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Real Estate Investing: The "Business Plan" and How to Implement Your Plan

By Michel Lautensack

Republish: EasyPublish™ Published: 09Apr2009 Word count: 583 Viewed: 216 time(s) Get Free Content For Your Site

We're going to talk about things like the purchasing process, particularly the renovation strategy. It is extremely important that you think that through. Do you want to do substantial rehabs where you have to gut the thing right down to the wood? Do you want to keep it pretty simple and cosmetics?

What is Your Renovation Strategy?

One of the things that I would encourage you to do as far as doing rehab is to get a pretty good sense of the rehab costs. One of the things that helped me out quite a bit in my career is - I don't know if you know Ron LeGrand. He is a pretty famous real estate entrepreneur and does a lot of teaching. I don't know if he does it that much anymore, but he certainly did 10 or 15 years ago. His program was pretty simple.

In his early teachings, he started out spending a lot of time in the rehab process and figured out what each thing costs and spent time on this and that, square footage, and all that other stuff. It was a lot of work.

As the years went by, he simplified his system to this - He said rehabs are either $5,000, $10,000, $15,000, $20,000, $25,0000, or $30,000. They could be higher, but generally it's one of those numbers. That's it. There is no other analysis. If you can't walk through a house and really in 5 or 10 minutes figure out which of those numbers it is, you need to keep practicing.

In fact, I would throw the $5,000 right out the window, because it's pretty rare that you can do a house for less than $5,000. You should probably just start with $10,000 right off the bat.

Layout Your Strategy for the Private Lender

Again, if you could lay that out for a private lender and tell them what your plans are - you know carpets going to be X, paint is going to be Y. A typical rehab is going to be $10,000, $15,000, or $20,000. It just shows that you have a real mastery of what you're doing and a real skill set.

It's very important that you be able to do that for yourself and that you can come across as somebody that really understands this business, knows what they're doing, and again it comes back to, "Why should I invest with you?" Because you are the expert and you have to be able to portray those skills and expertise.

Decide on Types of Repairs

Some other things involved here are what type of repairs are you going to do? We talked a little about that. Do you want to do substantial rehabs where you gut it down to wood?

I generally as a rule certainly would not recommend any new investor doing that. I think it's a big mistake. I've done it a few times. I've never made money doing it. It never becomes quite what you think it will. If you're relatively new to this business, I certainly would not recommend that.

Decide on Rental Policy

What is your rental policy going to be? Also, some of what your rental policies are going to be. Are you going to do lease options at the end? Are you going to allow the person to ultimately buy the property? Are you going to do straight rentals? That's another one of your issues there.

That's really implementing your strategy and getting through that piece of it.

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