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One of the most confusing aspects of being new in any industry is learning the lingo. And, as you probably know by now, the real estate industry if full of jargon.
Today, we’ll dive into part 1 of a discussion of geographic “farming” in real estate: what it is, how agents go about the process of geo farming and how you can successfully implement farming in your marketing plan.
It’s not the Old McDonald stuff
Although you won’t wear dungarees, drive a tractor or slop the pigs, some aspects of traditional farming are analogous to geo farming.
For instance, the farming agent cultivates a geographic area (or a niche), plants seeds of interest in potential clients and nurtures those seeds until they become leads and (hopefully) clients.
The practice traces its roots back to the birth of the real estate industry and it involves various aspects of traditional real estate marketing, depending on the agent. These include door knocking (again, geo farming methods vary) and direct mail.
But it’s not all old-school. Agents amaze us with the fresh ideas they come up with and their willingness to share them with their colleagues.
The first steps to choosing a real estate farm
Before you can choose your ideal area for geo farming, you’ll need to know what type of real estate client you hope to attract. Typically, a farm yields both buyers and sellers.
But, is it condo clients, luxury home clients, golf course community clients or something else? In real farming, crops are chosen on the basis of how profitable they are. It’s no different in real estate.
By “profitable,” we’re not talking large, expensive homes. Condos can be quite profitable if there’s a large turnover in your market.
Then, learn everything you can about the homes and the people who typically choose them. Condos, for instance, are attractive to retirees and young professionals (if they’re located close to work).
Depending on the community’s affordability, they may also attract a large number of first-time buyers. Speaking of which, if these buyers are the ones you choose to pursue, create a tenant “farm.”
Marketing to both tenants, as buyers, and their landlords, as sellers, can be a lucrative farming niche.
These preliminary steps will be invaluable when it comes to determining your marketing methods.
The type of home you want to list or sell will help also narrow down your choices of geographic areas to farm.
Crunch the numbers whengeo farming
Choose several areas that you’d think you’d like to farm and analyze their profitability. Questions to get answers to include:
- What’s the average homeowner tenure?
- How many of the homes are rented?
- What is the vacancy rate for rented homes?
- What is the average rent in the area? Does it exceed 30 percent of the typical tenant’s income?
- What is the average sold price?
- What is the turnover rate?
Last year, the median homeowner tenure rate, nationwide, was a smidge over 13 years. Younger homeowners, however, tend to move more often, staying in their homes only six years, according to the NAR.
The rate my vary by city as well.
Vacancy rate is an important statistic as well. Cities with high vacancy rates (typically more than 7 percent) may have a number of landlords wanting to sell.
From determining turnover, year-to-date sales and absentee ownership, your MLS is a gold mine of much of the information you need to help you build a farm.
The Census Bureau can provide you with all the information you need to determine the total number of homes in an area, the number owned vs. the number rented, an area’s vacancy rate, the year the householder moved into the home and more.
Enter your city or ZIP Code in the box on the United States Census Bureau, American Fact Finder website and click “Go.”
Then click on “General Housing Characteristics (Occupied or Vacant, Year Built, Rooms, Own or Rent, Home Value).”
Determine the size of your farm
Once you’ve chosen a general area for geo farming, take a look at your budget. If you’re a new agent and money is tight, go for a smaller farm area.
Coach Tom Ferry recommends 250 to 500 homes when you first start out and from 500 to 2,500 homes for the established agent. He also recommends that the ideal farm has a 6 percent or better turnover rate.
How much money you’ll need also depends on which marketing vehicles you choose. We’ll get into that next time.
We’ve merely scratched the surface of real estate agent farming. Check back for part 2 to find out how to hit the ground running in regards to geo farming.
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