As a part of any business project, whether in business creation, business takeover, or business development, it is critical to formalize writing one’s ideas, approaches, and objectives. The document that contains all this information is the Business Plan. Still called a “business plan, “the real estate business plan aims to convince its reader of the attractiveness and viability of the project.
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What is a real estate business plan?
Before you start, you ask yourself, what is a business plan? The business plan is a document that formalizes your idea, whether creating a business or a real estate investment.
An accurate model of your project details the financial strategy to adopt, the profitability of the investment, the capital to be injected, etc. In short, making a real estate business plan helps you define the action plan to put in place to create and develop your project.
Moreover, the real estate business plan is often perceived as a sign of seriousness and credibility by investors. Indeed, a complete and clear business plan makes it easier to convince your banker to invest in your project.
Why make a business plan for a real estate project?
It is not always easy to see the point of making a real estate business plan for purchase. However, the business plan turns out to be an excellent tool for carrying out your real estate purchase construction project, especially if you intend to rent the property.
A real estate project can be compared to business creation, especially if you plan to acquire the property via an SCI. As for a company, your project:
- Has a business model;
- Requires investment;
- It aims to make a profit.
The real estate business plan allows, above all, to convince investors to finance your project. Thanks to this synthetic and structured document, you will show them that your project is viable and profitable. For example, you will insist on the ability to generate a profit through the rental or through the sale of the property after a given time.
The business plan for a real estate construction, just like the business plan for a rental investment, allows you to compare the objectives you have set and the reality of the market to reassure investors about their consistency.
In addition, to check that the results are in line with your forecasts, the real estate business plan serves as a common thread to which you refer during the progress of your project.
However, the business plan is intended to evolve. Therefore, it is an iterative exercise adjusted as the project progresses. It is, therefore, a communication and management tool to make your real estate investment project a reality.
What should a real estate business plan contain?
If this is your first time writing a business plan, we give you a brief overview of these sections and essential things to consider when charting your path forward.
The following are the nine necessary components of a real estate business plan:
Identifying who you are as a real estate agent and getting yourself in the right direction with your new real estate business plan starts with understanding you. Although it sounds a bit basic, it’s essential that you know your strengths, weaknesses, and what you want to accomplish.
We recommend you do some parts of this section last (mission statement and summary) because they are easier to do once you have dissected your business.
If you are part of a real estate team, you will also use this section to define the roles of each member of your team. Again, putting what everyone brings to the table on paper is a big part of achieving your goals.
For brokerages, keep in mind the type of business you want to run and the type of agents you want to attract. Remember, you are the ship’s captain.
Analyze your target real estate market
Knowing the vagaries of the real estate market is essential to success. This section will examine every corner of the market, which areas are hot, slowed down, and most importantly, where the opportunities lie. So we suggest you take your time here, dig into MLS, and figure out exapreciselyat the numbers tell you.
While they’re fun to watch, don’t spend too much time looking at national or even statewide numbers. Real estate is a local business, and while these macro numbers may have minor effects, what matters most is what’s happening at the street level in your community.
Here are some excellent examples of metrics to watch for in this section:
- The average number of days on the market for goods of different prices and types
- Typical referral commission rate
- Average price trend for a market you want to participate in
- Number of new listings in a particular industry month-over-month and this year vs. last year
Analyze your local competition
Just like the market, you also need to understand the landscape of your competitors. Knowing who does what and how well they do it will help you identify unfilled niches and service areas saturated with agents scrambling to get a slice of the pie.
Follow your competitors on social media, monitor them closely, and see who they are marketing to. Does their target demographic match their business? Then, since you have already identified your specific market, do a targeted MLS search for homes in their particular range. Which real estate agents also appear a lot in this range?
This section aims to understand what the rest of the field is doing and when there is an underserved market. After that, you can move in and meet a need.
Decide on the services you will provide
Now we get to the heart of the matter. You might think, “What do you mean by ‘services’? Am I not just providing, you know, REAL ESTATE services? These are the questions of those who have no plan. It’s not you anymore. While it is true that you provide real estate services, which ones do you provide? Where do you see the most potential?
What niche does your market need? Perhaps you will be a condo specialist? Maybe you’ll concentrate your efforts on first-time homebuyers? What about the game of unoccupied land?
You are not required to choose just one, but to select none is to pass up an opportunity. Consider carefully what you (and your team, if you have one) do, your passions, and the market’s demands. Your answer is found at the intersection of these categories.
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Identify who your ideal customers are
Once you’ve determined the services you provide in your market, you have a good idea of who your customers are. For example, suppose you need a real estate agent (or brokerage) specializing in first-time home buyers. In that case, you know your average client will be younger, which means they’ll be more likely to communicate via social media, which means their newspaper advertising is a waste of money.
On the other hand, if your target consumers are retired seniors, the mailbox remains a crucial method of communication. Explore and understand everything you can about your customers – it will pay off big time.
Perform a SWOT analysis
SWOT – or Strengths, Weaknesses, Opportunities, and Threats – is an everyday player in business plans and is particularly important in our real estate business plan templates.
Here, you rate each category using what you’ve discovered about yourself and your business as you write. Think of it as a summary so far.
Then incorporate that knowledge into your understanding of yourself and how you function. For example, maybe you are strong in analysis (strength) but weak in the cold calling (weakness)?
Maybe no brokerage primarily focuses on millennials (opportunity)? Perhaps your target market is new construction, and a slowdown in construction is expected (threat)?
Even when your real estate business plan is complete, a SWOT analysis is a valuable tool to maintain on hand. We’ve spoken to a few agents who make a copy of this section and stick it on their office bulletin board to prioritize it every day.
Determine your financial, personal, and growth goals
Your diligent effort in your real estate business plan resulted in accomplishing your objectives. This section will outline your different plans for your business: financial, growth, and others.
Utilize the research and analysis to convert your objectives into quantifiable statements that you can revisit and review regularly.
Consider the following objectives:
- Specific gross commission income
- A predetermined quantity of transactions
- A predetermined number of leads in a specified amount of time
- Hire an inside salesperson or assistant
- Add new agents to your team
- Spend some time working versus a home with family
Additionally, you will mention the tools you will utilize to accomplish your goals in this area. You’re probably already aware of the contents of this list. But be sure to schedule time to come back and review your real estate business plan to see if there are any new tools you need to add to the list or remove others that no longer move you forward.
Analyze your initial and ongoing financial needs
Understanding the arithmetic behind your strategies is the penultimate component of any real estate business plan. While financial planning isn’t everyone’s forte, most of the work has already been done for you thanks to the careful investigation you’ve conducted in the previous sections of this document, so fear not. Fill in the blanks, complete the formulas, and see where you stand.
This section will factor in your operating expenses, including your marketing and lead generation costs. In addition, be sure to factor in your monthly outreach and new customer generation efforts.
Make a plan to review your business plan
Finally, don’t forget to include a section on follow-up. It can be tempting to jump straight into the plans you’ve made, but you need to know when you’re revisiting your strategy.
Your real estate business plan is not a static document. Therefore, we suggest checking in quarterly to see if your chosen strategies move you toward your goals.
Four questions to ponder as you begin to write your real estate business plan
As you prepare to write your real estate business plan using one of our templates, here are some questions you should consider.
We’ve found that the conversation from these questions helps get the juices flowing, and the business plan wraps up a little easier. Or, if you need some food for your next estate agent-only dinner, that works too (more wine, please).
How do your short-term plans contribute to the achievement of your long-term objectives?
Every day you go to the office (or open your laptop on the couch) to work, you have the opportunity to get closer to your goals. So what daily routines will be part of your entry into the winner’s circle this year?
What questions will you address for your customers?
Understanding and anticipating the needs of your customers is essential to success. Put yourself in the shoes of your target clientele: What is the first question that comes to mind when you think of real estate?
How do your plans differ from those of your competitors?
This is a tricky question because you can’t be in your competitors’ heads or the boardroom. However, I believe that no one on the verge of launching a massively successful firm ever said, “Well, let’s just do it like everyone else.” It seems to work, doesn’t it?”
Even if your adjustments to the standard approach are subtle, there must be SOMETHING (even if only you know) that you are doing differently than others.
Who has the final say on decisions in different areas?
This question primarily applies to real estate teams and people starting a brokerage, but it’s a valuable thought experiment. If one person is responsible for ALL decision-making, you may miss an opportunity to use someone else’s expertise.
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