opportunities, you can think through and outline exactly why you should receive funding in a persuasive way. You will use this as an opportunity to pitch your services to the community and the customers that you aim to target.
Identify Your Target Market
Once we’ve outlined the problems we are facing and the solutions we are offering, it is time to properly outline the target market that we are working with. This section is extremely important, not just to you, but to your potential investors.
Use this section as a jumping-off place for your research to shine through. Using market analysis can help you to get the ins and outs of potential buyers and sellers in a specific market. Consider the real estate market in Phoenix, where buyers are a certain age and beholden to a certain median income. This information could then be parlayed into an actionable business plan, helping you to find what locales to target, how much to pay, and how many clients are even in your specific area.
Included in your Target Market
The Target Market section should include some key points of data for your investors to look over. Whether working with Hard Money Lenders AZ or another institution, you’ll need to understand
- TAM – This acronym stands for Total Available Market
- SAM – This acronym stands for Segmented Available Market.
- SOM – This acronym stands for Share of Market.
You will use these three concepts to better understand who you can target, what your ideal client is, and how many potential new home buyers you can reach within your first few years of business.
Now we need to take some time to focus on potential competition within the marketplace. Within the real estate industry, there are going to be a ton of different segmented markets to target. In order to understand where you fit into the larger equation, take a look at the companies most competitive with what you are offering.
Marketing and Sales
When developing your business plan, careful attention must be paid to how you will market your services and how receptive said market will be to what you have to offer. You can use services like Trulia and Zillow to get an idea of what some of the hot markets and metropolitan areas are. Using these sorts of online rankings can help you decide how to market going forward.
- Position – Where does your company fit into today’s current marketplace? This will be tied to your location as well as the market demographics that we outlined above. Create a Positioning Statement that clarifies what your target market is, how you will help them, and what you will do differently to your competition.
- Pricing – You need to design the pricing of your services so that they will meet and match that of the local market rate. Use market indicators like Average Time to Sale to let you know what you are in for so that you can better prepare your portfolio.
- Promotion – Detail and outline your marketing and advertising plans for print, online, and in-person promotions. Organize through local businesses, work with websites like Zillow, and even use professional photographers to better represent the homes that you are listing.
Financial Planning: Core Elements to Include
Finally, we need to take time to better assess the financial planning that will be required for long-term success. Your financial plan will make sure that your finances are in place and that they are accurate for what your business hopes to accomplish.
Some notable elements in your financial planning statement include
- Profit / Loss Statement – This will explain how your business profited or incurred loss within a specific period of time.
- Cash Flow Statement – This document shows how much cash your business is bringing in, how much it pays out, and how much the monthly cash balance is after bills have been removed.
- Balance Sheet – Understand how your company operates by getting a full snapshot of its existence. This snapshot will summarize how much you have in the bank, how much customers owe, and what you need to pay back to your vendors.
- Personnel – This will be a snapshot of your employees and how much they cost.
- Sales Projections – Give a forecast of up to three years in which you detail how your company will perform. Use metrics and market research to help identify a projection.
Take the Next Step With Hard Money Lenders AZ
Developing a winning business plan can be a test of research, patience, and your own abilities. Once accomplished, however, it is important to connect with a team of professional lenders who can help you to meet the needs that your business demands.
Reach out to Hard Money Lenders AZ for a consultation, today!