Jumping into any new career at any time in your life can be overwhelming. But, when you start flipping houses several decades in, like I did, the risk of failure isn’t one you take lightly. Without as much time left to bounce back from potential setbacks, you want to do everything you can to ensure you’re able to clearly define your financial goals and stay focused on them. Otherwise, there is a greater chance you won’t make the money you need to. This can be devastating to your business’s bottom line and your personal solvency.
That’s why I wrote my first fix and flip business plan years ago. If you want to buy, renovate, and sell homes like I do—even if you’re investing in real estate at a young age—and, want to see your business grow, I certainly recommend you do the same. Stick with me and I’ll show you how.
The Nitty Gritty of Writing a Fix and Flip Business Plan
Yes, I know that there are investors out there who don’t seem to make the time to map out their plans for investing in real estate and, on the surface, it looks like they’re doing alright. They successfully flip a house or two and, especially if they have a strong appetite for risk, just keep rolling with it. Maybe it’s that they have access to enough disposable funds that even a big bust on a deal won’t break the bank. Or, maybe, it’s because they don’t really think their career path as a real estate investor needs to be legitimately defined. You know, you either make money or you don’t.
Whatever the reason, I want to discourage you from falling into the ‘flying by the seat of your pants’ camp. You need to take your business very seriously. Times will get tough and you will be tempted by distraction. It’s only by having a clear set of goals and a defined strategy for reaching them that you can better your chances of succeeding where others eventually flounder and fail. That’s what an effective fix and flip business plan will do for you if you regularly refer to it.
How to write a business plan is another story altogether. But, luckily, it’s not as difficult or as overwhelming as you might think. Just be sure that you include the following elements in your flipping houses business plan to ensure you focus on the most critical aspects of driving your business forward.
Brief Executive Summary
Your executive summary kicks off your business plan by, literally, summarizing the contents that can be found within. Your mission statement is typically included here, too, as well as any details about your training as a real estate investor, fix-and-flip business niche, and investing goals that you deem critical for summing up who you are and what you intend to accomplish. The key points you want to make in your executive summary are, ultimately, up to you. The more succinctly you can get your point across, the more likely you, and others, are to read it and use it for staying focused.
Detailed Analysis of Your Market
If you’ve already chosen the area where you’ll be flipping houses, you’ve probably also done a market analysis to determine that the timing is right for realizing solid returns. If you haven’t, you most certainly should—and, write it down. There are risks to investing in individual properties, but also in generally attempting to build a good business out of flipping houses.
Evaluating those risks, in addition to the opportunities available, are critical to ensuring that you make smart choices that move your business forward. For example, is your market currently a buyer’s or seller’s market? Are there a high number of foreclosures and, if so, what is the driving force? How long do homes typically stay on the market before being sold and who’s buying? Being able to answer these and myriad other market-related questions not only position you as the resident expert in the neighborhoods where you invest, but they also position you to make good decisions about investing in property and, as a result, seeing potentially great returns there, too.
Strategy for Securing Funds
Accounting for how much money you need to make to run your business, and earn a living, is a must-have section of your business plan. You also need to outline your strategy step-by-step for reaching these goals, especially since getting hard money loans for purchasing properties to flip is not easy to do when you’re just starting out. Traditional mortgage holders, like banks, don’t typically lend on fixer-uppers, either.
But, since buying, renovating, and selling houses that generate strong returns is the lifeblood of your business, you’ll need to find a way to secure the funds to buy the deals over and over. That may mean you use your self-directed IRA for buying real estate. As the saying goes, to make money you’ve got to have money. And, to realize any returns you’ve got to have the funds to buy the homes.
The business structure you choose, whether it be a sole proprietorship, partnership, limited liability corporation, or corporate entity will impact everything from how you run your business to how you are taxed. And, this structure may need to shift over time as your business, staff, and exposure to risk grows.
Understanding the pros and cons of each of these structures is crucial to safeguarding the potential returns you realize from each deal as well as your business assets as a whole. You certainly don’t want to be holding the bag as a sole proprietor if a deal goes wrong and you’re found to be at fault—especially if you’re well past the time when you should have sought shelter from another structure. Losing the potential returns on one deal is big enough, losing your ability to realize future returns will close your doors.
It’s never a bad idea to plan for contingencies and to work out what those contingencies—usually a shift in exit strategy—look like should the potential sale of your property not produce the expected ROI. Unfortunately, the market sometimes takes a dip or an unexpected repair delays the home’s sale and eats up your potential returns. Rather than sell your investment property at a loss, it might prove better to hold it for a while, refinance your loan, or rent the home until you’ve recovered. And, depending on the deal, you may still need to sell at a loss—if that option results in the least negative impact on your bottom line. Understanding all of your options and how they each affect each individual deal is important, but so is outlining your preferences in your business plan. After all, you only want to make informed choices, not desperate ones.
How much length and breadth you give to each of these sections, and whether or not you decide to include a few additional sections of your own, is up to you. But, I find the more detailed you can get, the less likely you are to fall prey to the ill-fated advice of other ‘gurus’ or even your own doubts. After all, they say the devil is in the details. And, trust me on this one, so is the potential of how much money you can make flipping houses. If you go with the tried-and-true strategies of a real estate investing franchise, however, you’ll find that many of those details have already been hammered out for you. Often, that can be the best plan for helping you achieve better business results, and potentially better returns, than you could have imagined.
The Best Business Plan for Achieving Optimal Investment Results
As I mentioned, I got started in this business a little later in life. So, I already had an inkling coming in that, to really succeed, I needed to create the best business plan for repeatedly achieving optimal investment results. And, I did an OK job of it, if you count that I had to revise it a few times in an attempt to find what really works. Thankfully, before my trial-and-error method created the kind of errors I couldn’t come back from, I learned that by becoming an independently owned and operated HomeVestors® franchisee, I’d have a tried-and-true business strategy right at my fingertips. I already knew it was a strategy that worked because franchisees in 46 states have bought over 100,000 houses since 1996. And, now that I implemented the best fix and flip business plan around, I am too.
Make a plan to drive your fix and flip business forward with strategies worth writing about. Contact HomeVestors today!
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