How do you create a business plan before you’ve even under contract?
First – a business plan is a living thing. It changes constantly, especially in the early stages of evaluation.
BUT YOU NEED ONE!
Without it, you’re going on a journey with no destination or idea of what supplies you need.
Could you make it to an amazing place?
Is it more likely you’ll end up lost, hungry, covered with insect bites and wishing you’d packed sunscreen?
Most multifamily properties fall into one of these categories:
- Fully Stabilized – This is what all other categories have business plans to achieve. These typically >90% occupied for the past 3 months at market rates, are being used to their highest potential and have no significant issues.
- Light Value Add – Small improvements (think lighting, paint, cabinet hardware, minor exterior improvements, etc) changes only needed to bring property up to market rates and be Fully Stabilized.
- Heavy Value Add – Lots of issues and investment needed (think plumbing, electrical, mold remediation, structural fixes, significant upgrades, etc) to get to Fully Stabilized. However that investment is still worth it because the best use of the building/land is to get it back to former glory.
- Redevelopment Opportunity – Property is not being used to its full investment potential. For example, a single family home in the middle of a fast-growing market could offer much higher returns if it was torn down and a commercial building took its place. This takes the most investment and risk, but also can provide very good returns.
Spotting which one of these you (1) are interested in and (2) have the network/resources to pull off is the first key piece of developing a good business plan on a particular property.
The good news is that if you don’t have (2) yet, there’s a ton of free resources, groups, and mentors out there to help you get to what you are interested in. I’m happy to help!
Or if (1) doesn’t sound so fun, let’s talk through how you can make an impact – both in your life and the lives of others.