Prosper Newsletter: June 2007 > Real Estate
You understand that the following information is educational in nature and is not intended to be legal, accounting, or tax advice. You are responsible for your own financial decisions and should consult your own legal, accounting, and tax advisors before making your financial decisions.
Business Plans
Starting a business of you own I not always a simple task. Having a business plan can help you complete the startup in an orderly way. The business plan will also be a help to you in setting your goals, in determining who to include on your team, and in obtaining financing. Keep the plan simple but be thorough in writing each part of the plan. If it is too nebulous it will not give you sufficient guidance. The plan as first written does not have to be perfect. Details can change. Rewriting your plan as you gain experience makes good sense. But the first version of your plan needs to be sufficient to give direction and purpose to your efforts. There are three main steps to preparing a business plan, they include:
- Define your business
- Set goals
- Market study
Define Your Business
The first step in preparing your business plan is to define the business you will be doing. To clarify your vision of what the business will include, think through and write answers to these questions:
- Who is the customer you will deal with?
- What product or service are you going to provide to that customer?
- What is your plan for growth?
- What will give you a competitive advantage as you begin and also in the future?
Market Study
The third step is to study the market. You need to be aware of the different products available. Identify needs that are unfulfilled and make a plan to fulfill them. As you begin your business, you should be aware of what your competitors offer. You can gather this information from people already involved in the business. If you plan on forming a real estate investing business, you can talk to real estate agents and the Chamber of Commerce. You may also talk to other investors and ask them what opportunities they foresee.
The Business Plan
Once you have completed the necessary preparation, it is time to write your business plan. Do not use complicated jargon as you write your plan. It should be easily understood by anyone who reads it. The typical parts of a business plan include the following:
- Executive Summary
- Company Description
- Product
- Market Analysis
- Marketing Plans
- Strategy for Implementation
- Management Team
- Financial Analysis
Once you have created your business plan, you are ready to approach investors and find the help you will need in order to meet your goals. A local attorney or CPA can help you to determine which type of corporation is best for you.
Positive Cash Flow
I completed the 90-day Challenge! It has been a busy 3 months but the outcome has been great. I'm closing on two duplexes in the next couple of days. I'm buying them for $78,000 each and they are valued at almost $95,000! Not only is that $17,000 in equity I'm walking into, but they are currently leased with almost two years remaining on the leases. Each unit brings in $550 a month, so $2200 total. My positive cash flow will be about $700!
Michael T
Negotiating Tip
When making offers on real estate put some things into your offer that you can use as negotiating tools. These are extra items that you really don't care about actually getting in the deal. These items can include asking the seller to pay for closing costs, a home warranty, personal items (furniture, appliances, bear skin carpet, etc.), assistance with financing, etc. When it comes time to counter-offer you can concede and give in on these "extra" items instead of increasing your offer. You will be perceived as a willing negotiator willing to give in and concede and will not be seen as a hard nose buyer digging in your heels not willing to budge on your terms. As you take these things out of your offer the seller will feel compelled to give in and negotiate in good faith as well.
