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Property Rehabber Business Plan

1.0 Executive Summary

The purpose of this business plan is to raise $300,000 for the development of a property rehabilitation firm while showcasing the expected financials and operations over the next three years. The Property Rehabber, Inc. (“the Company”) is a Texas based corporation that will acquire residential properties with the intent to fix them and resell them into the open market. The Company was founded by John Doe.

1.1 The Operations

The Company will be actively engaged in the acquisition of properties throughout the State of Texas that are in need of substantial renovation prior to their sale or rent to a third party. Property Rehabber, Inc. will focus on developing ongoing relationships with real estate investors that will generally acquire rehabilitated properties after their completion. The business will also maintain an expansive marketing apparatus for marketing these units for sale to the general public (in conjunction with a retained real estate brokerage).

Management intends to acquire properties that are usually 30% to 70% under their fair market value. The business will have a number of inspectors on retainer so that the Company can know what specific issues must be addressed in order to bring the property to saleable condition. The Company will also have a through inspection of each property completed (among a number of different contracting disciplines) to ensure that there are no unexpected issues during the course of a renovation.

The third section of the business plan will further describe the services offered by the Property Rehabber.

1.2 Financing

Mr. Doe is seeking to raise $300,000 from as a bank loan. The interest rate and loan agreement are to be further discussed during negotiation. This business plan assumes that the business will receive a 10 year loan with a 6% fixed interest rate. The financing will be used for the following:

Capital to acquire properties for renovation.
Financing for the first six months of operation.
Capital to market the properties for sale to the general public.

Mr. Doe will contribute $50,000 to the venture.

1.3 Mission Statement

Management’s mission is to develop Property Rehabber into a premier property rehabilitation firm in the Texas and Midwestern US market.

1.4 Management Team

Mr. Doe is a veteran contracting professional that will be able to properly manage all aspects of property rehabilitation while quickly bring the operations of this business to profitability within the first year of operations. His biography can be found in the sixth chapter of this business plan.

1.5 Sales Forecasts

Mr. Doe expects a strong rate at the commencement of operations. Below are the expected financials over the next three years:

Property Rehabber Profit and Loss Statement

1.6 Expansion Plan

The Founder expects that the business will aggressively expand during the first three years of operation. Mr. Doe intends to complete a number of property rehabilitations during the next three years while heavily reinvesting the Company’s positive cash flow into new projects.

2.0 Company and Financing Summary

2.1 Registered Name and Corporate Structure

Property Rehabber, Inc. The Company is registered as a corporation in the State of Texas.

2.2 Required Funds

At this time, the Property Rehabber requires $300,000 of debt funds. Below is a breakdown of how these funds will be used:

Mr. Doe will make a $50,000 capital injection into the Company.

2.3 Investor Equity

Mr. Doe is not seeking an investment from a third party at this time.

2.4 Management Equity

John Doe owns 100% of the Property Rehabber, Inc.

2.5 Exit Strategy

As each real estate deal is completed separately, Management has not outlined a concrete exit strategy. In the event Mr. Doe wishes to retire or cease business operations, he will most likely contract a real estate brokerage to divest the Company’s current assets and the Property Rehabber entity will dissolve.

3.0 Operations

As stated in the executive summary, Property Rehabber, Inc. will be actively involved with the acquisition of properties that are substantially undervalued due to improvements that are needed. The business will work with a litany of third party contractors and inspectors in order to ensure that any specific rehabilitation can be carried out profitably. Mr. Doe has been actively building a large scale database of real estate agents and brokers that will source undervalued properties on behalf of the Company.

For project undertaken by the business, Management anticipates that it will take two to three months in order to complete the renovation. The Company will strive to achieve a return on investment of at least 50% on all acquisitions and rehabilitations. Generally, the Company will acquire properties that have an initial sales price of $100,000 to $150,000 with the anticipation that the properties will be sold for $175,000 to $250,000 upon their completion.

It should be noted that Property Rehabber, Inc. will generally use its own in-house construction personnel. Certain renovation and rehabilitative functions will be outsourced (primarily electrical work). At all times, Property Rehabber, Inc. will maintain all proper licenses, construction permits, and insurance policies. Mr. Doe has retained an attorney that will work on behalf of the business as it relates to general legal counsel regarding construction activities as well as for the legal aspect of buying/selling properties.
As it relates to targeted properties, the Company will focus its acquisitions on condominiums, single-family homes, duplexes, and triplexes. The Company will expand its operations over the next three years to include small-scale apartment buildings and multifamily residential properties. Property Rehabber, Inc. may seek to acquire additional rounds of capital from an investor in order to carry out large scale rehabilitations within the next three years. However, this business plan assumes that no further capital will be used and that all future growth will be financed via the retained earnings of the Company.

4.0 Strategic and Market Analysis

4.1 Economic Outlook

This section of the analysis will detail the economic climate, the real estate industry, the customer profile, and the competition that the business will face as it progresses through its business operations.

Currently, the worldwide economy is facing a number of uncertainties due to Covid-19. As a result of lower economic activity, interest rates have fallen substantially as people/businesses have cut back on expenditures. For real estate, there are now a number of new properties on the market (among people that are looking to sell properties rather than face foreclosure). This has created a number of buying opportunities among firms that have access to capital and want to acquire undervalued properties (especially those needing a moderate amount of renovation). It should be noted that many of the new single family, condo, and multifamily properties that are now being listed for sale were previously used for short-term vacation rentals. Many owner-operators of these firms are quickly looking to divest these properties given the waning demand for vacation travel (especially among investors that overleveraged their operations over the past four years).

However, the current economic climate should not impact Property Rehabber, Inc.’s ability to generate revenues. The business, as thoroughly discussed in this document, will acquire properties that are substantially undervalued. Additionally, the low interest rate environment will allow third party real estate investors (as well as potential buyers that will acquire a property as their primary residence) to affordably purchase these completed units.

4.2 Industry Analysis

The U.S. Economic Census estimates that there are 7,400 firms that specialize in the renovation of existing real estate units in the United States. Each year, this industry generates in excess of $14 billion dollars in aggregate gross incomes. Additionally, the business employs over 58,000 employees (does not include independent construction workers).

The growth rate of this industry is expected to mirror that of the economy as a whole. It should be noted that it is expected that there will be a flurry of activity over the next twelve to twenty-four months as the economy undergoes a correction as a result of the Covid-19 pandemic.

4.3 Customer Profile

Among individuals that will purchase completed properties as their primary residence, Management has developed the following demographic profile that will be used in conjunction with marketing operations:

Annual household income of $50,000 to $100,000
Has a budget of $175,000 to $250,000 for the acquisition of a home
Has a down payment of 5% to 20% for their purchase.
Will require a mortgage.

Among real estate investors that will purchase properties from the Company on an ongoing basis, the following individuals/companies will be targeted:

Maintains a current portfolio of residential real estate valued between $2 million to $15 million
Will generally cash (or a line of credit) to acquire properties without requiring a mortgage for acquisition
Seeks to acquire single family and small multiunit residential properties

4.4 Competition

Given the free market nature of real estate, Property Rehabber, Inc. will face competition from general contractors, other property rehabilitation firms, and individuals that engage in this type of activity. One of the ways that the Company will remain competitive in this market is by maintaining a low cost operating and overhead infrastructure that will allow the business to remain flexible on pricing at all times.

Additionally, the business will use modern styling in all properties rehabilitated. The Company will retain an interior designer that will allow each completed property to have substantial appeal among potential buyers.

5.0 Marketing Plan

Property Rehabber, Inc. will use a number of marketing strategies in order to ensure that the Company can divest its rehabilitated units within one to three months of their completion. Below is an overview of the strategies that will be used by the Company over the life of the business.

5.1 Marketing Objectives

Develop and maintain connections with real estate investors that will immediately purchase completed units.
Retain a qualified real estate brokerage that will market properties to the general public when necessary.
Maintain an expansive online presence that showcases in development properties.

5.2 Marketing Strategies

Foremost, Property Rehabber, Inc. will maintain strong relationships with Texas based real estate investors that will continually acquire properties that will then be rented to tenants. By partnering with these investors, the Company will be able to ensure a free flow of capital once a property is ready for sale. Mr. Doe has been actively working with real estate investors for many years, and he will call on these contacts to expand these relationships.

As it relates to online marketing, the Company will maintain an expansive website that showcases completed properties (including prior work of the business), properties that are currently under rehabilitation, the business’ contact information, and other pertinent information regarding Property Rehabber, Inc. This website will be search engine optimized and mobile friendly.

The Company will also maintain a presence on social media platforms including Facebook, Twitter, Instagram (for photos), and YouTube (for video). When a property is completed, images and video tours of the property will be placed on these platforms. This will further create interest among potential homebuyers.

Additionally, for properties that have been recently completed (but not yet under contract) – Property Rehabber will list these properties on popular real estate sales focused platforms. This will shorten the lead time between completion and sale.

In order to further drive sales of units to the general public, the Company will maintain relationships with local and regional real estate brokerages (and their associated agents). Property Rehabber, Inc. anticipates that commission rates will be 3% to 5% for each completed property.

6.0 Organizational Plan and Personnel Summary

6.1 Corporate Organization

6.2 Organizational Budget

7.0 Financial Plan

7.1 Underlying Assumptions

The Company has based its proforma financial statements on the following:

The Property Rehabber will have an annual revenue growth rate of 29% per year.
The Owner will acquire $300,000 of debt funds to develop the business (carrying a 10 year term and a 6% interest rate).
The Founder will contribute $50,000 towards the business.

7.2 Sensitivity Analysis

Property Rehabber, Inc.’s revenues are moderately sensitive to negative changes in the economy. As has been discussed throughout this document, the business intends to focus its operations on the acquisition of distressed and heavily discounted properties that need a moderate amount of improvement. This will provide the Company with a substantial financial cushion as it progresses through its operations. This, coupled with the strong gross margins generated from each sale, will ensure that the Company can remain profitable and cash flow positive at all times. It should be noted that Property Rehabber, Inc. will generate instant equity in each completed project.

7.3 Source of Funds

7.4 General Assumptions

7.5 Profit and Loss Statement

7.6 Cash Flow Analysis

7.7 Balance Sheet

7.8 Breakeven Analysis

7.9 Business Ratios

Appendix A – SWOT Analysis

Strengths

The ability to create substantial equity in each project upon its completion.

Ongoing relationships with real estate investors will allow for a short lead time between completion and sale.

Moderately low operating and overhead costs as a function of revenues.

A highly experienced owner-operator (John Doe) that has years of experience in the contracting and construction industry.

Weaknesses

Rapid changes in the economic climate can impact of the operations of the business.

Property rehabilitation requires a substantial upfront investment.

Opportunities

Potentially rent certain completed units in order to produce a recurring stream of revenue for the Company.

Acquisition of additional rounds of debt capital in order to further fuel growth.

Syndication of equity capital that would allow Property Rehabber, Inc. to complete renovations and rehabilitations on larger scale residential and commercial properties.

Threats

Continued economic uncertainty as a result of the pandemic.

Other companies competing to sell their units among real estate investors and homebuyers.

Appendix B – Expanded Profit and Loss Statements

Appendix C – Expanded Cash Flow Analysis

Real Estate Investment Firm Business Plan

1.0 Executive Summary

The purpose of this business plan is to raise $210,000 of equity capital and $1,000,000 of debt capital for the development of a real estate investment firm that specializes in the rental and sale of residential properties while showcasing the expected financials and operations over the next three years. The Real Estate Investment Firm, Inc. (“the Company”) is a New York based corporation that will provide real estate acquisition and rentals to tenants in its targeted market. The Company was founded by John Doe. Revenue generating operations are expected to commence later this year.

1.1 The Services

The primary revenue center for the business is acquiring properties with the intent to rent them to the general public (among middle income renters). The business will generate profits from both the ongoing rental income paid to the Real Estate Investment Firm while generating capital appreciation from the long term holding of these properties (which will be recognized within the next three to seven years).

For the first acquisition, the Company intends to acquire a 40 unit property that is currently 95% occupied. The average rent per unit is $750. The Company will acquire this property for $1.1 million (with $100,000 being used as a down payment and $1,000,000 sought as a mortgage (carrying a 5.25% interest rate and a 30 year term).

The Company will acquire additional multiunit properties in both Year 2 and Year 3. These properties will be of similar size to the first acquisition.

The third section of the business plan will further document the operations of Real Estate Investment Firm, Inc.

1.2 Financing

Mr. Doe is seeking to raise $210,000 from an investor. The terms, dividend payouts, and aspects of the deal are to be determined at negotiation. The business will also secure a $1,000,000 mortgage for its first acquisition. The financing will be used for the following:

Financing to acquire the initial property
Financing for the first six months of operation
General furniture, fixtures, and equipment

The next section of the business plan will further document the usage of investment and borrowed funds.

1.3 Mission Statement

Mr. Doe’s mission is to develop the Real Estate Investment Firm into a premier regional real estate investment firm that will acquire and rent properties profitably.

1.4 Management Team

The Company was founded by John Doe. Mr. Doe has more than 10 years of experience in the real estate industry. Through his expertise, he will be able to bring the operations of the business to profitability within its first year of operations.

1.5 Sales Forecasts

Mr. Doe expects a strong rate of growth at the start of operations. Below are the expected financials over the next three years:

1.6 Expansion Plan

The Founder expects that the business will aggressively expand during the first three years of operation. As the real estate market returns to normal conditions, the Real Estate Investment Firm will be an excellent position to recognize profits from the sale of properties. Over the next two years, the Company will acquire additional capital (debt and equity) in order to acquire two additional properties (one in each year).

2.0 Financing Summary

2.1 Registered Name and Corporate Structure

Real Estate Investment Firm, Inc. The Company is registered as a corporation in the State of New York.

2.2 Required Funds

At this time, the Real Estate Investment Firm requires $210,000 of equity funds and $1 million (via a mortgage). Below is a breakdown of how these funds will be used:

2.3 Investor Equity

John Doe intends to sell 50% of the Real Estate Investment Firm in exchange for the initial equity capital sought in this business plan. Subsequent capital raises for the acquisition of additional properties are expected over the next three years.

2.4 Management Equity

John Doe will retain 50% of the business once the initial capital is raised.

2.5 Exit Strategy

Mr. Doe may seek to sell the business to a third party for a significant earnings multiple or divest the properties individually. Most likely, the Company will hire a qualified real estate broker to sell the properties on behalf of the Real Estate Investment Firm (with the initially acquired properties sold over the next three to seven years).

3.0 Real Estate Operations

The direct finance and purchase of residential property is the primary business of Real Estate Investment Firm. Residential real estate will provide a continuous stream of rental income that Management will use for reinvestment and profit stability for the Company.

The first property to be acquired by the business features 40 units (with each unit having an average monthly rental fee of $750). There is also an onsite laundry room that features coin-operated washers and dryers.

Management is developing a complex economic pricing strategy that will determine the fair market rate of a property based on its capitalization rate in conjunction with the market values of residential property. Residential real estate is the least risky form of real estate investing because the service offered is a necessity.

It should be noted that the Company may seek to use syndicated equity focused capital raises over the next two years as opposed to direct investment in Real Estate Investment Firm. However, this business plan assumes that future investments will be made directly into the Company rather than the through use of limited partnerships.

4.0 Strategic and Market Analysis

4.1 Economic Outlook

Management is developing a very complex pricing method to ensure that the Company can continue to provide its units at profit despite possible drawbacks in the overall economic market. The Company’s two prong approach to real estate will allow the business to grow successfully in the rapidly changing real estate market.

Currently, the economic climate is uncertain. The pandemic stemming from Covid-19 has created a substantial amount of turmoil within the capital markets. It is expected that a prolonged economic recession will occur given that numerous businesses are being forced to remain closed for an indefinite period of time (while concurrently having their respective employees remain at home). However, central banks around the world have taken aggressive steps in order to ensure the free flow of capital into financial institutions. This is expected to greatly blunt the economic issues that will arise from this public health matter.

However, the current economic has create a number of buying opportunities (as well as property rehabilitation opportunities) given that interest rates have declined and there are now a number of distressed properties on the market (especially among people that are selling properties due to economic reasons). As such, by sourcing capital now – the Company will be in an excellent position to acquire undervalued properties that will generate substantial capital appreciation once normalized economic growth resumes.

4.2 Real Estate Strategies

The Real Estate Investment Firm plans to actively pursue a real estate acquisition program that will focus on the purchase of multiunit apartment buildings with the intent of creating a recurring stream of income. Management will use reasonable leverage to purchase these properties so that a positive cash flow is generated after debt service has been paid.

The recurring streams of revenue generated from the rental of multi-unit residential property will allow the Company to continually recognize revenue despite drawbacks in the real estate market. As these properties increase in value through capital appreciation, the Company will divest of these properties to reap its capital gain profits.

The Company will divest its properties once Management feels that its real estate holdings have become overvalued. Mr. Doe has worked diligently to create a pricing model that will allow the business to understand when the properties have an unusually high price. This model will examine the capitalization rates of the income producing properties for a determination of true asset value.

There are tremendous tax benefits for the Company as it engages its real estate investments. As the business makes its real estate divestitures, The Company will recognize capital gains income rather than income on its properties. These windfall gains will be taxed at a rate that is significantly lower than the federal regular income tax levels.

4.3 Industry Analysis

In the United States, there are 2 million companies that operate in a real estate investment capacity by sourcing funds from private investors/banks with the intent to engage in real estate related activities. Each year, these firms aggregately generate $1 trillion per of gross revenues (including the sales of properties).

This is one of the country’s mainstay industries, and the future growth rate will mirror that of the economy in general.

4.4 Customer Profile

As the Company intends to operate among several different investment and operating units, it is hard to characterize any specific tenant that will occupy the Company’s properties. However, Management will enact strict tenant quality and credit review procedures to ensure the Company’s revenues will not be interrupted by tenant default.

Generally, Management will use the following profile when targeting potential renters:

Annual household income of no more than $60,000
Will spend $750 to $1,000 on a one to two bedroom apartment
Currently lives within 20 miles of a property owned by the Real Estate Investment Firm, Inc.

4.5 Competition

Since real estate is effectually one of the most free market oriented businesses in the country, competition can not be accurately categorized. The Company anticipates that there will be a sizable amount of competition from both single owner investment firms to large construction companies that are seeking to gain from undervalued properties in the Northeastern United States.

5.0 Marketing Plan

The Real Estate Investment Firm intends to maintain an extensive marketing campaign that will ensure maximum visibility for the acquired units in its targeted market. These marketing campaigns will also target investors that will want to place capital with the Company for investment purposes.

5.1 Marketing Objectives

Maintain an expansive website which will include the use of social media and SEO to boost visibility.
Develop strong connections with real estate brokers that will rent units on behalf of the Company.
Maintain strong relationships with investors.

5.2 Marketing Strategies

Management will use a two-pronged investment strategy in order to target people that will rent properties as well as real estate investors that may want to invest capital with the Company.

As it relates to sourcing renters (for when a vacancy occurs), Management intends to use a highly qualified regional real estate brokerage that will list and show properties on behalf of the Real Estate Investment Firm. The Founder anticipates that each successfully placed renter will cost the equivalent of two months of rent. At this time, the Founder is actively building a database of real estate agents that work within the New York metropolitan area that can effectively deliver results for the business.

Beyond retaining a qualified brokerage, the business will maintain a proprietary website that showcases all properties and units that are available for rent. This online form of marketing will run concurrent to that of the Company’s retained brokers and agents’ marketing plans. This website will be heavily search engine optimized and mobile friendly.

It should be noted that videos of each property owned by the Real Estate Investment Firm will be created and uploaded to the website (via YouTube). These videos, when a vacancy occurs, will also be showcased on popular social media platforms including FaceBook and Twitter.

A substantial portion of the website will be geared towards potential ongoing investors for the Company. Access to information regarding how to invest with the Real Estate Investment Firm will be granted once a user confirms that they are a qualified or accredited investor. The link to the website will be listed among major portals that target real estate investors.

For search engine optimization, the business will retain a qualified SEO and/or web development firm in order to ensure that the Real Estate Investment Firm’s website is found when relevant searches are carried out among major search engines. The business will have its SEO firm place linking text among numerous websites that focus on real estate rentals and sales (as well as investment portals as discussed above).

From time to time, the business will list available units (for sale and for rent) among circulars within the greater New York metropolitan area. These advertisements will be placed in tandem with the print marketing that the Company’s brokerage carries out.

It should be noted that the Company has a full-scale stand alone marketing plan specific for targeting real estate investors. This document is available upon request.

6.0 Organizational Plan and Personnel Summary

6.1 Corporate Organization

6.2 Organizational Budget

7.0 Financial Plan

7.1 Underlying Assumptions

The Company has based its proforma financial statements on the following:

Real Estate Investment Firm will have an annual revenue growth rate of 37% per year.
The Founder will acquire $210,000 of equity capital for the acquisition of the first property (which will also be financed using a $1,000,000 loan carrying a 5.25% interest rate and a 30 year term).
In Year 2, an additional equity investment of $250,000 will be acquired coupled with a $1.25 million loan (with a 30 year term and a 5.25% interest rate) to acquire a second building that features 30 units (with an average monthly rental fee of $850).
In Year 3, the Company will secure a $500,000 investment and a $1.5 million loan (with the same terms as the other credit facilities) for the acquisition of a 50 unit building (with average per unit rental rates of $1,000 per month).

7.2 Sensitivity Analysis

The Company’s revenues can change depending on the general economic climate of the real estate industry. In times of economic recession, the Company may have issues with its top line income as fewer sales will be made and rental income may decrease. However, the Company will generate income from its rental business (which will always remain as its primary source of revenue), which will reduce the risks associated with this business.

7.3 Source of Funds

7.4 Profit and Loss Statement

7.5 Cash Flow Analysis

7.6 Balance Sheet

7.7 Breakeven Analysis

7.8 Business Ratios

Appendix A – SWOT Analysis

Strengths

Economically insulated business as people are always going to require residential real estate.

High gross margins from ongoing rental with minimally anticipated renter default (as a result of substantial credit review checks in place).

Recurring streams of revenue on a monthly basis.

A Founder-Operator (John Doe) that has extensive experience in the real estate investment industry.

Weaknesses

Many regulatory and compliance issues.

Legal liabilities resulting from accidents within owned buildings.

Competitors within the same New York metropolitan area market.

Opportunities

Expansion of the business to maintain several properties.

Attract additional equity capital from private equity firms and angel investors.

Threats

Errors and omissions can cause serious legal liability for Real Estate Investment Firm, Inc.

Many other businesses targeting the same clientele.

Liabilities resulting from onsite renter injury can severely damage the Company.

Appendix B – Expanded Profit and Loss Statements

Appendix C – Expanded Cash Flow Analysis

Real Estate Investment Firm SWOT Analysis

Since the beginning of capitalism, individuals and corporations have developed or acquired real estate with the intent to generate income from rent or the sale of units to a third party. Real estate is effectually one of the freest markets in the world – and the demand for affordable housing, high visibility commercial space, and related properties tends to remain strong in any economic climate. For real estate investors that have an understanding of the economy as a whole, real estate can be a highly lucrative enterprise that allows revenue and income to be recognized among a number of centers (rental income, capital appreciation, and specialized service income).

Strengths

One of the most interesting strengths for real estate investment firms is that they generally have continued access to capital as needed provided that minimal equity requirements are met. Banks and financial institutions are always keen to provide debt capital for the acquisition of real estate (or for development ventures) given that they money is backed with a tangible asset. Additionally, the demand for real estate (especially residential units) is often considered a necessity. As such, these businesses are able to generate a highly recurring stream of revenue from their rental operations on a month-to-month basis.

The ongoing operating costs related to the day-to-day management of a real estate investment firm are generally considered to be low as a function of revenues. As such, well placed investments are generally able to produce revenues and profits in any economic climate.

Weaknesses

While substantial access to capital for these businesses is one of a real estate investment firm’s strength – it is also one of its weaknesses. Many firms often over-leverage their properties which can cause significant issues during difficult economic climates (such as the current issues with the pandemic). Additionally, people that are renters of residential property are generally more susceptible to negative changes in the economy.

However, through proper and appropriate leverage (as well as comprehensive tenant screening protocols) these weaknesses can often be remedied before they create issues for a real estate investment firm.

One of the other issues that is commonly faced by these businesses is that unexpected major repairs to properties can have a deleterious effect on a firm’s profit and loss statement.

Opportunities

For real estate investment firms (in any economic climate), opportunities are always abound. There are always distressed and far-below-market-rate properties that can be properly rented, improved (through rehabilitation), or sold to a third party. As discussed earlier, there are always numerous avenues of capital that a real estate investment firm (or independent real estate investor) can use in order to secure the necessary financing in order to capitalize on the investment.

Threats

The biggest threat facing most real estate investment firms are increases in interest rates or drastic increases in inflation (which is a modest risk at this time). However, with proper planning and a foresight to these matters – most real estate investment firms are able to remain profitable at all times.

Additionally, changes in ongoing landlord laws can impact the way that these businesses conduct their operations. Given this time of economic uncertainty, there are expected to be some regulatory changes.

Property Rehabber SWOT Analysis

In any economic climate, there are always distressed properties that can be acquired at a discounted rate with the intent to resell them at profit or rent them for a substnaital capitalization rate. One of the best aspects to owning and operating a property rehabilitation firm is that these businesses can easily obtain debt financing in order to acquire the property and leverage the return-on-investment. For properties in wealthy areas and other high economically viable markets, there are always investors that are willing to provide capital for these projects as well.

Strengths

For individuals that are highly trained in the fields of construction, contracting, and design – property rehabilitation can be a highly lucrative enterprise. The properties that are generally acquired for these purposes are usually 30% to 50% under their market rate value given the substantial work that must be done to the property. The returns-on-investment for each dollar of improvements made are substantial. This is especially true for multi-unit properties.

As discussed throughout this website, real estate focused companies enjoy substantial access to capital given that banks love when tangible property is the underlying collateral. It should be noted that many property rehabilitation firms often acquire lines of credit that are secured by properties that are purchased outright at the time of closing.

Weaknesses

As with any major property rehabilitation, there are going to be problems throughout the course of the project. Contactor issues, permit issues, and unexpected issues with the property are all stock-and-trade for this industry. As such, it is imperative that the entrepreneur that is starting this business have a complete understanding of proper construction methods.

One of the other issues that a property rehabber can face is that market conditions can quickly change during the course of a large scale renovation. As such, a substantial amount of capital is generally kept on hand in order to manage carrying cost and unexpected delays between the time of completion and sale (or rental).

Opportunities

Given that many major areas often have hundreds (if not thousands) or properties that are in need to rehabilitation, the opportunities for a property rehabber are endless. In many areas there are specialized tax incentives for developers/rehabbers that are able to improve properties.

As discussed above, access to capital is usually a straightforward process for many businesses in this field as real estate acts as the collateral. Additionally, substantial equity is quickly generated at the end of each project. In the event that a property is slow to sell, a long-term mortgage can be acquired in order to refinance the debt that was used to carry out the acquisition and rehabilitation.

It should be noted that a successful track record is developed; many property rehabilitation firms will use syndication methods (sourcing capital from a number of real estate investors) in order to take on larger projects (including multi-unit properties).

Threats

The biggest threat among property rehabilitation firms is the ongoing and rapidly changing economy. However, residential real estate is always in demand (especially in markets that need affordable housing).

Competitive issues are more of a minor threat for this type of business. It is imperative that a property rehabilitation firm produce high quality homes that are affordable (either via sale or through rent).

Apartment Building SWOT Analysis

Multiunit properties are generally the least risky form of real estate investing given that a single vacancy does not generally cause a substantial issue for satisfying underlying financial obligations. This is especially true for properties that have ten or more units. It should be noted that the package offered on the website includes a plan specific for the acquisition of a moderate scale multiunit property (in addition to two other business plans specific for ongoing real estate investment as well as property rehabilitation). This article will showcase the strengths, weaknesses, opportunities, and threats faced by real estate investors that focus their acquisitions on multiunit property buildings.

Strengths

As discussed above, these types of properties are generally able to generate substantial rent rolls in any economic climate as the rental fees associated with multiunit properties are substantially lower than single-family and duplex styled properties. The ongoing risks related to managing these properties are lower given that the rent roll is not centralized on one specific tenant.

Given the economic security of these properties, banks and financial institutions are always happy to provide acquisition loans as well as refinancing credit facilities. The terms of these loans are preferable.

Weaknesses

These properties often have slightly higher default rates given that they cater to the needs of lower and lower-middle income earning people. During difficult economic conditions, rent generation can be difficult as unemployment rates increase. As such, many owners of these types of properties should have substantial cash on hand to deal with these potential issues.

It should be noted that these properties also face competition from similar facilities in any market. In order to keep occupancy high, many owners of these properties will often offer amenities such as free internet. This can contribute to a higher operating cost.

Opportunities

Quite simply, the method of expansion is to acquire additional properties. Many real estate entrepreneurs will hypothecate their initial property in order to finance additional acquisitions. As discussed earlier, the acquisition of additional rounds of capital to acquire new properties is a straightforward process for real estate.

Threats

As with most real estate ventures, the biggest threat that these companies face are negative changes in the economy. Major deleterious changes can impact rent rolls as well as the underlying financing costs (which is a limited risk at this time as interest rates have dropped substantially over the past four months).