1-2-3 Flip » Business Goals

Goals for 2009

J Scott — Tue, 30 Dec 2008 04:01:11 +0000

It’s hard to believe that we’re already done with 2008. It seems like just yesterday that I was writing my 2008 goals, and looking back, it amazes me that we were able to accomplish as much as we did in 2008.

I’ll go into more detail on our 2008 success (and goal reaching) in another post, but this one is about setting goals for the upcoming year. While I’m not a huge fan of annual goal setting (things can change quickly and often over the course of an entire year, so I’d rather set monthly or quarterly goals instead), the process of thinking about where I want to be a year from now is tremendously valuable.

In 2009, my wife and I are excited about branching out and including many other facets of real estate into our investment business. While 2008 was all about building a team and learning to flip houses, 2009 will be all about building an investor network and learning how to make money in other aspects of real estate investing. Don’t get me wrong, we’ll start be flipping plenty of houses (our “bread and butter”), but we recognize that there are other aspects of investing that have even higher ROI, and may be better suited to short-term cash-flow in this crazy market.

I’m hoping that the extra work we take on won’t spread us too thin; we now have three full-time employees in the business (my wife, my brother and myself), and we’re hoping to add at least one more this year. If we’re smart, we should be able to accomplish a tremendous amount with 4 full-time employees; if we can’t, this is an indication that we’re not being smart about scaling our business.

Now for some details…here are our 2009 goals:

Update the Business Plan

With the expansion of our business model in 2009, we will need to once again focus a signficant amount of effort on our business plan. In 2008, the business plan we created went a long way towards guiding our strategy and helping to make us successful in reaching our goals. In 2009, we a much more aggressive set of financial goals, a strong business plan is even more important.

Create and Execute a Detailed Marketing Plan

To be successful with the other goals we have laid out for ourselves, we will need to focus a significant amount of effort on Marketing, and in some cases, Internet/Online Marketing. So as not to pigeon-hole ourselves with this plan, I won’t say much more here, but I imagine that our Marketing Plan will detail both online and offline marketing aspects, including print marketing, building a professional website as a landing point for our networking efforts, building an online methodology for finding both investors and retail buyers, and perhaps even hosting investor/buyer conferences and seminars.

Build a Strong Investor/Retail Buyer Network

Many of our income-producing goals for 2009 revolve around finding other investors and building a buyers network. In 2008, we were strictly focused on rehab and resale; in 2009, our focus will extend past house flipping and into wholesaling, consulting, and other aspects of investment real estate. To be successful, our networking efforts must succeed.

Specifically, to support our financial goals, our networking efforts must succeed in at least the following:

Build a Database of 50 Investors or Potential Investors
Build a Database of 50 Pre-Qualified Retail Buyers

Continue to Build Our Team

In 2008, we built a strong team of contractors, agents, personal lenders, a CPA, etc to support our rehab and resale business. In 2009, we will be focused on additional aspects of real estate that will require support of additional team members. Specifically, we’ll be focusing on wholesaling properties, staging properties, and consulting for other investors. These aspects of the business will require a whole different set of team members, including:

Specifically, this goal will include:

Finding an attorney who can write our RE contracts
Finding an attorney who can support our creative RE needs
Find a title company that can facilitate our wholesale deals
Find a set of lenders who can support our investors we work with

Facilitate 20 Non-Lish Transactions

Now that my wife has her real estate license, we have an opportunity to make additional income by facilitating transactions for other buyers, sellers, and investors outside of our own Lish Properties business. On a typical $100K deal, my wife will earn over $2500, so doing just 20 additional transactions next year for buyers, sellers and/or investors other than ourselves should generate at least $50K in additional income. While not life-changing, this income will cover our personal expenses for the year, and allow us to reinvest all additional income back into the business.

Stage 10 Houses for Profit

My wife’s main goals for 2009 revolve around building a staging business for other investors, as well as for other retail sellers. This is a strategic business area for us, as we see staging as an up-and-coming growth area of investor real estate. Additionally, we believe that if we can establish a business and business model around staging now, we’ll have huge opportunity in this area once the market turns and investors begin flowing back to real estate in the coming years.

In 2009, we hope to both build a portfolio and build a reputation as a premier resource for local investors interested in staging their houses. While staging may not generate a large amount of income in 2009, we expect it to play a key role in our business, allow us to support other financial business goals, and position us to make signficant income from this activity in 2010 and beyond.

Perform 30 Real Estate Transactions

The basis for success in our business in 2009 will still focus on generating income from real estate transactions, whether those transactions be flips, wholesale deals, or purchasing rental property. In fact, in 2009, our goal is to successfully tackle all three of these real estate areas, to varying degrees.

Specifically, our transactional goals in 2009 will include:

Purchase, rehab, and resell 12 houses, averaging $15K per flip
Wholesale 12 houses to other investors, averaging $5K per deal
Purchase and hold 6 rental properties ($15K equity, $100/month CF)

Starting the Marketing Plan

J Scott — Mon, 08 Dec 2008 04:01:27 +0000

My wife and I sat down late last week to start putting together a Marketing Plan for our business (Lish Properties). We spent several hours brainstorming, and then I took our long list of brainstorm ideas and organized them into logical marketing components. For the most part, the bulk of our marketing efforts will likely fall into the following three areas:

Branding/PR: While generating income is certainly a primary goal of the business right now, we are lucky to be in a position where we have enough financial and employee resources that we can focus some attention on longer-term business growth. For us, this means creating not just a business entity, but a business brand. Using both traditional and innovative campaigns, we’re hoping to define a full-service real estate investing brand that ultimately allows us to capitalize on our current business model as well as create new business models and revenue streams. Put another way, we are working on strategies that will allow us to create a recognizable name and brand that will help us generate more money down the road.
Building a Buyer Base: Due to current RE market conditions, finding buyers is the key to our ability to flip houses and generate income. A couple years ago, when anyone could get a loan, acquiring property at rock-bottom prices was the focus of most investors; today, great deals are aplenty and finding qualified buyers is the challenge. Many of the marketing ideas we are in the process of developing are geared towards building a base of buyers for our properties; while some of those buyers may be qualified short-term (in other words, they’re ready to buy today), we also are focused on taking unqualified buyers and getting them qualified, so that they can buy our properties 1-, 6- or even 12-months from now. While building a buyer base is by-far the least “sexy” part of our marketing efforts, it’s probably the most important in terms of positioning us to succeed.
Professional Relationships: Much of our success and failure will determined by our ability to build relationships with other real estate professionals. This means building a network of agents who can bring us property deals, agents who can bring us buyers, financiers who can help us get our potential buyers qualified, and legal professionals who can help us get the deals done. We will focus a good part of our marketing efforts around building strong relationships with those who will ultimately mean the difference between success and failure in our business.

Over the next several weeks, my wife and I plan to add some meat to our Marketing Plan, put together a list of marketing goals for next year, and hopefully by the beginning of the year, we will start rolling out some programs and marketing efforts.

My Strategy From Here

J Scott — Fri, 18 Jul 2008 04:01:41 +0000

A lot of people who have been reading my blog have been asking why I’m focusing so much on single family houses recently when my plan was originally to focus on apartment investing. It’s a good question, and I can understand why those following this blog would be confused…I haven’t really clarified my plans in a while.

While I still love the idea of apartment investing, and I have little doubt that my long-term focus will be multi-unit properties and other commercial ventures, I’ve come to realize a couple of things recently:

Breaking into the apartment market here in Atlanta is going to take time. There are some big-time investors with a lot of experience, capital, and relationships, and as much as I’d like to just jump right in, it’s going to require some work to meet the right people, make the right connections, and start getting involved in the “investor scene” with the multi-unit investors. I’m certainly not giving up, I’m just being realistic that it’s something I’m going to have to work on over time (and I am!)
I’m starting to see trends that indicate that the apartment market is slowing around here. Vacancies are up in the past quarter for the first time in several years (mostly due to all the single family homes now on the market as rentals), and rent growth has slowed to almost nothing. I have a feeling the apartment market is going to follow the single housing market in a year or two, and the best deals are ahead of us
This is perhaps the best single family housing market in 50 years, and all the financial projections I’ve done indicate that it’s possible to make as much — if not more — in single family houses over the next couple years than in apartments
While apartments are my long-term goal and I imagine that’s what I’ll be investing in 5 years from now, the single family market is much less risky, and considering both are offering great returns today, I’d rather focus on the less risky business model

So, given the above, I’m starting to change my main focus from apartments to single family houses. As I’ve mentioned in this blog, I’ve started making offers on properties, have been talking to banks about financing, and have created a new business plan centered on building a highly scalable SFH investing business. While I’ll still be working hard to build those relationships with the apartment investors, brokers, agents, lenders, etc, I’m going to focus my short-term efforts on taking advantage of this great time to invest in houses.

Rich or Wealthy?

J Scott — Thu, 19 Jun 2008 04:01:21 +0000

Do you make a distinction between being rich and being wealthy? Most people probably don’t, but if you’re going to invest in real estate (or anything for that matter), I think it’s important that you consider the differences and decide which is your goal.

That said, how do I define the difference between being “rich” and being “wealthy”?

Being rich is a function of how much capital (cash) you have. Someone who is rich — in theory — has enough money that he can do whatever he wants to do today. Perhaps he has a job (or a business), but he also has enough money that if he wanted to take some time off (or quit), he has that option. Someone who is rich is can choose to fly to Paris on-a-whim for a weekend getaway, or can buy a new car without thinking twice. The rich guy has the ability to do today what many non-rich people don’t have the option to do, because the non-rich don’t have the money to afford it.

On the other hand, wealth is not just a function of having capital. It is a function of having capital plus having an ongoing income stream to ensure that capital needs are met far into the future. A wealthy person not only can fly to Paris tonight for a weekend getaway, but could stay there for the next 20 years without having to be concerned about running out of money in the meantime. A wealthy person can quit her job this year, and not have to worry about how she’s going to pay for that new car 10 years from now. The wealthy person has the ability to do what many non-wealthy people don’t have the option to do (even what most rich people don’t have the option to do), because the non-wealthy don’t have the income stream to afford it.

While the rich have enough money to do whatever they want today, the wealthy have enough money to do whatever they want forever. And that’s an important distinction. Many non-rich people admire the rich, thinking, “That’s my goal!” What they don’t realize is that the rich are looking at the wealthy thinking, “That’s MY goal!”

So, you’re probably wondering, what does this have to do with real estate?

As I discussed in a previous post, there are many (hundreds!) of different real estate investment paths and investment vehicles. Some will put you on the path to riches. Others will put on you the path to wealth.

For example, a great mortgage broker, a good real estate agent, or a good house flipper (come on, you’ve watched those shows!) can certainly earn enough money to get rich. The best of them can easily earn $1M a year or more. But what happens when they stop working? They stop making that money. And pretty soon, most of them need to stop living the lifestyle that having that money affords them.

But, what about the guy who owns 200 rental units, with each of those units being managed by someone else, and each generating $100 per month. He’s making $20,000/month, and if he stops working tomorrow, he’ll still be making $20,000/month! And next week (next month, next year, ten years from now), he’ll still be making at least $20,000/month. That person is on the path to wealth.

There are many real estate vehicles that will put you on the path to riches. There are many real estate vehicles that will put you on the path to wealth. It’s important to know the difference; it’s also important to know what your goals are…only then can you choose the right vehicles. In real estate, just like any other investing activity, you need to ask yourself, “What is the goal?” And, “Will this investment get me to where I want to be in the long-run?”

For those that want wealth, sometimes it’s necessary to follow the “get rich first, get wealthy second” plan. And sometimes it’s possible to following the “get wealthy first” plan. There’s no right or wrong way to do it (it all depends on your situation and your motivations). The key is to ensure that you know what you want, and create a plan to get there.

By the way, most wealthy people start by getting rich — by selling/flipping houses, having a high-paying professional job (doctor/lawyer), running a business, etc. They make a lot of short-term cash, giving them the option to do whatever they want at that time. But, instead of just spending that cash (with the plan of just going back to work year after year), they instead decide to leverage the capital they have to help them get wealthy. They leverage that money to create investment income streams that will generate more money far into the future, and long after they stop working.

If you’re happy just being rich, that’s great. But, if you want wealth, you need to plan for it. Whether it’s real estate or any other type of investing, you need to ensure you have a plan that fits that goal.

My Investing Niche

J Scott — Tue, 06 May 2008 07:01:19 +0000

One of the first things I realized when I jumped into studying real estate is that there are literally dozens (if not hundreds) of different real estate investments, strategies, and tactics. Real estate investments range from single family houses and apartments to strip malls and office buildings to oil wells, vacant lots, self-storage facilities and large pieces of undeveloped land. Each of these types of properties has its own sets of benefits and pitfalls, and an expert in one type of property investment isn’t necessarily an expert in the others.

In addition to all these property types, there are many ways to make money within each. Some investors will buy property, hold for many years, and enjoy the recurring cash flow that the property produces through rental income; in fact, many investors retire off the money their rentals provide for them every month. Other investors prefer to buy undervalued property, fix it up, and resell it for a quick profit. Other investors will build property on undeveloped land, selling off individual parcels to home buyers or leasing office space to businesses. Still other investors will never actually own any property – they spend their time finding good real estate deals and passing those deals off to other investors for a flat fee or commission.

While there’s no right or wrong way to make money as a real estate investor, each investing style and each property type holds its own set of benefits and drawbacks. Certain types of real estate investing appeal to certain types of investor personality types, some investment styles require more upfront capital, and some investing strategies require much more of a time investment.

The most common type of real estate investing for new investors is residential property (single family houses and apartment buildings). Because these types of properties are most familiar to people, and because there is a large base of traditional financing available for these types of property investments, a great many investors start their careers buying residential properties.

I’ve decided to start investing in residential real estate, specifically starting with small and mid-sized apartment buildings. That’s not to say that I wouldn’t invest in other types of real estate should the right deal come along, but I believe that the hallmark of a good investor is specialization; good investors pick one niche area and become the best in that area.

Now that I’ve called out my preference for multi-unit residential real estate (apartments), it’s probably worth discussing why apartments are more attractive (to me, at least) than single family homes or duplexes/triplexes/4-plexes. In my next post, I’ll discuss some of the differences among the various types of residential real estate and why I’m choosing to start my real estate career investing in apartments.

REI Goals For 2008

J Scott — Mon, 05 May 2008 07:01:59 +0000

Now that my introduction is out of the way, it’s time to get down to business. And the first order of business is to define my goals so that I can track my progress and adjust as necessary.

By the time we settle down on the east coast, it will be mid-year, leaving only six months to accomplish any goals I lay out for 2008. Additionally, if you include all the tasks and time associated with acclimating to a new city, helping the fiancée with her business, planning a wedding, getting married, and taking a honeymoon, I won’t have the opportunity to devote full-time to my REI business in the second half of 2008.

That said, I will try to devote at least 25-30 hours per week on average to the business (which will likely translate to 50 hours some weeks and 10 hours other weeks), and I am defining some very realistic goals – based on that amount of available time – for the remainder of 2008:

Buy My First Piece of Real Estate (Personal Residence)

While more a personal goal than a business goal, the benefits of buying a personal residence as my first piece of real estate will provide me a deal of knowledge about the tactical aspects of real estate acquisition. Proceeding through a first RE deal will help me understand the entire acquisition process – locating properties, negotiation, due diligence, the lending process, and the closing process.

Create a Formal Business and Management Structure

This goal is all about setting up a formal structure that will provide both tax and legal benefits for my investing activities. As I expect that I will be building multiple businesses over the next couple years, ensuring that I get this part right the first time is very important; I plan to work with several accounting and legal professionals to ensure this goal is carried out correctly.

Specifically, this goal will include:

Define my business structure
Register my business structure
Create a plan for accounting and management of the business
Set up bank account(s), credit card(s), and other services as necessary
Understand and plan for tax implications and expense accounting

Complete my Business Plan

I wouldn’t even consider buying my first investment property without completing a full Business Plan for my RE business. This should include my business goals, strategies, tactics, and risks. It should go into detail about investment criteria and how I will potentially work with outside investors and supporting team.

Build a Reliable/Aggressive Team

To be successful, I need to build a strong supporting team. At the very least I need to identify (and retain) the following team members:

Certified Public Accountant (CPA)
Attorney
Real Estate Agent
Property Management Company
Insurance Agent
Title Company
Property Inspector

I will create a set of criteria and questions used to judge the ability of each team member to support the company and make us successful. I will use that criteria and question list to find the most complementary team members.

Identify an Investing Location Using Formal Analysis

While I’ve already identified the area where I will be living (Atlanta), it’s not yet clear exactly where I will be investing. It would certainly be convenient to invest in the Atlanta metro area (and if at all possible, I will), but the decision on where to invest should be based on much more than just where I live.

I will do some formal analysis of various location criteria to determine my primary investing location(s). If Atlanta proves to be my preferred investing location, I will do more formal local analysis to provide direction on which specific local areas I should be targeting.

Purchase At Least 10 Units of Investment Property

Once I identify an investing location, it’s time to start buying property. Unfortunately, until I actually start trying to locate and acquire property, I have no baseline to determine how many units I can/should expect to acquire over a given period of time.

Additionally, being new to REI, I don’t want to rush into large investments just for the sake of owning units. Instead, I will acquire properties at whatever pace feels natural, and only when I find properties that meet my criteria.

All that said, I think it’s important that I state a goal for how many units I plan to own by the end of the year. Based on the fact that I don’t yet know if I will be buying single family homes, duplexes, triplexes, 4-plexes, apartment buildings, or apartment complexes, I don’t want to be too specific with this goal. But, I think it’s reasonable to set a goal of 10 units (where a unit could be a single family home, half of a duplex, or single apartment unit, etc) for the remainder of the year.

I will likely revisit this goal as I continue to learn and gain experience.

Those are my RE investment goals for 2008; I will communicate all progress and obstacles here on the blog throughout the year, and have even created a separate section of the website to track these goals and my progress against them (this section is linked to from the main navigation bar at the top of each page).