Beginning a real estate investment business plan may seem intimidating to you. You may feel you haven't had the experience and you don't know where to begin. Fortunately, the process is not really that difficult if you put the issues in order and then prepare a rationale plan to support the issues.
First, before beginning a business plan, you need to consider what an investor or lender needs to know about your project or larger business. The major items are:
- Define the project or business,
- Explain specifically what the investment requires in cash and participation,
- Explain the risks and how they are managed focusing first on the invested capital and then on the intended returns,
- Define the financial plan with a good sources and uses table, pro forma financial projections, and return projection tables,
- Describe the exit plan for the investor or lender's capital
With these points in mind, you should have the following:
- Your research or history for income and expenses;
- Your study of the market and competition;
- Your sales and marketing plan with revenues for products, services, rents, and eventual sale; and
- The capital improvements or investments you expect to make
Most entrepreneurs at least have these elements together. To the extent that you run into developing the business plans, these are probably your issue more than writing the plan itself.
Now, with this information in hand the key point is to understand is that writing a business plan is really a matter of "eating the elephant a bite at a time". To make this easier a simple plan outline can really simplify and assure your ability to write the business plan. The plan can be complete if you include the following in the following order (remember too if you want to add additional information that you feel the investor or lender must know simply add it at the point you feel is most appropriate):
- Executive summary with paragraphs explaining what the investor or lender will contribute and under what terms you anticipate the contribution, a few line description of the market and competition, the key differentiator / success factors of your plan, the financial highlights including top line sources and uses, top line income, expense and returns, and a brief summary of the exit.
- The main body will include:
- Investment proposal,
- Market review,
- Competition,
- Operations summary,
- Financing including 1) Sources and uses, 2) Pro Forma Financials, 3) Return Tables
- Exit
- Appendices
- Management biographies,
- Detailed pro forma projections,
- Operating Agreement,
- Other documents as appropriate
So get started and create a great business plan.
