One question: Are you treating your property investing like a business? If you don’t, your property investment is likely to be failed.
Property investing include trading (buy and sell) which just exactly like a business. Just the process of putting the plan together is extremely valuable. You will be forced to ask yourself some questions and come up with solutions for the existing and potential problems. At the very least, it will expose some threats to your business or identify potential opportunities, so you are aware of what is around you.
Here are 4 reasons why you need a business plan on your property investment:
➊ Evaluation your strategy
There is no any courses that can teach you more about your business, therefore, you have to figure out on your own. When you come out a plan, you will have a clear understanding of your S.W.O.T (Strengths. Weaknesses. Opportunities. Threats. This should be apply on all the plan). With these information, you will be able to understand more about yourself and your business. Creating the business plan should take a fair amount of time and there are some key areas you will be focusing on. For example, about your product, your target market, your competitors and your goals on this business plan.
Your business plan should be updated throughout the year as you may hit the certain goals, or the market have changed. Therefore, keep your plan up to date and understand what is the demand that the people needed recently.
➋ Understand your target market
For property investment, location is extremely important as if you invest in the wrong place, you’re doomed. There are some cases that happened on the newbie property investors, where they buy property without having a proper research on the location and study the potential risks on the location. Or putting too much money on the renovations and caused themselves over budget. There are a ton of houses in the area, you need to spot the opportunities, what things make your house stand out from the others, knows the market and the competition.
Are you focusing on students, workers or travelers. Once you know which market you are target on, you must really focus on a type of seller and offer the market to them. Looking at the different opportunities should be part of the business planning process, so you will be forced to study your target market carefully.
➌ Monitor performance
As we mentioned earlier, you have to update your business plan at least once a year. Study about your industry and check into your competitors. Keep yourself update of what is going on recently. What are the things that people more concerned about. It is easy to over look this and get caught up in the everyday business operations, but without keeping update, you will not be able to make the necessary changes in time or become successful.
For instance, you are targeting on flipping property in Penang Island. Penang Island becomes saturated with investors and wholesale pricing starts to increase. Prices for materials are also increasing, but you are not seeing higher resale prices. Your plan calls for RM 150k profit per property, but you are not making RM 15k or RM 10k or even less. The sooner you identify the problems and research other neighborhoods, the closer you will be to staying on track with your year end projections.
➍ Attract investors and partners
If you want to go bigger on your business plan, you will need partners and investors. Where it really does come in handy is when you are dealing directly with individuals for funding. This could include private lenders or partners. Investors need to know how you run your business and how they can get benefit from it. For this reason, you will share your full business plan with the them when they appreciate your ideas. This proves that you have done your research and have a solid strategy for growth.