If you want to be successful in real estate, you should follow the lead of top agents and farm your market. Real estate farming is one of the best ways to set yourself apart and create a viable brand for yourself as a real estate professional.
First, what exactly is real estate farming if you aren’t familiar with the term?
The term means you identify a particular geographic area and target demographic and you market directly to the group of people that fall into that category.
When you create an established territory for yourself, it allows you to gain a deep understanding of that market and the trends that impact it. You can also start learning more, not just about the area, but the people are drawn to that area. You can gain in-depth knowledge about their preferences, behaviours and general taste over some time.
The following are tips to claim your real estate farm area.
Choosing An Area
If you’re starting with real estate farming, and you’re not sure what area to choose, maybe go with something close to where you live.
When you choose your community, it helps you because not only do you already have an understanding of it, but you’re part of it which can add to your authority and sense of expertise in the eyes of potential clients. You’re already a local expert just because you live in the area, and it’s going to be easier for you to keep your ear to the ground when you’re part of the community that you use as your real estate farm.
Additionally, if you stay near your community, you’re already close by if clients need you, and your day-to-day life is an ongoing opportunity to meet prospective clients.
Specific things to know about your farm area include:
- Boundaries of the community
- Number of homes in the area
- Average sales price
- Turnover rate
If you choose an area where you already have name recognition, it’s going to be a lot easier, and you shouldn’t go for a farm with any more than 500 homes.
The narrower you can make your farm, the more tailored your marketing can be, and that tends to be most effective.
Research Your Area
Probably one of the hardest aspects of cultivating a real estate farm is doing the initial research. The research is the foundation that your marketing will be built on, however. Spend time in the research phase, and it will pay off later.
Some of the things to look for in your research, most of which can be found on the MLS include:
- The median lot size
- The typical style of home
- Common home features and dimensions
- Median sale price
Inventory research is what you do to determine market behaviour in your area. Within this broader category falls the absorption and turnover rate. The absorption rate can be calculated by looking at the number of active listings in your room last month, divided by the listings sold.
If there are around four to six months of inventory, you can usually classify this as being balanced if there’s less than that it’s a seller’s market and more is typically a buyer’s market.
The turnover rate looks at the number of homes in your designated area that sell in a period compared against the total number of homes. High turnover is good because you’ll have more opportunities to close deals.
Determining Your ROI
With farming, you have the opportunity to determine your ROI reasonably clearly. For example, if you choose a farm area that has 250 homes, you can then start adding up how much it would cost to market in this area throughout let’s say one year.
Marketing might include a combination of printed collateral, social media advertising and local events. Then you can compare this against the turnover rate to get a reasonably good idea of how many homes you could potentially sell and how much you would have to invest in doing so.
Once you’ve done your research and crunched some numbers, you can start moving into your marketing strategy. Goals of your marketing strategy should be to clearly outline the value for your targeted audience upfront. You also want to make sure you always include a call-to-action of some kind, and your message and branding need to remain consistent for real estate farming to work well.