Real Estate Investment Venturebusiness Plan Business Plan Samples
TABLE of Contents
Keys to Success
2.1 Business Model and Value Proposition
2.1.2 Due Diligence
2.2 Acquisition and Disposition
2.3 Focused Project Management
2.3.1 Rehab and Improvement
2.3.2 Management Bios and Project Providers
3.0 Industry Analysis
3.1 Buying, Holding and Selling Properties
3.1. Lead Generation
3.2. Researching Properties
3.3. The Maximum Purchase Price Worksheet
3.5.2. Turnaround Time
3.6. Rehabbing Properties
3.7. Selling Properties
4. Marketing Plan
7. Financial Management
7.2 Sales Forecast
1. Executive Summary
Hurst Real Estate Investment Venture is being formed to focus on the acquisition, renovation, and re-sale of residential properties. We will make essentially all of our revenue by recognizing capital gains on the sale of properties purchased and then "flipped"; from this revenue, we anticipate covering the operating costs related with our business and profit distributions to our stakeholders. Our principal objective is to generate attractive investment returns for our stakeholders.Hurst Real Estate Investment Venture is a business venture headed by Victoria Hurst. The company will investigate investment opportunities throughout the US, with a focus on New Jersey and Virginia and growing to Florida, Arizona and Nevada. By leveraging industry expertise and performing efficient property acquisition the company is projected to be a very profitable venture. I will be rehabilitating houses and flipping them to make a substantial profit. Our company will work to fix homes that are foreclosed, condemned, rundown and otherwise in need of significant renovation, by purchase them to resell for a profit. We will found our business within the East Coast, USA market, with later intention on westward expansion. Our mission is to make good homes for good people by using quality professionals, local vendors and reliable partners.I want to bring transparency and trust to our building process to ensure that we are renovating buildings in the most honest way possible. Before constructing we will consider what, if any, building issues in the community need to be taken into account. We plan on adding aesthetic details to homes that will make the renovated building and the surrounding buildings more appealing. Finally by hiring local bonded contractors we will allows the locals to build trust in the rehabilitation process.Below are three key drivers that will make our business successful: i. Building a brand through continued marketing within the community ii. Understanding appreciation by determining the right times to buy, rent or sell iii. Monitoring and assessing properties before and after they enter the market.We will also offer two services under the current company name: 1) real estate 2) rental. This strategy allows us to buy homes to renovate and to quickly sell the renovated homes. If we choose to rent the property we will also offer this service.We will invest a lot of time and effort in marketing using a variety of strategies. Marketing is essential to our process, because we have to be able to sell the renovated homes quickly back to the community before possession of the property can become a substantial burden on our bank account. Secondly, our marketing strategy should be designed to attract potential sellers, so that they come to us first. Thus we will be using a five pronged approach marketing collateral, signs, letter writing strategy and property database.The current real estate market has created a particularly favorable environment for an investment company like Hurst Real Estate Investment Venture. Savvy investors can now acquire real estate from economically challenged and over leveraged sellers at deep discounts, while having a pool of wealthy individuals who weathered the last economic downturn to re-sell to. Because of the current conditions the Company intends to aggressively build a short term real estate portfolio by purchasing and then re-selling foreclosed, distressed, and undervalued properties in the target markets.Before making any purchase, the Company will perform thorough due diligence to evaluate a properties purchase price, expected renovation costs, rental capacity, and finally re-sale potential. If the property passes the company's underwriting criteria, the company will acquire the property and start any renovations that may be needed. Our acquisition strategy couples our multi-channel acquisition infrastructure with a disciplined property selection process."There is this kind of middle man investor who is doing the flipping," says RealtyTrac's Daren Blomquist, he says the difference for today's flippers is that they must add value to the home before selling, because price appreciation alone won't net the profit they seek. This kind of market analysis and data fits directly in line with the business model of Hurst Real Estate Business Venture.This business plan details the operations of the company. The start-up funding being sought, totaling $2,000,000 is discussed along with a full market analysis of the areas the company will operate in.
Real Estate Investment Ventures mission is to provide our investors high returns from residential real estate investment opportunities, while making good homes for good people by using quality professionals, local vendors and reliable partners.
2. Company SummaryHurst Real Estate Investment Venture is being structured as a corporation which will make a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. This legal entity will act to protect the company from liability while allowing the best tax strategy.Real Estate Investment Venture aims to take advantage of the present real estate market environment of having reduced competition from unsophisticated investors who currently do not have access to relaxed credit policies. In addition, numerous investors misestimated the market and are stuck with properties that are highly leveraged and unable to be sold for a profit. The company anticipates launching a strong foray into the market.The Company intends to establish a reputation as a leader in the rehabilitation, build out and sale of high quality homes. The company's team has experience in seeking to maximize profit through the acquisition, construction/rehab, and re-sale of real estate properties. Hurst Real Estate Investment Venture will excel due to its focus and connections. To maximize value and earnings by concentrating on carefully chosen real estate with a devotion to detail and quality is at the core of the company's philosophy.The cautious value investment thinking, deep connections to third party vendors and servicers, and experienced project management team places Real Estate Investment Venture in a strong position to execute on its goals. The company will be in a great spot for opportunities where it will be able to create value through attention to detail in design and utilization of market connections.2.1 Business ModelThe Real Estate Investment Venture business model is based upon adhering to strict due diligence guidelines and focused project management to deliver value which will in turn create profits for the company.
2.1.1 Company Strategy
This business plan defines a long-term strategy for development of a real estate investment company. We recognize that investing in real estate is an opportunity to build substantial company wealth over the long-term and have set the following parameters to achieve our goals.* Buy properties only from highly motivated sellers* Buy properties at wholesale prices; resell properties at retail prices* Make purchase offers based on a Maximum Purchase Price worksheet* Maintain adequate cash reserves within the company* Establish and follow a goal-based timeline* Build and rely on a team of professionals* Develop and follow exit strategies for each property and for the companyBuy properties only from highly motivated sellers: Through the company's marketing efforts, we will actively seek out motivated sellers with an identifiable, distressing problem that forces them to sell their property at discounted prices. Common types of distress are personal financial pressures; unemployment; relocation; divorce; health problems; and inheritance of unwanted property.Buy properties at wholesale prices; resell properties at retail prices: The key to the company's investment strategy is in purchasing properties at wholesale prices. At the heart of the company's strategy is the ability to identify and secure good deals, by targeting properties that can be purchased for at least 20-25% less than retail value. If targeted correctly, purchasing discounted, below-market properties can immediately provide positive returns. We can either assign the sales contract to another investor (for a profit) without taking possession of the property; rehab and resell the property at a retail price, or hold the property as a long-term rental investment.Make offers based on our Maximum Purchase Price worksheet: To consistently achieve positive net profits, the company has developed a spreadsheet to forecast each property's net cash profit opportunity. The formula is based on determining the bottom line amount of net profit the company can expect from purchasing a property. Every offer to buy is based solely on whether the investment is a sound business decision. Simply, if the numbers suggest the property may prove to be a successful investment, then an offer is made for the property. The offer price is determined by the formula - which limits our risk in estimating the properties net worth to the company. We limit the number of offers on the table at any given time to the amount of liquid cash accessible; any investor or partnering opportunities present; and the amount of credit we have available.Maintain adequate cash reserves within the company: Debt management and cash flow is of paramount concern for the company. We will carefully manage the company's cash flow situation, never allowing our cash reserves to fall below a predetermined level.Establish and follow a goal-based timeline: Setting goals and then following through with each goal is imperative for planning our business. We recognize that investing in real estate cannot be entirely planned, as the actual speed at which properties are purchased and resold is not something we can accurately predict. Nor can we predict market conditions. Following a goal-based timeline keeps us moving forward in achieving our objectives.Build and rely on a team of professionals: We actively build and proactively use a team of professionals with deep experience in real estate investing. The team includes an attorney skilled in real estate; an accountant; several contractors that work consistently with real estate investors, several mortgage brokers and private money lenders, a title company and a network of like-minded real estate investors. We enthusiastically participate in our local real estate investment association, taking advantage of the educational opportunities as well as the opportunity to meet other investors.Develop and follow exit strategies for each property and for the company: We have a clear strategy for the intent of each property before we make an offer to buy. Just as importantly, we've developed an internal Operating Agreement that clearly defines how the company functions, including specific methods regarding how to cease all company operations, close the company, pay all debts and divide the company's assets between the owners.
2.2 Acquisition and Disposition StrategyTo acquire real estate that best meets our criteria for investment, the company will foster a regimented investment approach that combines the experience of its team of real estate professionals with a structure that emphasizes thorough market research, stringent underwriting standards and an extensive down-side analysis of the risks of each investment.
2.2.1 Due DiligenceThis property selection procedure starts with a complete market analysis of the proposed purchase properties location. The company will then use appropriate assumptions when valuing potential acquisition candidates. Hurst Real Estate Investment Ventures is looking for residential real estate that conforms to our investment standards. The company will have no mandate to deploy capital at predetermined rates and will have time flexibility in selecting properties.The company believes that by sticking to a disciplined approach will help us avoid overpaying for properties and allow us to focus on the best return opportunities. Current market conditions in our target markets are expected to allow the company to successfully use the disciplined property acquisition strategy we are putting in place.
2.2.2 Acquisition Identification
Hurst Real Estate Investment Venture will invest in single family detached homes and multi-unit properties. The company intends to identify potential acquisition candidates in the following ways:*Utilizing existing bank and real estate brokerage relationships*MLS (multiple listing service)*REO auctions*Direct solicitation of property ownersThough these are the guidelines and resources within which the company will work, Hurst Real Estate Investment Venture feels that the company is most likely to meet investment objectives through the precise selection and valuation of individual assets. When making an acquisition, the company will emphasize the potential and risk characteristics of that individual property, how that investment will fit with the performance objectives and how the returns and risks of that property compare to the returns and risks of available alternative properties.2.2.3 Asset Acquisition Management Techniques
Hurst Real Estate Investment Venture believes that successful real estate investment requires the implementation of strategies that permit favorable purchases, effective asset and property management and timely disposition of those assets. The company's approach also includes active and aggressive management of each asset acquired. The company believes that active management is critical to creating value. Each property will also have a well-defined exit strategy.The following practices summarize the company's investment approach:Market Research - The investment team extensively researches the acquisition and underwriting of each transaction, utilizing both "real time" market data and the transactional knowledge and experience of management.Underwriting Discipline - Real Estate Investment Venture follows a tightly controlled and managed process to examine all elements of a potential investment, including, its location, income-producing capacity, prospects for appreciation, and condition. Only those real estate assets meeting the company's investment criteria will be accepted for inclusion in the portfolio for re-sale.Conditions to Closing Our Acquisitions- Hurst Real Estate Investment Venture may obtain an appraisal prepared by a competent appraiser. The company's investment policy will be that the purchase price of each property will not exceed its value at the time of acquisition of the property. Appraisals, however, are estimates of value and will not always be relied upon as measures of true worth or realizable value. The company will also generally seek to condition our obligation to close the purchase of any investment on the delivery of certain documents from the seller. Such documents include, where available:*Plans and Specifications*Surveys*Evidence of marketable title, subject to such liens and encumbrances as are acceptable to the company*Title insurance policies
2.3 Focused Project ManagementThe success of Hurst Real Estate Investment Venture relies as much on the management and their intellectual property as it does on insisting on strong due diligence for each investment as discussed above. A key element in driving the company to prosperity will be the management team and their experience and deep connections within the markets that the company will be operating in.
The following practices summarize the company's focused project management approach:Hands on - management will conduct daily onsite visits to all projects to insure progress is being made as required.Strict adherence to timelines - projects will be monitored to follow the time frames set.Proactivity - management will attempt to predict any issues that may arise and address them as far in advance as possible.Budgeting - management will make sure all project adhere to the prescribed budget.Strong focus will be given to the proper management of each real estate project; the company understands that this can be as important as the acquisition cost for a positive profit result. Before construction begins, management will secure the correct zoning and entitlements, select contractors, and create a working schedule and budget to facilitate the focus on managing the real estate project. Once any construction and/or rehabilitation deemed necessary is underway, management will ensure the project is being built to the exact specifications necessary. Finally, the company's focused approach to project management will include making sure all contractors, suppliers, and other partners are paid on schedule.2.3.1 Rehabilitation and ImprovementThe rehab and improvement method we use to increase property values is an important aspect of the company's business model. Hurst Real Estate Investment Venture will be meticulous when it comes to estimating repair and/or improvement costs. The management team has a profound ability to bring rehab and improvements to real estate both in time and on budget, based on years of experience.
The method we follow is:Exterior work is done first - The Company seeks to immediately increase the curb appeal of its properties and take care of any exterior structural work that may be needed.Efficient planning - The Company makes sure that electrical, plumbing, and other major integrity and functionality issues are all finished before any drywalling or finishing work is started.High Quality - The Company is afforded the luxury of being able to purchase and install high quality products and fixtures at deeply discounted prices, thereby allowing a greater end value in rehabilitated homes.2.3.2 Management Bio & Project ProvidersVictoria HurstCurrent- Technology Account Manager, Fannie Mae, Philadelphia, PAProject Management by mentoring and building team managerial skills to meet the standards of our technology account management service organization. Ultimately, providing clients with second to none customer relations by combining both cutting edge technology and strong interpersonal relationships.Selected Accomplishments:*#1 ranked vendor with Popular Mortgage Services.*Developed and launched end to end asset management platform.*Identified strategic opportunities, researched new product possibilities, collaborated with sales team and created opportunities.*Developed innovative work process to automate and maximize work flows. Resulting in home sales increase of 130%*Wrote sales, training guides and training brochures that enhanced the sales reps' understanding of service features and helped them sell more successfully.*Performed ongoing client research to identify and capitalize on unmet market needs in the ever-changing loan servicing arena.*Developed a nonprofit platform to help create turnkey housing opportunities for first time home buyers. Platform includes acquisition, rehab thru disposition to homeowner.*Increased employee production by creating incentive and team building incentives.*Assumed a lead role in pitch team meetings due to strengths in presentation and negotiation skills, and helped close deals with major real estate companies to facilitate their buyer’s loan needs.*Generated campaigns to assist investors complete due diligence to exit strategy completion.
Assistant Vice President, NPR CapitalProvide the CEO and shareholders with economic goals, up to date business portfolios reflecting market needs, trends and business opportunities. Develop and maintain existing customer relationships and new business opportunities. Re-organized fulfillment services to support the closing and delivery of operations. Established the ground work for a small bank program which supported loss mitigation processes for banks and credit unions under $100mm. Collaborated and secured 3 new bank contracts for asset management and received preferred vendor status with the GSE's. Fifteen percent of time served was traveling the United States.Assistant Vice President, Arbor Mortgage Servicing, Buffalo, NYPrimary responsibilities consist of building the Outsourcing Department for the future REO. Managing staff and building process/procedures implementation. Responsible for all daily activities in the REO department such as market analysis, reconciliation of values, MI Claims, preparation of the action plan (repairing the home, price allowance for repairs, selling as is), appraisals, approval of offers, review of contracts, preparation of the Liquidation Notice to the Cash Management department, review of HUD-1, review list changes and closing of the accounts. Additional duties included working with Loss Mitigation, Short Sales, Loan Modifications, Foreclosure and Bankruptcy departments. Twenty percent of time served was traveling throughout the United States.Assistant Vice President, Popular Mortgage Service, Cherry Hill, NJPrimary responsibility consisted of managing Equity One portfolio of post foreclosure properties from foreclosure sale to REO settlement. Responsible for the performance of the department and the outsource vendors who assist in the liquidation of the assets, and managed all assets that come to the REO department from both the managed portfolio in Loan Administration and the Consumer loan branch network. Responsible for all daily activities in the REO department such as market analysis, reconciliation of values, preparation of the action plan (repairing the home, price allowance for repairs, selling as is), appraisals, approval of offers, review of contracts, preparation of the Liquidation Notice to the Cash Management department, review of HUD-1, review list changes and closing of the accounts. Additional duties include building and maintaining relationships with all of Equity One's outside vendors, monitoring 1st payment defaults for repurchases from correspondent that loan was purchased from, maintaining the portfolio for all MI Insurance claims, Hazard Insurance claims and Title Issue/Title claims. Prior to promotion to AVP, I managed Loss Mitigation, Short Sales, Loan Modifications, Foreclosure and Bankruptcy departments, monitored default calls live daily and recorded all on the witness system and reviewed for script, content and accuracy. Training facilitator for collections, call center, loss mitigation and customer service in loan servicing. Maintain a streamline of reports and analysis for the Default Department as well as the building and implementation of Bankruptcy, Foreclosure and Loss Mitigation departmental process/procedures.
National Title/Closing Agent:Fidelity National Title3106 Brigantine BlvdBrigantine, NJ 08203
Davis Brothers Home Remodelers902 Lincoln RdMullica Hill, NJ 08062
Preferred 3 Party Vendors:
David SanchezRelar (Property Evaluations)Brian CombsUVestor (Software)
Duarte & Associates1040 N. Kings HighwaySuite 200Cherry Hill, Nj 08034
Cipriani & Associates, LLC111 Egg Harbor Road, Suite BSewell, NJ 08080
3. Industry AnalysisReal Estate Industry Overview -
Companies in this industry acquire, develop, operate, lease, dispose, sell, and market real estate. Real estate agencies and brokerages, commercial and single- or multifamily residential real estate developers, commercial and residential property management companies, and REITs (real estate investment trusts) are included in this industry. Real estate investing is a part of the industry and it involves the purchase, ownership, management, rental and/or sale of real estate for profit.Within the real estate industry investor category is a subcategory of real estate flippers. Flipping is an expression used mostly to define acquiring an asset and then swiftly reselling (or "flipping") it for profit. Profits from flipping real estate can be gained in several ways and can consist of multiple forms, such as:
*Buying low and selling high*Acquiring a property that needs repair and fixing it up before reselling it for a profit.
3.1 Buying, Holding and Selling Properties We follow a straight-forward process for identifying, buying, holding, and selling property. The process includes:* Lead Generation* Researching Properties* Determining the Maximum Purchase Price* Making Offers* Financing* Rehabbing* Holding Properties as Rentals* Selling Properties3.1.1 Lead GenerationKey to the company's strategy is a marketing plan designed to attract motivated sellers into our lead generation program. The plan is based primarily on generating leads from regional Internet advertising; maintaining a property database; developing a letter-writing campaign targeting preforeclosure property owners; displaying signs prominently in our targeted neighborhoods; and networking within our local real estate investment community. We've included a detailed marketing plan within this business plan.3.1.2 Researching PropertiesOnce leads are established, we research the properties to determine whether we should present an offer to the owner. We use two primary means of researching properties. First, we use a proprietary Maximum Purchase Price worksheet to help us determine whether to pursue a property. The worksheet is a vital component in deciding to make offers on properties, as it helps determine several important factors: the retail value of the property; the maximum wholesale price we can offer for the property; the amount of cash required for buying, rehabbing, and reselling the property; and the likely net profit for the company when we resell the property. We review the worksheet in detail in the following section.Additionally, we research the property by accessing the County Assessor and Treasurer's records. Specifically, we're looking for how much equity the owner has in the property and if any liens are recorded against the property.3.1.3 The Maximum Purchase Price WorksheetThe decision to buy and sell any property is based on an evaluation using the company's Maximum Purchase Price worksheet. Using the worksheet for each property allows the company to apply a formula-like approach in our effort to consistently generate positive net profits. The worksheet breaks down the decision-making process into a simple formula. Applying this formula to each property we consider purchasing provides a framework for the company to make its real estate investing decisions. In this section, we'll break down the worksheet and explain how each part functions. Of course, as with all of our forecasts, this example is based on ballpark estimates. Actual numbers always vary for each property. How the Worksheet WorksThe worksheet is a formula-based MS Excel file consisting of thirteen simple areas, labeled as Sections A through H. The premise of the worksheet is straightforward. First, we estimate the price at which we realistically could resell the property. We refer to this as the retail value of the property. After estimating the retail value, we then forecast the property's net profit potential by subtracting all costs associated with acquiring, rehabbing, reselling, and profiting from the resale of the property. The number we come up with is the maximum amount we would pay for a property, which we refer to as the wholesale price. Again, the business model of the company is to only buy properties for wholesale prices, then either resell the properties at retail prices or hold the properties as long-term rentals.
3.1.4 Turnaround TimeOur goal is to quickly rehab and resell each property. By keeping each property's holding costs to a minimum, we can maximize our net cash profit as quickly as possible. Net cash profits are used to purchase additional properties. The longer our cash is held up in one property, the less money we'll make over the long term.
We keep a percentage of our property acquisitions as long-term rentals, intentionally targeting properties that can provide positive cash flow and that are likely to substantially appreciate in value. If the property is identified as a long-term rental that we want to keep in our inventory, then the property is quickly prepared and rented after we sign the sales contract. The rental income is recognized in our sales forecast and rents are used to offset the mortgage on the property.3.6. Rehabbing Properties
The company's approach to rehabbing properties starts when the property is initially considered for purchase. Based on a physical inspection, we identify each component of the property that requires rehabbing and estimate the individual costs for all repairs and the time required for each repair. This allows us to incorporate rehab costs into our overall net profit forecast and gives us a clear picture of the timeframe necessary to rehab the property.
Also, each purchase offer is contingent on a physical inspection. If the inspection reveals that the property requires additional repairs, we'll renegotiate the purchase price based on the estimated cost of each repair.
Estimating the cost of repairs is one of our biggest challenges. Our philosophy is to hire contractors for rehabbing the properties rather than perform the repairs ourselves. Our time is best spent negotiating for properties and we recognize that it's in our best interest to leave the rehabbing to the experts. We bring in our trusted contractors to provide a cost estimate for each area requiring repairs.
We hire only licensed, insured, and bonded contractors. Doing so limits our liability and helps ensure that the repairs are guaranteed and professional. Our rule of thumb is to get three written estimates for each repair, which should include a total estimated cost, a breakdown of deliverables, payment terms, and a finish date. We generally provide the contractor with a small advance and then pay incrementally based on the percentage completed. We have the contractor specify a payment schedule in the estimate.
Our initial focus for rehabbing a property is to present the property in the best light, which translates into a thorough cleaning inside and out, new carpet and paint for the interior, and basic landscaping for the exterior. Beyond the basics, we'll rehab sections of the house based on the expected return for the effort. This means focusing on the house's curb appeal, the kitchen, the bathrooms, the master bedroom, and the mechanical systems. Once the rehab is complete and ready to be placed back on the market, we'll often 'stage' the property using the services of a staging company. A staging company decorates the interior to provide the most appeal to potential buyers.
3.7. Selling PropertiesWe begin to market each property for resale as soon as we control the property through a sales contract. The sales contract includes a clause that allows us to place signs on the property and have access for the purpose of showing the property to potential buyers and investors.
5.0 SWOT Analysis
6.1 Sources and Uses of Initial Funding
6.2 Initial Funding Requirement and Capitalization
6.3 Profit and Loss Projection
Real Estate Investment Venture ROI Projection:
Return on Rental Investment in One Year:
Recurring Annual Rental Income : $264,000
FORECAST P&L TOTAL MONTHS: 42
Expenses – New Jersey Office