166: Writing Your 2018 Strategic Plan

SHOW NOTES FOR EPISODE 166: WRITING YOUR 2018 STRATEGIC PLAN

In our last Fun Facts Friday episode, we talked about looking back at the past year.  Documenting and recording everything you did relative to your real estate investing, or, if you’re a Newbie, all the education and preparation you did as well as examine your personal finances.  Or:

• I read these books,
• Attended these seminars
• Joined a REIA club or meet-up
• I had meetings with potential lawyers, partners, mentors

In this episode, we will outline exactly what elements are needed for your 2018 strategic plan.  The importance of getting the plan started and completed before the new year is important.

It’s just important that you document everything.

Now it’s time to put the pedal to the metal or this is where the rubber meets the road!

The idea here is to get this plan written – Even if it is only one paragraph per tab or per page

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

If you want to go there, you can but it’s not necessary for the purpose of this document.

Do this for now:

• Get a clear slide in notebook
• Buy 10 clear tabs
• Start writing/typing each section, page
• What’s important is that you get something down – you can revise later
• It’s alright if it’s not perfect the first draft. It is a “living” document that will change-over-time
• The main thing is to get it in writing and plan to start it the 1^stof the New Year.

Your Plan’s Elements

Write a Strategic Plan

• Clarify what you want
• And align with your “why” (see episode #122 – The Importance of Knowing Your Why)
• Make sure the plan helps you get and stay focused

Create a Simple Plan

• It can be more of a “to do” list than a doctoral thesis
• Outline baby-sized steps (better to have bite-sized” goals that you can achieve than largely complicated objectives)

To jumpstart your plan, start building now with this simple outline

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.
• What is your business
• What benefits do you provide
• What is your purpose

“I want to achieve _____ so that I will be able to do________”

Vision

• Where do you see yourself heading
• Dare to Dream
• Develop a mental picture

“5 years from now, my company will _______ by _______”

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.

• • What do you plan to achieve investing in real estate
  • Be specific with you want to achieve (don’t just say I want to have more money and more time)
  • Here are goal examples
    • To upgrade to a nicer home in the future
    • Have my dream vacation
    • Pay for cash my kids’ education
    • Create $______ of steady monthly cash flow for retirement

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.

• • Wholesaling
  • Student rentals
  • Multifamily
  • Single Family buy ‘n holds
  • Rent to own or lease options
  • AirBNB or vacation rentals
  • Fix ‘n flip

• Strategy suggestion: Pick one and focus for at least a couple of years – be good first before moving to another
• That strategy (or 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. Decide what you are going to do and stick to it at least 2 years. This is also what you need to do specifically to achieve your goals.  Break it down into small pieces.  It’s best to start with the goal and work backward.

Time Frame

• What is your time frame to achieve each 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 in the next 6 months? Document your timeline here. You can do this in accordance with your goals, as mentioned above.

• • What are your timelines for each goal?
  • This will help you “prioritize” your goals

Other Sections

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 to get the numbers you need). 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. But if you are investing out-of-state, for example, define what market(s) you’re targeting and why.

Investment Criteria

• Before you go out and start looking for deals, you need to define your target property criteria. You’ll want to define your loan to value, cash flow requirements, max purchase amount, max rehab amount, max timeframe, Cap rate, ROI, etc. (these are all items you’ll pick up as we go further).  My Example:

• • I am seeking value-add multifamily properties, prefer off-market, that are built after 1970, B/C class property in B area with pitched roofs, individually metered, with value plays such as low rents, poor management, high vacancy and a motivated/flexible seller. I am targeting properties 100 to 400 units and less than $15 million purchase price.
  • Net cash flow of at least $100 per door

• 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 so motivated sellers come to you?  How will you attract investors? 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?

How I Will Finance My Deals

• How do you plan on acquiring your deals?  Are you using money from your savings or taking out a line of equity in your home?  Are you borrowing – conventional, hard money, private money, equity partners, seller financing, lease options, or some other creative method?  Finding the right financing is often a challenge in today’s market, and private money can provide a tremendous solution.  Learn to attract private money, so you’ve always got a steady flow of finance when deals present themselves.

My Team(s)

• Clearly define your team and the systems you and they will use to delegate and automate tasks.  Who will be on your team?

• Who are your business partners?
• Who do you need to support you to find and make your deals reality?
  • Broker or Agent
  • Lawyer
  • Banker
  • Inspector
  • Insurance Broker

• Will you need an attorney, CPA, etc.? You don’t necessarily need to know who those people are yet, 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 business plan, especially for new investors.

• How will you get your money out of the properties
• Possible strategies
  • Hold till as long as you live – pass on to kids
  • Value-Add Rehab – sell or re-fi in 3-5 years with increased equity

• 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 today.

• What investment capital do you have
• How do you plan to finance your investment property
• Financial Strategies:
  • Borrow equity from home
  • House Hack: buy a duplex, live in one unit for a year and repeat
  • Self-Directed IRA
  • Cash
  • Sell stocks
  • Get business partners

• What do you bring to the table? Do you have any equity you can use? Are you starting with nothing?  After purchase, will you have enough liquidity to cover expenses for six months, should something go awry.  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 your complete financials current and ready.

Summary

Don’t worry if you don’t understand every element at this point or know how you’re going to accomplish everything in the plan.  Remember, your strategic plan can and will change over time, and as you learn, you’ll fill the plan out with more details.

Start researching, collecting data, buy your notebook and/or whiteboard and start the process.

Successful real estate investors (REIs) treat real estate investing like a business and create a Strategic Plan

You CAN do this plan before year-end!  Don’t delay!

Just do it!

 

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