A question I get asked a lot is whether or not you should change your business plan or investment strategy once it is written. My answer is always, absolutely. It is very rare to find someone who hasn’t changed it to some extent.
When starting out in Real Estate Investing, you should always have a Business Plan. Your Business Plan will help keep you focused and it get’s you to think about what it is you want to do.
The thing to remember is that a Business Plan is not a static document. It’s a living breathing thing that will change based on reality. The markets may change or your situation may change. Whenever something external changes, you will have to change or end up fighting a losing battle. Let’s look at an example.
Suppose you put together a Business Plan for your new Lease Option business. The plan may outline a process where you are buying properties and Lease Optioning them to Tenant Buyers. What happens when you can no longer get mortgages? You can no longer qualify because of the rental income to expenses ratio and because you have been buying these properties with little money down. If this happens you either have to stop doing Lease Options or change your plan. For example, you could start doing Sandwich Lease Options, which will take a lot more time so you may need to hire a salesperson to help out. You could bring in an equity partner, or several, to start buying properties in a joint venture agreement. You could look at getting investors to hold a second mortgage. Or you could look at another investment strategy all together.
The other thing that could change your Business Plan are your own personal desires. Maybe you don’t like the short term cycle of Lease Options and want to start buying rental properties for long term. Maybe you want a less active role and you now just want to be a cash investor and hold mortgages.
Goals and desires change. Markets change. Capability changes. Whatever the change, be prepared to change your Business Plan.