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SHOW NOTES FOR EPISODE 470: PUTTING TOGETHER YOUR 2021 STRATEGIC REAL ESTATE INVESTING ACTION PLAN
“A goal without a plan is just a wish.” So is a real estate investor’s hopes of being successful without a plan. A good strategic real estate investing plan is critical if you hope to succeed as a real estate investor. In this episode, Bill shares why you need a plan as well outlining how to write a Strategic Real Estate Investing Plan for 2021 that will yield significant results!
Introduction
As we approach year-end, I am very excited about completing my 2021 Strategic Plan. If you are just starting out in real estate investing, this could also be a great time for you to start putting your first strategic plan together. Or, if you are already investing, to review where you are and look ahead to what you need to do to reach your investing goals. In this episode, I will explore the importance of careful preparation and planning for your 2021 Plan and what is required.
Developing a good strategic plan is very important if you are serious about real estate investing. Just buying a house here and there is not a plan. Or even saying I will buy one house a year. Your Strategic Plan puts your goals into perspective, helps define HOW you will achieve those goals and keeps you on track – focused – to achieve your goals.
I would recommend buying a notebook – one with the clear slip covers so you can put 2021 Strategic Plan on it with relevant tabs. Start collecting all your data in one place.
I also love brainstorming with white boards. I have a big one I use when planning where I can joint down random thoughts, ideas, goals, etc. to help me organize my thinking and ultimately the plan,
Don’t get hung-up on how it looks. You are not writing a doctoral thesis. It just has to work for you. But do take the time to map it out carefully so that your goals and objectives are realistic and achievable.
The First Step is Looking Back
If you are already investing, one of your most important steps, before writing your 2021 plan, is to look back at 2020 before developing next year’s plan. You can gain great insight by looking back and assessing at where you’ve been.
Start collecting & compiling your data
Print out all your financials — all the financial tracking data. Profit and Loss statements. Balance Sheets. Rent Rolls. All of your income and expenses. If you don’t have those numbers readily available, it time to consider getting a financial bookkeeping program like QuickBooks or maybe even hiring a part-time bookkeeper. If you use Excel spreadsheets you can draw from that data but it’s best to have a way to easily track and generate reports that will help you continually assess how you are doing.
Also, look at other data pertinent to your real estate investing activities over the last year – look at your calendars, day timers, whatever records you had to get a good perspective of “The Year in Review,” so to speak. Where did you go? How did you spend your time? Track how many hours per week you spent on real estate investing education, mentoring, research, etc. Did you attend any industry boot camps or conferences? Did you listen to podcasts? Read books? Write down how much you spent on all these things. Make records of your hours spent as well as how much money you spent on those activities – even mileage, as those are all legitimate tax deductions. Approach as if you are a reporter, writing about someone or chronicling a company. Dig deep.
Write down everything you can
Look at what you accomplished. Did you meet any of your goals? It’s time to celebrate your successes and learn from your failures. It’s OK to pat yourself on the back for your wins. Write them down. If something worked well, make a note and do more of it, but refine and do it even better. If you blew it, take the time to look at why you messed up, learn from it and either refine or kill it!
Paint a good picture of how your year went and write notes for what you would do differently in the year ahead — to do it better, in the year to come.
If you have not done anything yet but plan to get started in 2017, now is the time to look ahead.
Good Planning Resources
I would recommend that you get some good books that will help you plan such as the The ABCs of Real Estate Investing by Ken McElroy, The Unofficial Guide to Real Estate Investing by Martin Stone, BiggerPockets The Ultimate Beginner’s Guide to Real Estate Investing (free), The Millionare Real Estate Investor by Gary Keller, Multifamily Millions by David Lindahl or The Complete Guide to Buying and Selling Apartment Buildings by Steve Burges, listen to our episodes #006 – “How to Get Started in Real Estate Investing” and #010 on “Setting Your Real Estate Investing Goals.” Both are good primers before you write your plan.
The Key Elements of Your Plan
- Your Why
- Mission Statement
- Goals
- Strategy
- Timeline
- Budget
Take note: this is not a Business Plan. A business plan is more formal and includes the following:
- Executive Summary
- Company Overview, Business Model, and USP
- Your Market Analysis and Specific Business Practices
- Marketing Plan
- Implementation
- Financial Plan
- Important Assumptions
You can get more formal if that helps you but I’m just saying… if you make it too complicated in the beginning, it may discourage you from continuing year after year. It just has to be focused but workable – a reference you can tap into on a daily or at lease weekly basis
Your Plan’s Elements
Your Why – This does not have to be formally written in your plan but you should know your why before you get started. For more detail, see episode #122 – The Importance of Knowing Your Why. Also a good book is Start With Why by Simon Sinek
Mission Statement — When people ask you what you do, what do you tell them? This mission statement should clearly define your purpose and should include the benefits your business provides. Do your research and come up with a solid mission statement. This is the “why” in your road trip. Here is a good book to help: Your Simple Guide To Creating Mission, Vision & Value Statements by Stuart Rice
Goals — Where do you want to go? What do you want real estate to help you to achieve? If your goal is to make $5,000 per month in passive income – write that down. If your goal is to flip four homes per month – write that down. These goals may change over time, affecting the rest of your plan – and that’s okay. Make sure to put down both short and long term goals. By setting smaller, more achievable goals, you’ll give yourself something to always look forward to accomplishing — this will help you stay motivated. Here are good resources to help you with your goals: 368: Let’s Get Real About Goals, How to Set and Achieve Your Real Estate Goals and 010: Setting Your Real Estate Investing Goals.
Strategy — There are hundreds of ways to make money in real estate – you don’t need hundreds. You simply need to pick one strategy and become a master of it. That strategy (vehicle), if dependable, will carry you through to your destination (your goals). If you are choosing to wholesale or flip homes to generate cash in order to save up enough to purchase rental properties to eventually quit your job – write that down. If you are looking to build passive income from small multifamily properties for your retirement – write that down. Here are more links that will help: 464: What is the Best Real Estate Investing Strategy for Older Investors?, 229: Finding Your Strategy and Your Niche and A Beginner’s Guide to Real Estate Investing Strategies
Time Frame — What is your time frame to reach your goal? Be realistic, but don’t be afraid to reach, either. Do you want to retire in ten years? Are you planning on quitting your job next month? Document your timeline here. You can do this in accordance with your goals, as mentioned above. Here are two great resources to help you: Gary Keller’s The One Thing and Clockwork by Mike Michaelowicz and listen to Mike’s Old Dawg interview: 235: Clockwork: Designing Your Business to Run Itself With Mike Michalowicz
Budget – How much will it cost to implement your plan? Each element of your plan (direct mail, social media campaigns, Google or Facebook ads, etc.
Market — Define your market. What kind of property will you be looking for? Low income? High Income? Commercial areas? As a beginner, choose an area you feel most comfortable with. Most new investors should plan on investing within a short driving distance to your home, rather than investing long distance (unless your location makes it impossible). Doing this will help you to become an expert in that area, which will help you more easily analyze deals and opportunities. It will also help you know the players in the area, which will ultimately help you find partners — and again, opportunities. Here are some more good links: 10 Tips for Successful Real Estate Investment in Emerging Markets, 095: How to Find Hot Emerging Markets for the Best Deals and 316: How to Find Hot New Markets. Also read Dave Lindahl’s Emerging Real Estate Markets
Criteria — Before you go out and start looking for deals, you need to really think about and determine the criteria which those deals must fall in. You’ll want to define your loan to value, cash flow requirements, max purchase amount, max rehab amount, max timeframe, etc. (these are all items you’ll pick up as we go further). One of the most important lessons you can possibly learn is to stick to your criteria and walk away from any deal that does not meet your criteria. It is very easy to become emotionally attached to a deal, but by sticking to your criteria, you take the emotion out of the picture. Here’s a helpful article: 4 Buying Criteria For Rental Property
Flexibility — If you are not finding enough deals to cherry pick from, you can change your market and/or strategy. This part of your plan is one of the most important to fully understand and clearly define. Too many new investors get excited and buy the first deal that comes their way. By having clearly defined criteria, you are able to easily reject the 99% of properties that are not a good deal.
Marketing Plan — How are you going to create a marketing system so motivated sellers come to you? How will you find the best deals that are listed? Will you use the MLS, agents, online searches, direct mail to lists, or other means of finding deals? Here are good resources: 144: Rental Property Marketing Secrets and the Power of a Picture, 159: Direct Mail Marketing with Postcards and The 1 Page Marketing Plan by Alan Dib and The Complete Guide to Internet Marketing for Real Estate Investors by Ed Stapelton
Financing Deals — How do you plan on acquiring your deals? Are you using conventional, hard money, private money, equity partners, seller financing, lease options, or some other creative method? Finding financing is often a challenge in today’s market, and private money provides a tremendous solution. Learn to attract private money, so you’ve always got a steady flow of finance when deals present themselves. Here are some good resources: Investment Property Financing for Beginners, 007: Finding the Money for Your Real Estate Deals – Part 1 and 009: Finding the Money for Your Real Estate Deals – Part 2
Your Teams — Clearly define your team and the systems you and they will use to delegate and automate tasks. Who will be on your team? Will you need an attorney, CPA, etc.? You don’t necessarily need to know who those people are, simply what roles you will need on your team. Here are more resources: Building a Powerhouse Real Estate Investing Team, 020: Building a Great Out-of-State Team, and 328: Assembling a Powerhouse Real Estate Investing Team
Exit Strategies & Backup Plans – Having multiple clearly defined exit strategies is one of the most important parts of your business plan, especially for new investors. How are you going to exit the deal? What are your backup plans? Do you flip, lease option, wholesale, bird dog, sell the note, sell the entity holding title, rent and hold, or some other technique? What is the end game? This needs to be clearly defined. Here is another good article: The Best Real Estate Exit Strategies for Investors
Financials — Include a personal description of where your financials are today. Where will your investment funds come from? What do you bring to the table? Do you have any equity you can use? Are you starting with nothing? Document your current situation and update it as often as it changes. As you move forward with your investments, it is always important to have at the ready your complete financials.
Summary
An effective strategic real estate investing action plan can become your formula for success. Start researching, collecting data, buy your notebook and/or whiteboard and just start the process. Don’t worry if you don’t completely understand every aspect or know how you’re going to accomplish everything in the plan. Just start getting your thoughts and ideas down on paper. Remember, your strategic plan is a “living/evolving plan” that will change over time, and as you test and learn, you’ll shape and mold the plan as you go. If you’re faithful to carefully track and follow-through, it will become better and better year after year. As your plan and strategies succeed, you will enhance and do more of the same. When you fail, you’ll trim out the things that aren’t working and replace those things with winning strategies. The idea is to JUST DO IT! Get started and don’t give up!
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