The beginning of the calendar year is always a time of reflection for a lot of people. It is a time where, people set goals that they would like to achieve in the coming year. These goals may be goals that someone wants to achieve in a number of areas of their life. Goals can apply to such areas as relationships, health, finances, or your career.
As a real estate investor, you should also have very specific goals that you want to achieve in the upcoming year. Goal setting is very important because it gives you something to aim for.
Many experienced real estate investors often have multiple goals with regards to their real estate investing career. In addition, goal setting is especially important for people who are looking to buy their first rental property.
If you are new to the real estate investing game, and you have not purchased your first rental property yet. Here are some action steps that you need to take:
1. Write your business plan
This is the most important thing that you need to do. A business plan is essential to a real estate investor. I suggest that you start simple, and write out specifically what you are trying to accomplish with real estate investment.
2. Write your mission statement
Just like how major companies have mission statements, write out your own personal mission statement. This action will help clarify to you why exactly you are getting involved with real estate investment. Once you complete this task, you may be surprised as to what your inner motivations are.
3. How many properties do you plan on purchasing
It is imperative that you write down how many rental properties you are planning on purchasing. This is important to ‘commit to paper’ as this simple act will cause you to stay focused and committed to achieving what you have set out in writing.
It is important to note that the timeline in business plans can vary in length. For instance, a business plans can be written taking into account the next 5 years, or it can be written taking into account the next 10 years. To new real estate investors just starting out, I recommend that you begin by writing your business plan over 1 year at least. What this means is that you are writing down all of your goals with regards to real estate investing over the next 1 calendar year.
4. Where are you going to get your financing from?
As part of the business plan, it is important that you document where exactly you are going to get the financing to purchase the properties that you have committed to purchasing. This is important, because by planning exactly where you are going to acquire the financing, allows you to have a game plan moving forward. To take a simple example, let’s assume that you have decided that over the next one year you are going to buy one rental property. At this point in time, you do not know where you are going to obtain the money to purchase said rental property. As such, in your business plan, you need to write down specifically where you are going to obtain the money. As a result, you would have to write down that you are planning on purchasing one rental property over the next year, and that you would be partnering with a joint venture partner who would provide the funds required to purchase the rental property
As another example, let’s assume that you have a goal of purchasing 2 rental properties over the next calendar year. You know that you have enough personal savings to purchase one rental property, however, for the second property, you are not sure where you are going to get the financing. In this scenario, you would write down in your business plan the follow:
“I will purchase one rental property this year, and will utilize my own personal funds in order to make the down payment. I have X amount of funds saved, and all of these funds will be used towards the down payment.”
Further, you may also write down in your business plan the following:
“I will purchase a second rental property this year, by partnering with a joint venture partner. The joint venture partner will provide the funds required for the down payment, and I will do all of the work required in purchasing the property, negotiating the sale price, overseeing any repairs and maintenance, finding tenants, maintaining the ongoing relationship with the tenants, and I will also oversee the eventual sale of the property at the end of the holding term. The joint venture partner and I will split the cash flow on the property 50/50 and I will distribute the returns to my joint venture partner on our agreed upon intervals. Upon the eventual sale of the property, the joint venture partner will receive all of her initial funds and then the profits will be distributed 50/50 to the joint venture partner, and myself.
The more detail that you have in your business plan the better. A business plan is like having a road map. You begin at point A, and you need to plan your route so that you can eventually get to point B. Point A is a position where you don’t own any rental properties and point B is a position in which you finally own a rental property or properties.
