Starting a real estate business can be a lucrative thing. Apart from enjoying the numerous tax benefits that come from investing in real estate, it’s also a solid hedge against inflation and it helps you create a business with a solid cash flow early on and achieve much, much more.
Nonetheless, for this business to give you all of this and more, you need to ensure it starts on a solid foundation. Therefore, you need to learn how to make a good real estate business plan. In theory, a business plan needs to have components like a mission statement, SWOT analysis, as well as goals. So, how do you make all of this fit the real estate industry? Let’s find out!
The mission statement
Naturally, the main objective of any business is to generate profit but the way in which you achieve this needs to be clearly defined in your mission statement. First of all, you need to set efficient buying and selling costs. In terms of investment, think of this as setting a stop order (stop gain or stop loss). Second, you need to consider the way in which you’re going to achieve this. We’re talking about the way in which you aim to stay competitive in the business, the level of collaboration that you aim to establish various services and the way in which you implement new technology. As long as these factors stand at the core of your mission statement, you’re good to go.
The type of real estate business
There are so many different types of real estate businesses and it’s pivotal that you choose yours early on. First of all, you get to decide whether you’re going to be a builder-owner or merely a real estate investor. The first one requires you to create a hybrid between real estate business and a construction company. Even if this is the case, the difference between residential, commercial and industrial properties is an enormous one. This, in turn, forces your hand to employ different sorts of specialists and specialized machinery. For instance, floor concrete grinders are a must for commercial and industrial properties. All in all, there are a lot of important choices that you have to make early on.
The SWOT analysis
The next thing that’s incredibly important for any business is the ability to realistically assess the situation that they’re in. We’re talking about finding objective metrics to measure your standings in this field. The easiest way to achieve this is through a SWOT analysis. Here, ‘S’ stands for strengths of your business (a unique angle or proposition that only you can make). The ‘W’ stands for weaknesses (the edge that your direct competitors have against you). The ‘O’ is an opportunity. Although impossible to predict, you need to have a plan on how to respond to an opportunity that might appear. Lastly, you need to consider threats to your business (‘T’) and plan a course for your business that will keep you as far away from this as possible.
Lastly, when setting your goals, you need to ensure that you put them within a reasonable time frame. This means that you have to know what you want to achieve within a certain amount of time. Other than this, you need to understand that success, in any field, doesn’t grow linearly but exponentially. Therefore, you need to understand just how unreasonable it would be to compare the first year of your company’s performance to its third or fifth year. Overall, there’s no easier way for you to be discouraged than to set unreasonable expectations.
Other than this, you’ll also have to do a thorough market analysis and figure out the logistics and infrastructure of your company. This, however, depends on so many factors that it’s simply ridiculous to even think about offering or suggesting a one-size-fits-all solution. Still, with these four components set in place, your real estate business plan will be off to a great start.
This post was written by Diana Smith. Diana is a full-time mom of two beautiful girls very passionate when it comes to home decor and latest DIY projects. In her free time, she enjoys exercising and preparing healthy meals for her family.