Farming: Carving Out Your Little Slice of Real Estate HeavenDec 18, 2019
Wouldn't it be nice to walk out your front door on a Saturday, walk 150 steps to the house 3 doors down, and get ready for an open house?
Big question? Are you the "Mayor" of your neighborhood? Do one out of every ten people you see riding your bike down the street know who you are, and what you do? If they do, you are a good real estate farmer. If not, you've come to the right spot.
Farming is simply cultivating relationships with a specific set of people. It is not selling. It is not marketing. It is the actual getting to KNOW a specific set of people. In farming, you employ the FORD model of getting to know someone, specifically their:
- Family - the household in the vaguest sense: 2 children, one in college and a dog.
- Occupations - the type of work the household's breadwinners engage in.
- Recreational preferences - what do they do for fun?
- Dreams - what seems to make them tick? What gets them out of bed in the morning?
This is the depth of knowledge you want to have with this group of people. Why farm? It has the potential to set you up for LIFE, because it branches out as your farm gets modified. Clients may do 2 or more deals again with you long after they move away.
One out of every eight households is likely to move in the next 12 months, and if you know 100 households well enough for them to think of you, you are already set up for 7-10 transactions THAT YEAR.
How does one decide if the area they are in is good for farming? Turnover rate. Look on the MLS and circle the area you are thinking of farming.
Not that kind of turnover...
Use MLS data (or many MLS's offer an app called Infosparks Marketview) to figure out how many agents are operating in your farm. Then, review your neighborhood turnover spreadsheet and check out the agents with top market share. You are looking for a turnover rate above 10%. (If 150 homes are in your farm and 15 sold in the last year, your turnover rate is 10%)
Turnover rates dip when the market does. They rise when prices do, as homeowners decide to cash in on their equity.
Total Number of Homes / Total Number of Homes Sold = Neighborhood Turnover Rate
So, for instance, if 50 agents operate in your farm and only 6 homes were sold by 2 agents, your competition is actually minimal.
On the other hand, a farm with a large number of homes sold by several agents requires much more effort. With insight into the competition, you’ll be far better prepared.
(Let's pause here a second and note: farms needn't be geographical. They can be online as well. What if you created a campaign targeting all lawyers in your city? If you have a previous career that resulted in you knowing people in a specific type of profession, capitalize on marketing to people in that profession you already know a great deal about. Now, back to the geographic farm.)
Still lost? Here is a video telling the story of how one agent eventually gained a market share of 19.7% in her farm, resulting in 44 home sales over a 3-year period.
On average, you’ll need a farm with a minimum inventory of 150 similar property types. Areas with less than 150 of any single property type lack enough diversity to provide potential clients with multiple price options.
Again, this is where your neighborhood turnover rate comes in handy. If only 5 homes a year are sold in a neighborhood of 200 properties, the low turnover will make it impossible to build volume.
For comprehensive step-by-step instructions and advice on choosing a neighborhood, consider joining Dollar Coaching Club. At $20/per month, it may be the best career investment you'll ever make.