As a real estate professional, you need to be able to set yourself apart from your competition in a positive way. For most agents, this means strategically developing and growing their personal brand.
There are countless different ways that you can do so, but one of the most effective techniques for standing out is to become known as an expert within a particular community or neighborhood.
By specializing in a particular locale, you can hone your marketing efforts to generate much better results than if you were broadly trying to cover your entire real estate market.
Why you need to be specializing in a neighborhood
When you select an area to specialize in, you’re essentially strengthening your real estate business and brand. You become known as the expert in that area, and you gain both the business of its residents and the respect of your colleagues.
Mortgage professional Scott Schang said, “Being recognized and trusted as a local expert is an important part of growing and preserving your position as the go-to real estate agent in your community.”
A few of the biggest advantages of specializing in a particular farm area include:
- You will gain the experience to become an expert, if you aren’t already there.
- You will become known as an expert in that area.
- Marketing will be easier because you are trying to appeal only to a particular group of people.
- Your brand will become associated with that area, and your business will increase.
But how exactly do you decide where to specialize? First, it’s important to understand exactly what specializing in a neighborhood entails and the other ways you can specialize in your real estate business.
Specializing in a neighborhood is different than specializing in a niche
Before diving headfirst into choosing a farm area, it’s important to understand that specializing in a community is entirely different than specializing in a niche.
In the words of Leads and Leverage founder Christina Ethridge, “I’m finding that my fellow real estate agents think that a niche means a location. For example, when many agents say they are focusing on a niche, most of them refer to a town, neighborhood or community.”
In reality, specializing in a niche involves working with a particular type of clientele such as first-time homebuyers, seniors or some other clearly defined demographic. Having a niche that you specialize in can also involve certain kinds of properties such as urban condos or rural estates with acreage.
For agents working in competitive markets, specializing in both a particular neighborhood and niche can offer a leg up on the other agents already working the space. However, in smaller markets, it’s important to make sure that you’re not limiting yourself to too small a number of potential clients.
That being said, in some areas, agents can earn a healthy income from becoming the leading specialist for just a single residential building.
Selecting the right neighborhood to specialize in
If you want your farm area to produce results, you need to select the right neighborhood. For many real estate professionals, the best way to start the selection process is to identify the places in which you are most familiar. These places could be the neighborhood where you live or one that you just spend time in on a regular basis.
When making a list of potential farm areas, there are three primary characteristics that you should focus on:
1. What price ranges are homes selling for in the area?
Assuming that commission rates are relatively constant in your locale, there are two main things that contribute to your earnings — the number of deals you close and the average sale price of each transaction.
Unless you’ve already gained a reputation for dealing with a particular range of home values, you might want to focus on neighborhoods whose properties are selling around the median in your area.
2. How many properties are in the farm area?
A neighborhood can be the hottest spot in town — the place where everyone wants to live — but if it has only 50 homes in the entire community, there probably won’t be enough sales to make it worth receiving the entirety of your efforts. At the same time, you don’t want to take on such a large area that you’re having trouble keeping up regular contact with its residents.
Agents just beginning to specialize in a particular area should select a neighborhood that encompasses around 500 homes. You can always expand as your business grows, but it’s important not to bite off more than you can chew from the get-go.
3. How often are homeowners selling?
Somewhat an extension of the last point, but important enough that it deserves its own mention, you also need to pay attention to how often homes are selling in your targeted area. Real estate turnover is going to vary from location to location. According to the National Association of Home Builders, the average homeowner plans to move every 13 years, with younger first-time homebuyers relocating slightly more frequently.
In general, you want to select a farm area with a turnover rate around 7 to 8 percent. To calculate the rate for the neighborhood you’re looking at, add up all of the properties sold within the past 12 months and divide that by the total number of homes in the area.
For example, if you’re considering an area with 500 residences but only 25 sales in the past year, you might want to think again. With just a 5 percent turnover rate, it might be a challenge to maintain enough business to earn a stable living, even with so many properties located within the farm area.
Look at your competition — there’s nothing wrong with having to put in a little work, but think twice about entering a market that already has an established leader.
Finally, it’s also important to consider what’s in store for a neighborhood in the future, as well. Is interest in the community on the rise, or are quality homeowners moving away to more attractive, modern locations? You don’t want to put in tons of effort marketing to a community that’s on the decline.
Stay tuned Tuesday for Part 2, which will explain how to get the best results from marketing to your new farm area.