It is not uncommon for “green” investors to jump into the real estate industry without looking where they are going first. This is often the result of blind ambition, and while it is certainly good to be motivated, it is ill advised. Neglecting to devise a plan is one of the biggest mistakes a real estate investor can make. Investing in real estate is a business, and it needs to be treated as such. It requires countless hours preparation and planning to determine the best course of action. Before you think about purchasing your first, or next, property; you need to take the time to plot how you want your business to go. If you don’t have a plan, it is very easy to get off course. In order to realize sustained success, you need to have a plan for investing in real estate.
The first step in any plan is determining a definitive vision. If a plan doesn’t have a goal in mind, it really isn’t a plan. It may not always end the way you want, but you need to have a starting point and exit strategy in mind before you begin. With real estate, your starting point usually begins with financing and working capital. The amount of money you have available or how you will finance your deals dictates the type of properties you can buy. You may intend to find inexpensive properties on the MLS with the intent to flip them, but if you don’t have the money to do so you need to shift to plan “B.” There are outlets to find money and options if your capital is limited, but the first step to any investing plan has to be determining how you will fund your deals.
Once you have an idea of what you could buy, you need to figure out what you want to buy. Between wholesale, rehab and buy-and-hold deals, you have options as to how you want your money to work for you. Having said that, you need to determine what types of properties you are interested in. You could explore condos, single-family properties, multifamilies and mobile homes in different price ranges and locations. A good realtor will help you match your price points with what types of properties are available on the market. What you want may not be realistic or may not be available in your area. Even the best plans need tweaking, but if you know what you can afford and what types of properties you want to look at you are greatly ahead of the game.
Any good plan needs a time frame. The best way to execute your plan is to attach real dates to them. It can be quite eye opening to realize that even quick flip deals take several weeks. If you are relying on the funds for another deal or to cover expenses, you need to be realistic in your time frames. You should also set firm action dates for when you want to buy, when you want to start and when you want to finish. Every step along the way should have a date attached to it and a plan for how you want to achieve it. You don’t need to make yourself crazy following these dates, but once you let the first day go by you will be playing catch up the rest of the way. Time frames and deadlines will force you to work hard and will keep you on track. If you want to close your first deal by the end of the year, you need to take action as to how you will do that. Setting dates and time frames for everything you do help you accomplish your goals.
The more people you have access to, the easier the business will be. One of the most important steps in your plan is to find people to help you get there. Between your realtor, attorney, mortgage broker, contractor and accountant, you will lean on a good number of people while you are getting off the ground. These people will not find you. It is up to you to go out and meet them. Any investor can do an internet search and find people to work with, but you need to find the right people for your plan and personality. Not only will this make your business more efficient, but working with the right people can also make it much more enjoyable. If you have a quality realtor that you are confident knows what you want, it will save you hours of frustrating searches. If you know your attorney will handle the contract and has your best interest in mind, a great deal of stress is released. Before you start, you need to meet as many people as you can.
The more organized you are, the better investor you will be. This means having a plan in place and the patience to stick with it. Investing can be very overwhelming if you are just trying to throw something against the wall and see if it sticks. You may be able to successfully close a deal or two, but if your goal is keep the cycle going you need to have a plan in place. The more defined your plan is, the more likely you will be able to follow it and maximize your profits on every deal. If you do not have a plan, you may find yourself without a business.