What Is a Real Estate Business Plan?

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 What Is a Real Estate Business Plan?

A real estate business plan may be formulated in order to help guide a real estate business toward the success that is its goal. Developing such a plan is usually a necessary first step in starting a real estate-oriented business, such as a brokerage, listing service, real estate investment business, or other real estate business. One of the main reasons for business failure is a lack of a well-thought-out, clearly written business plan resulting from a thorough planning process.

A real estate business plan can provide guidelines for the operation of the real estate business a person wants to develop. For one thing, a real estate business plan is a plan for financial success, which is the goal of anyone going into business. A real estate business plan keeps the owners accountable and on track for achieving goals.

Also, following a business plan can help ensure that the organization complies with real estate and property laws.

What Should Be Included in a Real Estate Business Plan?

An expertly prepared real estate business plan should include such information as:

  • Summary: The plan should begin with a summary that includes a description of the business, its mission, and a focused statement of the basic plan;
  • Marketing Strategy: This would involve identifying the target market, i.e., who the business’s clients will be. It would also state how the clients will learn of the business’s existence and be drawn into a relationship with the business. Today, a marketing strategy would have to involve a website and social media plan;
  • Parties and Roles: The plan should identify the parties who are going to be involved and what their roles will be, e.g., owners, potential managers, agents, brokers, and the like. Some experts recommend identifying the tasks for which various parties should be responsible and the timeframes within which they should complete their assigned tasks;
  • Skills and Contributions: A delineation of the skills and contributions that each party brings to the business;
  • Summary of Operations: The daily business operations should be summarized;
  • Finances: Financial details should be provided, including the initial investments that will be made and by whom, projected revenue, both in amount and source, expenses, and projected profit. The owners should identify what their monthly break-even point is, at least initially, and how they plan to reach it. Some experts recommend predicting annual sales for the first three years of the business;
  • SWOT Analysis: “SWOT” stands for “strengths, weaknesses, opportunities, and threats.” These realities should be analyzed. The owners want to identify the strengths and weaknesses of their own business and the opportunities that present themselves. The founders then should identify the threats to the success of the business. For example, some questions the SWOT analysis should answer are:
    • What sets this business apart from all the others;
    • What skills does the business need to add or improve;
    • Whether any opportunities have been overlooked;
  • References: References to additional key documents.

Also, the business plan should include guidelines for what kind of legal documentation is needed to start the business. For example, one of the first things every business has to do at its inception is decide what form it will have. The issue is whether it is going to be a sole proprietorship, partnership, limited liability partnership, limited liability company, or something else. This is the time to consult with a qualified business attorney. A business attorney can review the projected operations of the business and the various options for business structures in the state in which the business is to be located.

If the business is going to be a partnership, it would probably be a good idea to have a partnership agreement. But whatever the form of business, some kind of registration process is required in every state. A business license may be necessary. Then a business has to have a taxpayer identification number and a bank account. Several such technicalities must be taken care of, and a business attorney can provide a complete list of items of this type that need to be addressed.

Consulting with an experienced business attorney is a good occasion to consider other legal considerations that may be key to the business’s operations. For example, will the business have contractual relationships with its clients? If so, then those contracts have to be prepared. Is the business going to need contracts with suppliers and other partners? If the business is going to hire employees right away, then the issue of employment contracts arises and requires planning.

The owners may want to consider what kind of contracts they want to negotiate. They may want to reflect on whether they want to avoid lawsuits and require alternative dispute resolution options in their contracts to avoid litigation’s expense and uncertainty. There may be other legal and financial issues that need to be resolved at this point. The business may need a collection policy if clients do not pay as promised in contracts.

For instance, the plan might indicate what steps need to be taken if a real estate contract is breached or other similar issues. Are there available strategies for avoiding potential litigation other than alternative dispute resolution, and how can they be deployed?

What If There Is a Dispute over a Real Estate Business Plan?

Many business plan disputes occur because an owner, manager, or employee is working against some of the terms or principles outlined in the business plan. In this event, legal action may be necessary, especially if:

  • The dispute is hurting profits or resulting in other negative economic consequences;
  • The dispute results in a breach of contract;
  • There has been a major violation of the law, such as wrongful termination.

Thus, it is important for a business plan to be well-written and clearly organized, because it can help avoid major disagreements in the future.

However, it should also be kept in mind that a business plan itself is not a legally enforceable document and working against it is not, in itself, cause for lawsuits. If the business has interests that are worth protecting through litigation, then these need to be the subject of legally enforceable documents, such as partnership or employment agreements and other contracts. Partnership and employment contracts can specifically describe the performance expected of each party and the consequences for failing to perform as promised.

Should I Hire a Lawyer for Help with Real Estate Business Plans?

Business plans are critically important for any organization, especially for real estate businesses. You should consult a real estate lawyer for help in planning a real estate business operation. Real estate laws and disputes can often be complex, but an attorney in your area can help address any concerns that you might have regarding your situation.

Specifically, a qualified attorney in your area can help you identify the business structure that best suits your operations and plan out the legal documents, such as contracts, that you need to operate as effectively as possible and protect the interests of your business. Should litigation become necessary, it is best to have a relationship with a qualified lawyer whom you trust to help you navigate the process.

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