Creating A Real Estate Plan

The creation of a real estate business plan begins by looking at when you want the money to be available and how much!  You start at the end and then work backwards to see if the plan is feasible.  Different real estate properties have differing rates of return.  It is important to match the rate of return with the risks involved, and the timeline for the expected income if you are going to meet your income goal.  For most of us this is not very hard.  For example, if I am 40 years old now and want to retire at age 65 with a passive income from real estate of $10,000 per month; I would need own roughly eight single family homes.  A real estate configuration of two commercial, 4500 s.f. office or office/warehouse buildings, will generate about the same income. 

It would be wonderful if we could buy one property and hold on to it for 30 years but that is the exception rather than the rule.  Markets change, interest rates change, neighborhoods change, and therefore you must, on a regular and periodic basis, reassess the properties to be sure they are producing as you expected.   You must know how to determine the drives for supply and demand.  The strongest indicator of demand is the employment indicator for an area.  You want to be in a stable or growing employment location to maintain rents.  Another indicator is population.  The larger the population areas the greater the job demand.  Having investments in good population centers will allow for higher rates and stronger residents.  When choosing a property, one must consider the location of that property for convenience, transportation, and other amenities that make an area great to live and work.   Some investors make the mistake of choosing price as the main reason for the purchase only to find out that rents are too low to cash flow and vacancies are high because of the lack of viable residents to choose from.

Each property should be evaluated for it ability to generate a healthy return, the ability to manage the property effectively, and an investor should diversify the portfolio in different areas and in different types of properties.  Please contact us directly for a list of appreciating areas and properties.  Here are some other websites that we hope are helpful in creating a plan to purchase real estate:

How to Create a Real Estate Portfolio;     How to Build a Business Plan Part Time;