What It Should Cover
Here are some questions to answer within the plan:
- What is the deal and can you show easily where the profit will come from it?
- What is the intended outcome, is it to be sold or rented out for example?(exit strategy)
- When will the profit be realised?
- What length of term will the development need to run before profits are achieved?
- What operating costs are there?
- What are the financial projections?
- Do you have a secondary exit strategy just in case plan A does not work?
- Have you included ALL costs and fees for mortgages, interest on loan payments, solicitors, marketing,planning etc.
- What are the benefits to the entity loaning the money?
- Have you worked on similar projects that have been successful?
- Have you included supporting facts that an investor wants to know, plus planning consents etc?
Take it step by step. In the first part of the business plan for any property development you need to detail the market conditions, competition and your relevant experience or ability to bring the deal to fruition.
Follow this with costings and how the deal strategy will work and be executed. When looking for finance from banks or investors they will want to see that all bases have been covered and sound business sense prevails. If you plan to sell the property afterward, you must have a firm grip on both realistic sale/ rental values and timescales. Timescale is particularly important in a flat market, because, every extra month your property sits on the market will cost you money in interest payments, which in turn will eat into profits. Demand, and willing buyers in the market are key factors to success. This must be thoroughly researched and proved with comparable sales etc.
The Executive Summary
All business plans should include an ‘executive summary,’ which should include in bullet points the most important factors about the deal and it’s eventual profit. Be concise and make it easy-to-read, do not waffle on for pages and pages. It needs to be easy to skim through so that it creates interest. Ask yourself; Why should an investor or bank loan you money rather than the next person? It is essential to not over hype any financial facts and figures, after all, if you have to hype them, then it’s probably not such a good deal and an investor or bank will know that.
The most important parts of any property development business plan are the detailed descriptions of the project such as;
- If planning permits or agreements in place.
- If architects are required and ready to go.
- If contractors and suppliers have been costed thoroughly.
- The realistic time scales for project start and finish with benchmarks for the interim.
- A full marketing strategy from start to finish.
- Inclusion of any supporting graphs or images as a visual representation to support your claims.
- Realistic profit and timescale for the exit.
An important aspect for an investor is if they feel your figures are realistic and that time projections are correct. They may also want to know what to expect from you in the form of ongoing reports whilst the development is progressing. All financial statements should include spreadsheets showing the sales projections, income and expenditure and eventual profit projections.