If you want to build a long, lucrative career in real estate, don’t hedge your bets on overnight success. The foundation of your success is investing time and resources into building strong relationships with people in a specific neighborhood or within a particular group. The goal is to establish yourself as the go-to expert in that community.
How do you make that happen? You create your real estate farm.
It’s a funny term but relatively accurate by definition. Like a farmer carefully tending to their crops, you’ll start by identifying a geographic area or demographic to focus on to cultivate and nurture your leads and relationships.
Over time, by building a consistent and familiar presence, your “farm” will grow into a community of trusting connections and opportunities that seek you out, eventually saving you time and money.
What is the Difference Between Geographic Farming and Demographic Farming?
Both categories incorporate a process of narrowing down your target market to become an expert in the wants/needs and market in a specific niche and generate leads motivated to work with you as their real estate agent.
- Geographic Farming: This approach entails determining a specific geographic location (neighborhood, zipcode, suburb) that you want to work in based on several factors that will benefit your business goals. In just a moment, we’ll review the factors to consider when determining your “farm.”
- Example: Determining the parameters of a specific family-friendly suburb with community events to inform your marketing strategies.
- Demographic Farming: This strategy employs different methods of focusing your marketing to attract a specific demographic, such as investors, golfers, commercial business owners, first-time homebuyers, etc.
- Example: Market to young professionals with a broad reach looking for urban condos in a bustling environment.
Both require you to learn the market that appeals to your ideal client and adjust your marketing to attract buyers and sellers who consider you a match for finding the best deal quickly.
So, if you take the geographic approach… You must learn everything about your farm’s housing rates, turnover, price per square footage, average acreage, neighborhood events, upcoming developments, housing appreciation rates, schools, etc. Think of that neighborhood as your home, so you can give honest and genuine information as to why this neighborhood would be best suited for your leads and help them find their dream home.
On the flip side, if you take the demographic approach and want to appeal to young professionals, make yourself an expert in knowing the likely wants and needs of that particular demographic. Will they want rooftop locations to either work or relax in nearby, smaller square footage with less upkeep, coffee shops for meetings, walkability, public transportation, parking options, and affordability? Then, make sure that you establish your knowledge of urban condos that would suit your target audience’s needs.
Your approaches will likely overlap over time, but starting as specific as possible will yield faster results that will grow as your knowledge and reputation build.
How to Target Your Market
Let’s examine how to determine your geographic farm effectively. Before you define your ideal farm area, you’ll want to determine your business goals and then consider how you will accomplish those.
For example, say you want to earn “x” amount in commissions each quarter; you’ll want to be able to ballpark about how many deals you will be able to close in that quarter and at what commission rate you will need to procure for each closing to accomplish that.
You may already have figured out some locations where you would like to establish yourself, but you’ll want to analyze some key data points to ensure that the location will support your goals.
Here are a few elements to consider:
- Turnover Rates: You may want to focus on high-priced suburban markets that are more family-oriented. However, you will want to analyze the turnover rates to ensure that the location is profitable.
- For example, suppose you’re searching in a family-oriented location. In that case, the turnover rates may be lower because families want to maintain routines and have developed strong ties to the community. These are all beneficial selling points, but you don’t necessarily want to focus on an area that doesn’t yield a higher annual inventory than others.
- “To calculate it, you need to know how many homes are in a selected area and how many were sold in a particular period (typically the prior 12 months). Then, divide the sold number by the total number and multiply the result by 100 to get your rate. Generally speaking, a good turnover rate in real estate is 6% or greater.” (Source)
- Appreciation Values: Study appreciation values of homes to help you not only get a great deal for your clients in areas with higher appreciation rates (which will help build your relationship for repeat business) but also predict areas with higher market demand.
- “The forces of demand and supply also play out in the real estate industry. When the demand for homes is on the rise in a given geographical location, property prices in the area will also go up if the supply of new residential houses does not increase fast enough as the demand…The increased demand for houses in a given location tends to attract the attention of investors who buy or build residential houses with the goal of putting them for sale when the supply declines and prices increase.” (Source)
- Knowing appreciative rates can majorly affect long-term success in a specific geographic region.
- Personal Interests: These don’t necessarily have hard data to analyze, but they should be considered for longevity in a specific niche.
- For example, perhaps you have a passion for historic homes or luxury properties. Focus on neighborhoods that match your interests and education, which will naturally align your marketing to attract clients to your neighborhoods and encourage them to seek your advice for finding the perfect home for their interests and lifestyle.
- Practicality: Farming requires a significant time investment, including sponsoring community events or fundraisers, door-knocking, and building relationships with local businesses, developers, and lenders.
- Ideally, you want your farm to be a location you enjoy spending time in, which doesn’t require a hefty commute. I get it; lofty home prices may be exciting, but if it requires hours out of your day to travel to your work, you’ll want to consider whether that is sustainable for long-term success.
- Average Home Prices: It is ideal to take the time to conduct a comparative market analysis to help you determine the average fair market value in a particular neighborhood. One effective way to do this is to become familiar with the average price per square footage in recently sold homes and listed homes:
- “It is calculated by dividing the current listing price – or value determined by a comparative market analysis – by the square footage of a property. For example, a house in one city is listed for $500,000 at 2,000 square feet. The price per square foot is $250. In a more affordable city, the same 2,000-square-foot house might be listed for $300,000. In this case, the price per square foot is only $150. While comparing the price per square foot across homes is a valuable metric when deciding what towns or neighborhoods you want to live in, this metric can also be used to compare properties that you are considering buying.” (Source)
- By doing this analysis, you will also be able to more easily back into the numbers (# of homes and commission rates) you will need to achieve to accomplish your business goals and leave room for annual growth.
By starting with these factors to determine your farm, you will be more likely to choose a location that is profitable and aligned with your personal and business interests and goals.
Steps to Effective Farming
You’ve executed the prerequisite work to determine a bountiful farming location. Your next step is strategically planning your marketing strategies and fully immersing yourself in community and neighborhood knowledge.
Here’s how to get started:
- Define Your Boundaries: Whether geographic or demographic, clearly outline the parameters of your farm. You can get as specific as by street or coordinates, but by zip code is also a good starting point.
- Your goal here is to set a firm boundary where you draw the line with your expertise so that you don’t spread yourself too thin and your reputation becomes synonymous with your location. You want people to eventually be able to say without hesitation, “Oh yeah, call John. He’s the best agent in Silverlake and knows everything about what’s happening in the neighborhood.”
- Gather Neighborhood Information: With a reputation like that, you have to know what you’re talking about. Start studying zoning laws, school districts, and upcoming developments, and stay up to date on market trends, interest rates, and appreciation values. All the work you did prior must continue so that you are able to share the most up-to-date information with your leads and clients. This knowledge is what it takes to position yourself as a local expert.
- Create a Database: Organization is your best friend when it comes to building your database. Note every conversation you have about real estate in the neighborhood.
- If you happen to talk to the owner of a local coffee shop about new businesses in the area, make a note. You may be able to call on them for cross-promotional opportunities or inside information on upcoming neighborhood attractions that will impress your leads and add value to home prices.
- Use tools like tax records, public data, and regional lead generation companies to hone in on potential sellers and buyers, and keep an organized list to help determine your marketing efforts. Ideally, you have a comprehensive CRM system that will help you manage your contacts and alert you to times for follow-up communication.
- Engage the Community: Community engagement is of the utmost importance. Grassroots efforts will help you build trust within the community and quickly become a more familiar presence in the area. If there are local sports events, business openings, community festivals, or block parties, it’s imperative that you attend and network directly with the people you would like to work with when the time is right.
How to Set Up Your Marketing
Your marketing strategy is crucial to farming success. You must diversify your efforts through multi-marketing channels and become a physical presence in the community. This is also where you can get really creative with your business and branding opportunities.
Here are some practical strategies to get started:
- Direct Mail Campaigns: Send regular personal postcards, newsletters, or market updates that help educate and engage homeowners in your area. You want to make sure that your name and company stay at the top of homeowners’ minds without overwhelming them.
- Develop strategic times to appropriately engage potential leads for nurturing. Perhaps quarterly, but for a more personal touch around the holidays with season greetings, to announce a new business opening that could positively affect their home value, or to invite people to come visit you at the next community event for a free consultation about market values. Whatever you do, make sure it’s consistently on brand and personal to your potential leads.
- Social Media Advertising: Some lead generation sites have this built into their marketing strategies so that you can focus less time on social media targeting. The best way to use social media effectively in farming is to use geo-targeted Facebook ads to reach people within your chosen area. Again, keep the ads personal and make sure you are sharing information that is valuable to anyone who comes across this highly targeted ad.
- Open Houses: Everyone loves a good open house, and now that the laws of hosting open houses have changed a bit, this is a great way to build your contact lists and potentially generate new leads.
- Make your open house more than just showcasing the home; invite the neighbors with door hangers or personal letters expressing interest in meeting them and learning more about the neighborhood. It’s a great way to showcase your expertise, meet potential clients, or grow your referral business.
- Community Presence: Be visible. Join social clubs, eat at local restaurants, and shop in local businesses. You want to let people know that you are accessible and have a friendly presence to approach with any real estate need or interest.
Why Farming is Worth the Effort
With careful research, consistent marketing, and an in-depth understanding of your chosen market, you can establish your reputation in your determined farm and grow your business exponentially over time.
It takes time, so be patient with yourself and stay consistent. Even if you don’t see the desired results right away, you are planting the seeds that will grow into long-term success by:
- Building your reputation as a trusted expert.
- Creating a steady pipeline of leads.
- Enhance your market knowledge, helping you better serve your clients.
Ultimately, all of these factors help you become the go-to real estate agent in your desired niche!