Have you made a plan for 2008 yet? If you haven’t, you’re not too late but I suggest you start now. Whether you’re just starting out or you’ve been in real estate investing for years, you should have a business plan. Chances are if you’re a real estate investor or if you want to be one, your holdings will represent the majority of your wealth. Not having a plan for the majority of your wealth is just plain crazy - and yet most investors won’t have a clear plan or strategy.

1. What are you trying to achieve?
To be sure, some investment property owners just happened into their property through inheritance and the like but short of that there is a reason you got into this crazy business - what was it? Or if you’re just starting out - why? Don’t answer this with some vague - “well, I want to make a lot of money and uh well I like the seminars and uh“. You should be able to be specific. Are you after lifestyle? Security? What constitutes security or lifestyle or whatever you’re pursuing? Is it a specific amount of income? How much? Why is it that much? When are you are you going to achieve these things? Put dates on your goals otherwise they are just dreams

2. How do you measure your investments?
This is more for the new guys than the veterans but I’m not letting the veterans off the hook. How are you measuring your investments? What is a good investment to you? Recently I was working with someone who told me he wants to net $1,000 per month on any property he bought because that made it worth the work. He confessed to me that he thought this was maybe too simplistic, but I think just the opposite - at least he has a plan! So many people that talk to me have no idea what makes a good investment for them they are like professional real estate investment hobbiests or something. They buy nothing, everything is over priced in their world - don’t be this guy, get another hobby. Maybe you use cap rates, or gross rent multipliers, or maybe you just have a dollar figure you want - have a plan. If you own a number of properties right now - what is your return on equity? Is your equity doing all it can or is it at least doing enough for you that the effort you’re putting in is worth the return? Measure.

As a side note: Understand also that the achievability ( I made that up) of your returns is geographically dependent. Better areas close to Boston necessitate that you approach with long term value and appreciation in mind. Everybody loves big cash flow in a great area and that is why it rarely exists. The market drives values, not your goals.

3. What is your exit strategy?
Whether you’re just starting out now or you already have a portfolio, what is your exit strategy. Another way to say this is “Begin with the end in mind”. If you’re starting out and you’re buying a 2 or 3, or 4 family today how long are you going to hold it? When will you know that it is the right time to sell it? With little skills an excel spreadsheet and some time you can make reasonable assumptions about your exit. What are you forecasting for the future of the market you’re buying into for the next 3,5,7,or 10 years? If you don’t have a prediction then you should ask yourself why you’re investing at all. If you do your homework and you apply what you learn to your plan you should see a clear next step. If you are at the tail end of your investment career when are you going to end it? How will you exit to maximize wealth preservation? When you sell your property where is the money going to go? How much money will you need to retire?

If you don’t have a plan for 2008 you’re not too late. Start now. Ask yourself these questions and write the answers down. Self examination like this can lead you to surprising conclusions. Sometimes those things that have been bouncing around in your head look a little different once they hit the page.