In the face of disaster, business models stand! What is your business model? Do you need one to build a Property Portfolio in Real Estate Investing?
This is a question I get asked more often than not, but it is alarming to note that loads of the so called “Property Investors” don’t have any business model. To keep it simple I’ll interchangeably use Business Model and Strategy here although in the real sense, the two can have different meanings.
If you don’t know where you want to be, it is very difficult to know how to get there. That defines the importance of laying out your goals and the objectives of your investment (s). Once you have set the goal, then it becomes a matter of strategy to work out how you will get there in the simplest, shortest and least strenuous way possible.
There is almost no need to re-invent the wheel in real estate. However, it is best to pick the right wheel that will get you there and one that suits your needs best.
Let me layout a simple Property Investment Business Model that I have used consistently with stunning results:
- Define the Amount of Passive Revenue you want by end of year (or within a specific period)
- Layout your strategy to getting this Revenue (Business Model)
- 3.Get down to executing it.
- Mandatory Question – How does my property make me passive Income? – Under this:
- What is my cost structure – Income (Rental) vs. Expenses (Bond/Levies/Rate & Taxes etc)
- What is my net profit – Both realized (Rental) and unrealized (Capital Gains)
- When will I break even / live off the property / How do I intend to do this?
- What is my target audience for the Property I’m investing in?
- How well do I understand this market and is that one of my strengths?
- Can I reproduce this model, over and over through the years?
- Complement each other
- Need to understand a wide market of clients
- Too diverse and therefore cannot draw on the major strength of understanding your market
So what is this Business Model, we keep talking about? It is the consistent plan on how to Create, Build and Manage your property portfolio. The key word here is ‘CONSISTENT’. Most people think that they have a business model, but keep changing the plan to suite the circumstance; rather than focus on the circumstance to suite the plan.
A true Property Investment business model needs to meet a simple criteria:
If these questions are not affirmative, then there is need to re-check what you consider as Property Investment.
There is always a risk of having a wide portfolio of properties that don’t:
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