The 2nd Element - Research & Strategy (Warren Buffet Essential Elements to a Real Estate Investing Business Plan)

Warren Buffet once stated, “Whenever we buy common stocks for Berkshire’s insurance companies (leaving aside arbitrage purchases), we approach the transaction as if we were buying into a private business. We look at the economic prospects of the business, the people in charge of running it, and the price we must pay.” This basic principle sums up a lot of what made Warren Buffet so successful.

He didn’t just buy into opportunities because they seemed likely.

He actually closely looked at earning prospects, financial health, management, fundamentals, philosophies, and employers of businesses he was thinking of investing in. Real estate entrepreneurs need to be just as choosy and just as careful about the properties they buy. Even if you hope to just rent out, and/or buy, fix, and flip property, you should still investigate it and your marketplace with the same vigor as you would investigate a home you were putting in your entire life savings into.

When it comes to research, what are the demographics of the marketplace?  What cycle is it in? (expansion, contraction, or absorption)? What investment strategy should you apply to yield the greatest amount of cash profits in the next 6 to 12 months?  What’s the competitive landscape like?  Are their “clients” who want the services your investing business is going to offer?  Where are you targeting properties in the market?  What is the acceptable price range suited for your needs and why? What neighborhood is it in? Has there been any serious damage to these properties in the past 10 years? What are their real conditions? What are the average earnings potential per deal?