Young Woman Creating Business Plan On Laptop

How To Make A Real Estate Investment Business Plan, And Why It’s Important

Dan Miller4-Minute Read
August 12, 2021

A real estate investment business plan is an important step if you're looking to get started in the industry. A real estate development business plan can help you decide what form of real estate you're looking to invest in. Real estate has a wide array of opportunities, so it's important to narrow your focus. It's very difficult to be successful in several different areas of real estate at the same time. A business plan can help you decide what it is specifically that you’re doing.

What Is A Real Estate Investment Business Plan?

Put simply, a real estate investment business plan is a document that lays out how a real estate investor intends to run their business. The plan should illustrate the investor’s goals for investing in real estate as well as business strategies and timelines they intend to implement to achieve those goals.

There’s not a specific format you have to follow to create a real estate investment business plan. Instead, you can pick and choose sections that are important to you. A business plan is primarily a document that can help you decide what your business is going to focus on, whether that's rental properties, investment properties or flipping houses. You can also use a real estate investment business plan to help secure funding from investors or business partners.

Why Do You Need A Real Estate Investment Business Plan?

Having a plan is important because it can act as a blueprint or road map when starting a new business. It can also give it a sense of legitimacy when talking about your business with others. This is especially crucial when trying to attract business partners and investors or getting a small-business loan.

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11 Essentials For A Real Estate Investment Business Plan

As we mentioned earlier, there isn't a specific format you must follow when creating a real estate investment business plan. Plans can be as unique as each company they outline. Here are a few sections that you might consider including in a real estate investment business plan.

1. Executive Summary

An executive summary should illustrate things like the company’s mission and vision statement. Depending on how long your real estate investment business plan is, most people are not going to read the entire thing. So, an executive summary should sum up the investment company as a whole and provide a snapshot of the company's financial plan, marketing plan and other key factors.

2. Company Description

A business plan should include a description and history of the company as well as the target market. This lets people who read the plan know basic information about the company as well as its principal members. The company description section is a great place to give biographical information about each member of the company's leadership team.

3. SWOT Analysis

A SWOT analysis looks at a company's strengths, weaknesses, opportunities and threats. Analyzing each of these categories is important to include in a business plan. This will help you make sure you've adequately considered each of these categories, and these are things that potential partners will definitely ask about before investing in your company.

4. Investment Strategy

Detailing a company’s intentions with investment properties is another important part of a real estate investment business plan. Real estate is a broad term that covers a wide variety of different activities. Each of these real estate activities is different and will take a different strategy to be successful. This section will stipulate if you intend to invest in rental properties, flip houses, etc.

5. Market Analysis

You'll also want to include a market analysis in your business plan. This shows potential investors that you know the real estate market. The three most important words in any real estate plan are "location, location, location," and including a market analysis will show what conditions are like in the areas where you're looking to invest. Investing in a high-priced area like New York or San Francisco is much different than investing in a rural area with much lower market prices.

6. Marketing Strategy

Most business plans will also include a marketing strategy. The marketing strategy will show how and where you plan on marketing and attracting new clients. The specific area of real estate you're focusing on will drive how much you focus on marketing. Someone looking to become a real estate property manager will need to do more marketing than someone who’s buying rental real estate to hold.

7. Financial Plan

Your financing strategy and financial plan might illustrate income and cash flow statements. This could include historical records like bank statements or profit and loss projections. You might also include a balance sheet showing the company's assets and liabilities. The financial plan section is intended to give potential partners or investors a snapshot of the company's overall financial health.

8. Organization And Management Structure

A business plan should also include a company’s organizational structure, management team and ownership details. These items are mentioned in the initial executive summary; in this section you can go into more detail about each member of the management team. One thing that is good to include here is a listing of the various qualifications, licenses and/or certifications that each member of the team holds.

9. Real Estate Acquisition Strategy

A business plan should include a strategy for acquiring investment properties, if that’s something that the company plans on doing. There are many different ways to buy real estate, so you'll want to detail which strategy or strategies you plan on using in your real estate investment business plan. Some strategies may include going through a real estate agent or broker, as well as wholesaling and target marketing.

10. Goals And Timelines

A business plan should clearly state a real estate investor’s goals for their company. One way to show this is to make a 1-year, 3-year or 5-year plan. Detail your plans for the business over a variety of different timelines. You'll also want to include some strategies and details for how you plan on meeting them.

11. Exit Strategy

Having an exit strategy is important for a business plan. This can include items such as knowing if and when to sell an investment property.

The Bottom Line

Having a real estate investment business plan is an important part of owning a business. Creating a written business plan when you're starting a business will make your business feel more real. It can also be important if you are trying to attract partners, investors or lenders. For more information on this and other ways to lead a successful financial life, read more personal finance tips from Rocket HQ℠.

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Dan Miller

Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families to travel for free/cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids.