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May 17 2020

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Farmhouse real estate

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Real Estate Farming – How to Choose and Dominate a Farm Area

Real estate farming is the act of focusing the bulk of your marketing efforts on a specific area (geographic farming) or certain types of clients (demographic farming) as an expert in that area. Real estate farming equates your marketing efforts to sowing seeds on a farm.

If you’re looking for a quick way to start building your local list, try BoldLeads. In addition to offering exclusive seller leads so that only one agent (you) gets leads from a single farm area, you also receive training videos and webinars, a CRM, automated text messaging, and pre-written drip email campaigns for nurturing your leads. Claim your farm area now.

How to Choose the Right Real Estate Farm Area

Since it can take a significant amount of time to see a decent return from your farm area, your choice is very important. Here are five tips to selecting a lucrative real estate farm area.

1. Stay Close to Home for Your Real Estate Farm Area

If you’re just getting started, then farming your own neighborhood is probably your best course of action. There are many benefits of geographic farming in your own neighborhood. Using a community networking platform like Parkbench helps you do this by positioning you as the go-to real estate expert for a certain area. It creates hyperlocal websites that highlight small businesses and local influencers in the area as the neighborhood’s industry experts, and only allows one real estate agent per area. Click here to claim your neighborhood.

You’re Already a Local Expert

Setting up your farm area in a place you already know and love is just the best possible combination. You know the streets, many of the residents, and have insights it would be difficult for others to establish. For example, you may know that your neighbor’s friend will be transitioning to a nursing home and selling soon. Not only can you provide a great service, but you often have a heads-up in the market.

Many people may already know you, so establishing trust and business in an area where you’re known will be easier than for a newcomer. Saying that, even if you’re new to the neighborhood yourself, it is far easier to network in the area where you already live. Establishing yourself as an expert comes in many forms. One of our top 47 real estate lead generation tips is to host local educational events on buying, selling or renting in the area.

You’ve Already Got the Connections

As a local resident, you likely already have solid connections in your real estate farm area. Your circle of influence (family, friends, people they know) is probably concentrated nearby, you probably know local business owners, and best of all, you can wholeheartedly recommend the neighborhood because you live there.

The perks of geographic farming in your own neighborhood are many. This is like catnip for both sellers and buyers, especially relocation clients. Think about it. If you were moving to a new city, would you rather work with an agent who lives two hours away, or one who has lived in the neighborhood for years?

I know for myself, when relocating to a new area, using a local agent has been invaluable. Not only did he know my neighborhood like the back of his hand, he knew reputable contractors I could use right off the top of his head. His recommendations kept a close relationship between us, and set him up to be an expert that I later recommended to friends moving to the area.

You’re More Available for Clients

When you live in the area you farm, there are opportunities to meet prospective clients wherever you shop and visit on a day-to-day basis. Places like the local gym, grocery stores, coffee shop, and hardware stores are all opportunities to network during ordinary conversation in your daily routine.

So often, ordinary conversations at the check-out counter can turn into inside information about a home coming on the market or a local person looking for a solid realtor. If you don’t already have a great CRM to store those contacts you meet, we love Pipedrive, which allows you to keep in touch in ways that seem organic and thoughtful.

Another reason to stay close to home when geographic farming is that you’ll have greater ability to offer last minute showings and previews. It is far easier for you to be available to show clients a great new listing that just came on the market if it’s just a quick walk or ride from where you live. It’s also easier managing your life and far better on the budget. Car maintenance and gasoline costs can be one of the largest expenses a realtor has, but it can certainly be minimized if your geographic farming is close to home.

2. Do Research on Your Real Estate Farm Area

When deciding on the right area for your real estate farming, being close to home isn’t the only criteria for choosing well. Another important element to choosing a farm area is local demographics. Before you start demographic farming, you need to know as much as you can about the area so you can make sure it’s someplace you’ll be happy working in, and can give you the income you’ll need to meet the goals in your real estate business plan. Ultimately, demographic components is one area of many that you’ll want to research in your farm area.

Here are some things to research for your farm area:

  • Average income
  • Average age
  • Is it a commuter area?
  • Large employers – Software companies, hospitals, factories, etc.
  • Types of homes in the area (Victorian, Mid-Century, new developments, etc.)
  • Local amenities – Beaches, parks, nightlife, etc.
  • Transportation options
  • Recent changes or coming changes – Gentrification, construction, etc.

While most of this data will be a Google search away, you may have to use Census data to get incomes and age. This data can be useful in directing you to the kinds of commission checks you can expect, what type of homes people might be looking for, and amenities they may be interested in.

While you’re doing your research, try and focus on aspects of the neighborhood you personally respond to. For example, if you love vintage homes, it will be much easier to sell them than new developments. Since purchasing a home is largely an emotional decision, buyers will respond to your enthusiasm and personal knowledge on the topic.

Once you choose a geographic farm, if it’s in a larger area, you may also try to narrow down a specific demographic that you want to work with within that area, often referred to as demographic farming. For example, you might want to focus on homes worth over $1 million or senior communities. Researching the neighborhood and local demographics will help you make the choice of what works best for you.

3. Choose a Real Estate Farm Area with Well-Defined Boundaries

Whenever possible, try and pick a neighborhood with well-defined boundaries to help market your listings. Having well-defined boundaries when real estate farming helps you to market your listings more easily, because the geographic area you work in is clear to yourself and others. Even in large metro areas like NYC, there are well-defined boundaries.

In Manhattan, for example, the Upper East Side starts at 59th Street, from 5th Avenue to York Avenue, then extends up to 96th street. In the past few years, gentrification may have pushed the boundaries of the neighborhood a bit, with some agents calling listings up to 103rd Street the Upper East Side. Still, when you tell most clients you’re taking them to the Upper East Side, the boundaries are generally understood.

People envision a certain type of home and a certain lifestyle with designated neighborhoods. Almost all neighborhoods in any area have certain reputations, and capitalizing on these can help you market your listings. Our ultimate guide to real estate branding will help you leave a lasting impression on your customers by creating a brand that matches your target audience.

4. Make Sure Your Real Estate Farm Area Is the Right Size

In geographic farming, size matters. You need to make sure the area is large enough to ensure a decent turnover, but small enough that you can build a name for yourself there without draining your retirement fund.

A great example of this could be Manhattan. While the Upper East Side is a great place to work, it’s also home to a few hundred thousand people. Staying top of mind with the whole neighborhood would cost you tens of thousands of dollars per month. Instead, most agents who work on the Upper East Side focus on micro-neighborhoods like Yorkville, Lenox Hill, or The Gold Coast.

No matter where you live, consider the size of your neighborhood when real estate farming. The planning done up front will save you time, money, and ensure a nice pipeline of clients for years to come.

5. Run the Numbers in Your Real Estate Farm Area

Once you find an area you want to work in, the next step is to run the numbers to make sure the area has enough sales activity to make real estate farming worthwhile. In an ideal world, you want to find a farm area that has high sales prices, high turnover, and low competition. In reality, however, neighborhoods like this are extremely rare. To hedge your bets, you may consider looking at several farm areas and picking the one with the best balance of price, turnover, and competition. Here’s how to do it.

Average Sales Price

It’s easier than you might think to get an average sales price in your anticipated farm area, and takes just a few steps to complete. First, fire up your MLS program or a program like Realtors Property Resource (RPR) and choose the zip code of the area. RPR and many MLS systems offer the ability to draw an area on the map.

To get the average sales price of your anticipated real estate farm area, you’ll then draw your anticipated real estate farm area on the map, and pull all sold listings for the past two or three years. The average sale price will be the average price of the sold homes.

Once you have the average price, you can figure out what your commission will be per transaction. Once you know this, you can determine how many listings you will need to close in your farm area to make a profit and meet the goals you’ve set for yourself.

Just a note: if you haven’t used RPR before, it’s free with your NAR membership dues and offers an incredible amount of information in one centralized place that usually saves you time.

Turnover Rate

In order to figure out the turnover rate in your potential farm area, simply divide the number of homes in your farm area by the number of homes sold in the last two years. If you want to keep your lights on, make sure the area you want to farm has a relatively high turnover rate. Tom Ferry, a noted real estate coach, recommends only considering areas with a six percent or higher turnover rate.

Competition

Once you’ve determined the area has enough sales activity to sustain you, the next step is to figure out what your competition looks like. Be sure to take particular note of the top closing agents for the past few years. If you see that one agent already dominates the area, getting a piece of the pie might be an uphill battle. Chances are that agent has been working the area for years and is very well established.

However, if you see there are a variety of agents closing in the area, and there is high enough turnover to justify working there, then there is more than likely room for you as well.

Putting It All Together

Now that you know all about the demographics of the area, the kinds of homes and amenities that are there, and the numbers around sales activity, turnover, and competition, you need to pull all your information together to choose a farm area.

Over at The Lones Group, they put together a table you can create in order to pick your farm area. It should look something like this:


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SOURCE: http://fitsmallbusiness.com/real-estate-farming/

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