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By Stephanie Mojica
One of the biggest mistakes many would-be house flippers make is operating without a business plan, according to a recent article published by millionacres.com (a Motley Fool service).
However, this blueprint should not focus on a specific rehab property; it needs to be a document that discusses the vision for the overall flipping business, according to the article.
Any solid business plan needs the following basic information:
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- Specific goals for the company, with a realistic time frame set for each goal.
- Details about the actions necessary to achieve those goals with the desired time frame.
- An executive summary, which includes details about your experience and education (this is especially crucial for any would-be investors).
A complete business plan has multiple categories and is not a static document. It is a document that will change and evolve as your flipping business grows.
Other aspects of a solid business plan for house flipping include:
Information about the structure of your organization. For example, are you a corporation, LLC, or sole proprietor? Are there other people involved in your company? How and why was your company founded? A strong mission statement, which discusses the principles under which your business operates, is also important.
A market analysis. Basically, you need to identify and analyze the neighborhoods and communities of focus. Why are these neighborhoods good? Discuss schools, crime rates, and other information important to homebuyers. Are you focusing on specific types of properties, such as single-family homes or condos? What are your price points? Who is your ideal buyer?
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Financial details. Discuss, in detail, how your first few home purchases and rehabs will be financed. Also, what are your financial projections for the future of your company? Basic documents needed include an income statement, cash flow statement, and balance sheet.
Growth, leads, and acquisitions strategies. How do you plan to grow your house flipping business? How will you find the properties you want to flip? And how will you find homebuyers?
When creating a business plan, it’s important to stay realistic and back up any claims with third-party data, according to millionacres.com. Also, the business plan does not need to be a long document. While it should be thorough, most people nowadays don’t have the time or patience to read long, meandering documents.
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