Mr Al Young Dot Com

Kenric at Live, Learn, and Invest, recently wrote a good post on the need for a real estate investor to formulate a plan.  Kenric had a plan, but as changes in the market occurred, he deviated from his plan, and lost his focus on the “big picture”  As a real estate investor, I can see how that can easily happen.  As a real estate investor, you have to attend to so many short term issues such as vacancies, taxes, and repairs, that after awhile it is easy to lose track of your plan.  You forget why you bought these properties in the first place, and may even make bad decisions in the short run.

When I was a financial analyst in public finance, one of my main duties was to formulate a 10 year financial plan.  It is very difficult to make financial and economic forecasts 10 year in the future, which is why the 10 year plan needed to be updated every year, when additional information was gathered.  So, the 10 year plan was always a work in progress.

For the real estate investor, I also suggest making a 10 year plan, which I call the “big picture” plan.   It should detail where your real estate business will be in 10 years, and how it will get to that point in 10 years.  I would also suggest making a 1 year and 5 year plan.  This is the short term, and intermediate plan.  Each of these plans should be reviewed every year, and updated as necessary.

The 10 year plan should not change much from year to year as the goals remain the same.  However, the 5 year, and especially the 1 year plan will need to be adjusted more frequently with changes in the market.  I have written about the need to adapt to changing market conditions, and this is usually in the short to intermediate time frame.

The advantage of reviewing each of these plans every year is that it keeps us focused on the “big picture”, and our goals.  We can deal with short term issues while not losing sight of our overall plan.  So, we do not panic when short term issues come up, and make poor decisions such as bad financing choices, or panic selling.  We don’t forget why we bought these properties.  We see how it supports our long term goals.  These plans can also be used in evaluating new investment opportunities.  If these new investments causes us to lose focus with our plan, than we don’t pursue it.  We don’t panic, because we see how each piece fits in the big puzzle.

Planning for the future is essential for any business owner, and as I have pointed out, a real estate investor is a business owner.  Taking the time to plan, will keep on focused and on track.  If you have been bogged down with all the day to day issues of your business, now is the time to take a step back, and review your plans and goals for the short and long term future.