It is the time to plan for 2015, if you have not done so already. I hope I can help you with these 5 key numbers to plan for 2015. My planning is done, and it has long been done. Don’t get discouraged if yours is not done. It’s never too late. Here is how you can start right now.
No. 1 – The first number you need to know: profit
What do you want to make next year in the form of profit for your business? What is that bottom-line number you want to generate as a result of your real estate investing business in 2015? It is made up of two things: First, money you put into your pocket as your own personal compensation; then, the money you are going to invest back into the business so that you can buy more houses next year or do whatever it is to grow your business. First and foremost, you have to know your profit number – the bottom-line number that is either income or investment back in the business.
No. 2 – How many houses do I have to buy?
The number of houses you need to generate the profit number is the second key. Depending on what your real estate investment strategy is, this should not be a difficult number for you, whether you are experienced or inexperienced. It should not be difficult to estimate the number of buys you want to make. Look at your strategy. If you are a rehabber, how many houses do you need to generate that profit you want to get? You know how much you typically make on a house when you rehab it and resell it. Use that number, from prior experience, or if you are new, go to your local real estate investment club meeting and talk to other investors to see what they make on a typical rehab in your market. The same is true if you are a wholesaler. “Well,” you say, “I make $10,000 on every wholesale deal.” Great. Take $10,000 and divide it into your profit number and you will know how many houses you need to buy to generate your bottom-line profit goal.
No. 3 – How many appointments?
How many appointments do I need to get, and go on, in order to get that number of buys? We all know, whether you are experienced or inexperienced, even the best real estate investors do not get to buy the house at every appointment we go on. Do I buy one out of every 10 appointments? Or three out of every 10? You will need to know that number, or ask your peers in your market. Be conservative in your planning. Perhaps you want to plan on every 10 times you get to the living room, you are only going to buy one of those 10 houses. But you need to know the number of appointments, to get the number of buys, to get to the bottom-line profit.
No. 4 – Leads we need to get appointments
This is a critical, critical number. This is where we spent most of our money as real estate investors generating these leads. We all wish it was as easy as going on Craig’s’ list, or surfing the MLS, and picking the houses we wanted to buy. Unfortunately, it’s not that easy. You’ve got to generate leads that generate appointments. Just as every appointment does not result in a buy, every lead does not result in an appointment. If you have been doing this for awhile, you may know that in your market with your advertising strategy, only 50 percent of the leads you generate actually result in an appointment –getting to the living room of that house with a distressed seller where we can talk about solving their problem and ultimately purchasing that house.
No. 5 – Advertising
You will do yourself a disservice if you make up numbers or set lofty goals or have unrealistic expectations. It will do you no good. If that is how you are choosing to plan, it’s just not going to serve you well. You will not make it through January before you are frustrated, disappointed and let down if you do not have a good, realistic, simple, measurable plan for your 2015 real estate investing business.
Advertising is at the top of our list and is the single largest expenditure for any successful real estate investor. Advertising is critical to get those leads, to get those distressed houses and distressed sellers. You need to know how much advertising to spend in your market to generate the leads you get. Look at it in a simple form. Perhaps direct mail is your biggest lead-generation marketing activity. Well, you know how many letters you need to send and how much they cost. “OK,” you say, “I typically send 100 letters at ‘X’ cents per letter, and they generate 20 leads.” That math is very simple. You can quickly determine if that’s how many leads they generate, that’s how many appointments I will get, how many buys I will get and how much profit I will generate. Let me multiply that out to reach my year-end goal.
Get that advertising budget set. That is what you’ve got to stick to, and be completely focused on, and committed to. The minute you stray from that budget, those other four items will all unravel. And you will find yourself at the end of the year saying that planning process didn’t work. You have to have integrity and commitment to that advertising budget. It’s key.
Hear Kevin’s full discussion on his post here on BlogTalk Radio.
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