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SHOW NOTES FOR EPISODE 682: CREATING YOUR 2023 STRATEGIC REAL ESTATE INVESTING 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 in today’s economy and outlines how to write a 2023 Strategic Real Estate Investing Plan that will yield significant results!
Introduction
As we approach year-end, I’m hoping you have already completed your 2023 Strategic Plan. If not, it’s still not too late!
If you have listened to this show for a while you know that at the end of every year, I push for you to create a new strategic plan for the new year. And if you are already do this every year – good for you! I know that you are seeing the results.
And, if you are just starting out in real estate investing, this could also be a great time for you to put your first strategic plan together. Or, if you are already investing, this is a great time to review where you are, where you’ve been and to plan where you want to be going! It’s important that you look ahead to what you need to do to reach your investing goals.
And, especially in light of the economy, recession and inflation, it’s more important than ever that your strategic plan list not only your goals and strategies for achieving those goals but to look at contingencies should there be radical shifts in the market or economy – your PLAN B, C, etc.
Developing a good strategic plan is critical 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 – to achieve your goals.
I know many of you will be creating your plan digitally on your phone, however, I’m and old dawg and prefer the old school method — buying a notebook – one with the clear slip covers so you can put 2023 Strategic Plan on it with relevant tabs. So you can start collecting all your data in one place.
I also love white boards (you don’t have to do this) and 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 2023 plan, is to look back at your current year before developing next year’s plan. You can gain great insight by looking back and assessing 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, its 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 (This also counts for your Real Estate Professional hours for the IRS!). 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 or surpass 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 it to do 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!
If you have not done anything yet but plan to get started in 2023, 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. Also, 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. I will also be including a number of links from previous podcasts that will helpful on “Knowing Your Why,” “Setting Goals,” “Strategies” and other helpful topics
The Key Elements of Your Plan
- Mission Statement
- Goals
- Strategy
- Some sort of timeframe or timeline
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 that you review 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
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.
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 you 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.
Strategy — There are hundreds of ways to make money in real estate – you don’t need hundreds. You simply need to pick one key 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.
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.
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.
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.
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 that will draw motivated sellers to you? How will you find the best deals that are listed? Will you use the MLS, agents/brokers, online searches, direct mail to lists, or other means of finding deals?
Financing Deals — How do you plan on purchasing 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.
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? Who is your broker, attorney, CPA, etc.? You don’t necessarily need to know who those people are, simply what roles you will need on your team. More on this below.
Exit Strategies & Backup Plans – Having multiple clearly defined exit strategies is one of the most important parts of your strategic 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.
Financials — Include a personal description of where your financials are at today. 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
Don’t worry if you don’t understand everything yet or know how you’re going to accomplish everything in the plan. Remember, your strategic plan is a “work in process” that should get better and better the more you use it! It can and will change and evolve over time. As you learn through real life experience, you’ll revise, adapt and refine the plan to make your efforts more and more effective and profitable over time.
So, start researching, collecting data, buy your notebook and/or whiteboard and start the process. Remember… “A goal without a plan is just a wish.” So is a real estate investor’s hopes of being successful without a plan.
Additional References
- 368: Let’s Get Real About Goals
- How to Set and Achieve Your Real Estate Goals
- 010: Setting Your Real Estate Investing Goals
- 122 – The Importance of Knowing Your Why
- 508: Remembering Your Why
- 498: Best Real Estate Investment Strategies for a Covid Economy
- Top 5 Real Estate Investment Strategies
- A Beginner’s Guide to Real Estate Investing Strategies
- 347: Developing Your Real Estate Investing Action Plan for Maximum Success
- 058: Year-End Planning
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