With market analysis, you need to define what your price range is. Don't tell me you're a real estate investor and you buy anywhere from $10,000 to $45 million. That's not meaningful to anybody, and particularly not as a private lender. It doesn't mean very much if that's what your range is.
Define Your Price Range
If you're going to be buying single-family houses, I want to hear, "I'm going to be buying anywhere from $75,000 up to $150,000." That's a fairly nice range. Or, "I'm going to be buying single-family homes in nicer communities for $400,000 to $600,000. I'm not doing the low-end stuff. I'm not doing a little bit of this. I'm going to be buying bread & butter, medium priced homes."
If you really want, that's fine, you can do high-end stuff. Just say, "I'm going to be buying homes in the $1 million to $1.5 million range." Again, you have to define your range fairly tightly. Everyone understands what you're doing, and you become the expert in that area.
What Types of Properties?
What type of properties are you going to be buying? What types of buyers and renters is your focus? You want to focus on the types of properties you're going to be buying and the types of buyers and renters that you might be focusing on.
Are you going to be buying and trying to sell quickly, as they call flipping? That's one way of doing business. I think it's a tough way right now. Are you going to be buying and holding? What's your strategy once you've purchased the properties?
You also need to focus on the types of properties you're going to be buying. Are you going to be buying properties that are in foreclosure or short sales through lenders? Are there any other pieces of the puzzle? You need to think that through and really quantify it.
Again, I would ask and encourage you to spend some time thinking about these issues. It's one thing to be a "real estate investor" - it's another thing to be a real estate investor that has a well thought out and defined plan.
Repair Budget
Another thing on this list, and again you can address some of them, is what is your average repair budget going to be?
60-Second Business Plan
Now, what I'll do is give you in about 60 seconds what my business plan is. I think you'll find it meets quite a few of these criteria. If I was sitting in front of a private investor and the guy says, "Alright, I want to know what your business is." I would say to that gentleman or woman:
I buy in a town called Norristown, Pennsylvania, on the outskirts of Philadelphia. That town is a low to mid economic type of community. It is a town that is struggling but is improving.
It has approximately 15,000 to 18,000 homes. The average home in that community runs from about $75,000 at the low end to about $150,000 at the high end.
We buy houses that are 3, 4, or 5 bedrooms. That's it. We do not buy two bedrooms or less, and we do not buy six bedrooms or more. We are extremely focused on the 3, 4, and 5 bedroom community because once we purchase that home; we can turn around and rent it.
We buy and hold the property. We know the rents are going to be somewhere between $900 for a 3-bedroom home to about $1,200 to $1,400 for a 5-bedroom property. We can buy them from anywhere between $75,000 to $150,000.
We do not do substantial rehabs. We do not do properties that require foundations or major plumbing or electrical issues. We buy properties that need cosmetic work including carpet, paint, maybe kitchens and bathrooms.
Once we have purchased the property, we can turn around and rent it anywhere from that $900 to $1,200 range.
Focus is the Key
That is my business plan in about 60 seconds. You can see, it's pretty focused and has specifics. I know what prices are in my community. I know the demographics of my community. I know the type of people that are in my community. I know what they can rent for and what they can sell for.
So that's really the Market Analysis.
Source: http://www.directoryarticles.com/
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