Writing Winning Business Plans: How to Prepare a Business Plan that Investors Will Want to Read and Invest In (Rich Dad Advisors) by Sutton Garrett

Author:Sutton, Garrett [Sutton, Garrett]
Language: eng
Format: epub
ISBN: 9781937832360
Publisher: RDA Press, LLC
Published: 2013-02-28T00:00:00+00:00

Chapter Eleven

Market Trends and Timing

“Trends are your friends.”

– Anonymous

Sam

Sam was preparing a business plan for a real estate investment he wanted to make. He knew that he would have to persuasively present exactly how his project would deliver superior cash flow so that the bank would extend him financing.

Sam was interested in a 40-unit apartment complex in an older part of town. He prepared his plan using all of the real estate business plan template headings. He thoroughly analyzed all of the rents in the market and was familiar with all of the comparables. After his review he knew he could raise rents by 10% in six months without a problem.

Sam had his maintenance experts review the property to see what repairs needed to be made. He did not like to deal with deferred maintenance when he owned a property. Sam’s strategy was to only deal with properties that were structurally and cosmetically sound, and charge rents accordingly for the suitable product. Of course, buying a property with deferred maintenance was a different issue. Sam aggressively used a lack of repairs to obtain a reduced selling price from the buyer.

But it was Sam’s strategy of buying somewhat distressed properties in older parts of towns that had caused him troubles with various bankers. The current conventional wisdom was that you couldn’t make money on such properties. The reasons were legion: Interest rates were headed up. There were new apartments being built in newer, nicer parts of town. The market for homes was competing with apartments. And conventional wisdom was very much the banker’s currency. Sam knew that bankers wouldn’t (and really couldn’t) trade in the untested, unsound and uncertain. Instead, conventional wisdom was a comfortable place for banks to operate from.

For this reason Sam had learned to be very aware of market trends and timing. If the conventional wisdom of the day about the market and market factors was X, Sam knew he had to argue to X, or overcome X.

In the case of the 40-unit apartment complex he was now looking to acquire, Sam had already heard from one banker that the town was growing away from the downtown core. The conventional wisdom was that the complex was in a decaying and depreciating part of town. Sam knew he had to overcome this impression.

Fortunately, Sam was in a well-connected lead group. In communities all across America, there are groups that meet once or twice a month for breakfast or lunch to share leads and market intelligence on what is happening around town. Sam had been in such a local group for ten years and had learned of inside information and developments weeks and sometimes months before the news became public.

At this last meeting Sam had learned some interesting information about the old county hospital, which happened to be just three blocks away from the apartment building he wanted to purchase. It wasn’t public yet but it would soon be announced that the hospital was going to build a $100 million ten-story medical office building.

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