By Greg Herlean
If you’re considering getting into real estate investing, whether you realize it or not, you’re about to start your own business. Whether you decide to incorporate or not, and whether or not you choose to hire employees, you’ll be the owner-proprietor of your business. So, does that mean that you need to write a business plan to start flipping houses and build your house flipping business?
Mike and I have gone back and forth on this one over the years. The short answer is no. You don’t have to write a business plan, and plenty of successful house flippers create and grow their businesses without any kind of formal plan. On the other hand, those who do have business plans tend to have a clearer vision of what they want to do with their businesses and how they want to proceed.
The argument over whether or not you need to write a business plan and when—before you start flipping, after you’ve flipped a few houses, when you decide to grow your business, or never—isn’t a new one, and it isn’t unique to real estate investing. If you do a Google search for “Do I need a business plan?” you’ll find a wide range of entrepreneurial experts telling you all kinds of contradictory things. So how do you decide who’s right?
Since we already know that you don’t necessarily need to write a business plan to succeed as a house flipper, let’s look at a few reasons you may or may not want to have one.
Know Your Risks and Cover Your Bases
Writing a business plan gives you a chance to sit down and really think out all of the ways you can fail in your real estate investing endeavors. That might sound cynical and negative, but it’s important. When you know how you can fail, you have the chance to make contingency plans and create exit strategies for anything that comes your way. This is a pretty big argument for writing a business plan.
Time Spent Writing a Business Plan Is Time Not Spent Finding Flips
On the other hand, while you’re busy writing your business plan, other investors are busy filling their lead funnels, making deals, and flipping houses. You need to spend some time researching your markets and doing your homework on your flips, and writing a business plan might take away from the time you have to do that. That’s why some experts feel like business plans are a waste of time.
Develop a Game Plan for Future Growth
If you’re planning on growing your business, partnering with other investors, hiring employees, and flipping more and more houses at once, you may want a clearer idea than, “When I get to X simultaneous house flips, I’ll hire an intern.” A business plan can give you the road map you need to grow your business as smoothly as possible while avoiding a lot of the big mistakes that new business owners make.
In general, I don’t think you need to write a business plan to start flipping houses. As you get more experience and you gain more success—when you decide to start branching out and growing your business, for example—a business plan can be a very good idea. You don’t need a business plan to be a successful house flipper, but a lot of successful house flippers have benefited from writing clear business plans. That may not be the clear yes/no answer you were looking for, but it should give you a better idea of whether or not you want to take the time to write a business plan right now.