You wouldn’t open up a business with a vague concept of what product or service you wanted to sell, the revenue you needed to open that business, the permits and physical space you’d need, etc....so why treat property investing any differently?
A business needs a plan.
So do property investors.
Another thing that a business needs is time and attention spent on it, but with working a full time job and/or family obligations it’s common to push the needs of our property investment business on the back burner.
We’re only courting a poorly performing portfolio with little to no growth if we don’t attend to it, so it’s important to make our small business a priority by doing the following:
Craft your business plan
The foundation of every profitable business is their business plan. It directs where energies will be spent in order to achieve the directives of the business.
Include the following categories when creating your business plan:
While not absolutely necessary to investing, a mission statement can help you stay grounded to your goals. The more detailed, the better.
Be specific. How much profit do you want to make? What is your timeline and what steps will you take to achieve them? Don’t forget to add each action to your schedule.
Note: To ensure that you’re staying on track, schedule a review of your goals on a regular basis, whether that’s monthly, quarterly, yearly, etc., updating and changing them as needed.
This describes the means by which you’ll create wealth. Will you buy at a discount, renovate and then sell for a profit, do you plan to buy and hold, or perhaps you’ll simply build.
The strategy or strategies you choose may change as your personal and financial situations change, so revisit this part of your business plan when you review your goals.
How long will it take for you to reach your goal?
Let’s say you want to retire in ten years. Figure out how much you’ll need and then create a list detailing how long it will take for you to accumulate the wealth you need to realise your goal.
Get your financials in order. Determine the maximum deposit you can put down, what your cash flow requirements are, the maximum amount you can borrow, etc. and stick with those figures.
These too will change as your grow your portfolio, so stay on top of these criteria and modify them as necessary.
When you tell yourself you won’t leave the parameters you’ve set, you can make a decision based on the numbers rather than emotion.
Every good business needs to have a detailed marketing plan in place.
A good strategy to finding a viable property is to establish a good relationship with other real estate professionals; agents, valuers, mortgage brokers, etc. Let them know who you are and what you can do to help them.
When an agent knows what you’re looking for and she comes across something that fits your criteria, if you’ve already reached out to her and established a good rapport, she may just give you a call with the deal before it even hits the market.
Consider how you are going to finance your investments. Will you use private money, equity, conventional finance or maybe vendor financing?
Put all of your finances in order, updating it when things change, so that you’re ready at a moment’s notice to pull together information you’ll need to secure financing when a great deal comes your way.
The more quickly you can get the deal done, the better your reputation with not only the agent but other professionals in the area.
After all, people do talk!
Put together your team
Investing in property is a team effort, clearly. That’s why it’s so important to choose professionals who understand the unique needs you face as a property investor.
Make every effort to choose attorneys, brokers, agents, mentors, etc. who have experience with real estate investing and who are, preferably, still investing themselves.
Exit strategy and “Plan B”
Before you enter into any investment purchase you should know exactly how you’re going to get out of that purchase.
So for example, if you plan to purchase a property at a discount, tidy it up with some small renovations and then sell it at a profit, your ‘exit strategy’ is the fact that you’re selling the property at a certain point in time.
It’s been said that we should, “always plan for the worst, but expect the best.”
This is a good strategy to embrace.
Plan to set aside a large buffer for each of your properties as well as for your own personal income, to ensure that you’ll be able to weather market shifts and unforeseen events that could impact you and your investment portfolio.
Establish a schedule
Complete a detailed list of everything you need to do in connection with property investing. Add each item to your overall schedule to ensure that things get done and that they’re done on time.
The more you think of your investment property as a business - which it is - the more focused you’ll be on achieving your goals because you have a plan and a purpose laid out to follow.
It’s also encouraging to look back over time to see just how much you’ve accomplished.
To learn more about the business side of investing, come along to our next Property Investor Night
. At this FREE event you’ll find out where the best growth markets are, changes in the industry you need to know, strategies to grow your portfolio that you can put to use immediately, and much, much more.
Seats fill up fast, so book yours now!
Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!
Read more expert advice articles by Sam
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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