House flipping business documents are plans for success!
Any real estate investor who is flipping houses is also running a business. Whether operating full-time or part-time, every investor should have plans to succeed using sound business principles. These plans structure a house flipping business for the owners, the employees or team members, and the investors. Updating and following these plans will increase the probability of success by improving performance and lowering exposure to risk. Those catalysts together WILL allow our business to grow and scale well!
The article covers:
House Flipping is a business.
How the planning helps us.
How the plans help others to help us.
The business documents we should write.
Planning makes success a habit.
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House flipping is a business
Any real estate investor that is flipping houses IS running a business. The goal of each house flipping project (business venture) is profit. We may be flipping houses as a full-time job or to make some extra money part-time. Either way, when we invest time and/or money with the expectation of financial gain, then we are running a business!
Don’t be distracted by legal structures. Formation of a partnership, LLC, or corporation is not necessary to operate this business. We can flip houses legally in our personal names (we shouldn’t though). Regardless of legal structure, this should be considered a legitimate business.
How the planning helps us
Every single business could benefit by inserting sound business practices into our process. We doubt there is a business school anywhere that does not advocate for creating and maintaining these documents.
A house flipping business is no different! A house flipping business will benefit greatly from detailed plans to maximize potential. These plans explain our processes for ourselves (the owners), the employees or team members, and the investors. Updating and following these plans will increase the probability of success by improving performance and lowering exposure to risk.
Thinking through the process allows us to clearly understand the steps where we are weak. This is especially important for a new company that lacks experience. It is much better to realize we have a link missing from our chain before we need that chain! In the very first project this could be the end of the business altogether!
Thinking through the process is also important for seasoned companies that have done the whole process many times over. Weak points for experienced companies are surrounded by inconsistency or inefficiency. Sometimes these points are handled inconsistently from deal to deal for no solid reason. Other times, these points drag on due to a timing hand-off from one team member to another. These weak points in the process cost us money!
There are many other topics that a business could address with these plans. Some examples are: when to acquire office space; when to hire additional employees; where exactly to operate within the city; summary of current market and near future market predictions; etc. The list could be endless, but we shouldn’t let it be. The desire is to spend a reasonable amount of time mentally preparing ourselves for the road ahead.
As we spend time thinking, validating, and writing, we tend to become much more in-tune with our business. The documents offer a strong sense of permanence. We will remember the ideas and decisions we made, but if we need to, we can always look them up. They also become very transparent. Everyone else can see the documents too. We now have proof that we have plans! The ideas no longer exist only “in our heads”. The predictions we make for the future tend to turn into goals that will bring accountability.
How the plans help others to help us
Writing solid business documents allows the owners to clearly and transparently illustrate the vision of the company. This well-constructed vision can be used to attract investors and talented employees.
Investors will want to see legitimate plans. Whether we want to attract bank loans, venture capital, or angel investors, we need to have solid business plans. A presentation may pique their interest, but they will need a well-written document they can take away and study before they will make an investment commitment.
Investors want to see a business plan that’s both convincing and complete. They need to see that we’ve developed a vision for the company and that we’ve given thought to the details of how to get there. They will want to be given confidence in things such as financial projections, detailed marketing plans, and specifics about our market.
Good employees are hard to find. They want to see a solid business that they can be proud to work with. Well-written business documents can instill confidence in potential employees and really set us apart from our competition.
Employees also want to know the details of our open positions. They need to understand what is expected of them. This is especially true if we are a small company hiring our first few employees.
The business documents we should write
There are two business documents that every real estate investor should write. They are the business plan and the operational plan. Luckily, there is overlap between the two documents. The business plan will contain the majority of the operational plan at a higher level.
The business plan is the main document. It outlines the business structure, the current market and marketing model, as well as where the market is heading and how the company is changing in preparation. There are many other things that could be contained in the business plan. There is no ONE correct formula. It really depends on the particular business contained in the plan and the intended audience.
The operational plan contains the business structure and practices. These are the methods and rationale that will be used to operate the business. This should include descriptions for each position, including the work sequence expected, the tools provided, and the minimum results required.
Select Home Ventures LLC maintains these two business documents. Our documents are available here. They should create a good starting foundation. Of course, they must be tailored to fit different markets or models.
Planning makes success a habit
Well-written plans are blueprints for success. Updating and following these plans will increase the probability of success by improving performance and lowering exposure to risk. Those catalysts together WILL allow the business to grow and scale well! This planning gives smart investors the ability to make success habitual. The wonderful thing about habitual success is scalability!
Great house flipping business documents not only explain how to flip single properties well, but also to flip multiple properties well simultaneously. They can also accommodate separate teams of employees independently flipping multiple properties well simultaneously. Any real estate investor intent on running a successful house flipping company of that magnitude needs to write house flipping business documents of their own!