If you want to see the importance of real estate farming, come visit us here in New York City. On Manhattan’s Upper East Side, a co-op on Fifth Avenue facing Central Park can command a 50% price premium over an identical apartment just one block away on Madison Avenue. That means in less than a tenth of a mile–a mere 528 feet–you have two very different real estate markets.
Most Manhattan agents will never set foot on Fifth Avenue with a client, but a tiny percentage close 8 figures there every year. Why? Simple. These agents have spent years building out a geographic farm on Fifth Avenue.
While we can’t promise you’ll close eight figure deals on Fifth Avenue, in this article we’ll tell you everything you need to know to choose and dominate a farm area. Let’s start at the beginning.
What is Real Estate Farming?
Real estate farming is the act of focusing the bulk of your marketing efforts on a certain geographic area (geographic farming) or certain types of clients (demographic farming) in order to add the most value for clients by becoming an expert in that area.
The farming metaphor is very simple and can be applied to many aspects of real estate. Think of your marketing efforts (and dollars) as seeds that you sow on your farm. Like a real farm, there are two essential elements to a bountiful harvest–you need to nurture your planted seeds by watering them, pulling weeds, and applying pesticides, and you need TIME. If you’re expecting overnight success, real estate farming is not for you..
How to Choose The Right 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’s how to make sure you pick a lucrative farm area.
1. Stay Close to Home
If you’re just getting started, then working a farm area close to home is probably your best course of action. In fact, the neighborhood you live in is probably one of your best options. Why?
Because you’re more than likely already a local expert.
Your sphere 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. 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 that has lived in the neighborhood for years?
Even if you’re new to the neighborhood yourself, it’s easier to network in the area where you already live. There are opportunities to meet prospective clients wherever you shop and visit on a day to day basis, such as the local gym, grocery stores, hardware stores, etc.
Another reason to stay close to home is that you’ll have greater ability to offer last minute showings and previews. When I worked in Williamsburg, Brooklyn, I was a 5 minute Uber ride to 90% of my brokerage’s listings. That means last minute showings were never an issue, and clients with busy schedules (aka every client ever) loved the fact that I was available to them on a moment’s notice.
2. Do Your Research
Of course, being close to home isn’t the only criteria to choosing the right farm area. Another important element to choosing a farm area are local demographics. Before you start 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. Here are some things to research:
- 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.
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.
Once you choose a geographic farm, you may also try to narrow down a specific demographic that you want to work with (demographic farming). For example, you might want to focus on homes worth over $1 million or senior communities. Researching the local demographics will help you make this choice.
3. Choose an Area with Well Defined Boundaries
In Manhattan, 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 has 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. More importantly, most people envision a certain type of home and a certain lifestyle with the neighborhood.
Whenever possible, try and pick a neighborhood with well defined boundaries to help market your listings. If you do, you will have a much easier time marketing your listings.
4. Make Sure it’s the Right Size
In real estate 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.
For an example of this, let’s look at Manhattan again. 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. Some agents get even more local. A former coworker of mine made an excellent living working only in Tudor City, a historic eleven building complex overlooking the East River.
The reason he was able to make a great living working only in one apartment complex was because there were roughly 400 homes there. Any more might lead to sky high marketing costs, any less might mean very low turnover. If you can, try and stick to a farm area of around 400 or fewer properties.
5. Run the Numbers
Once you find a farm 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 it 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
Fire up your MLS or a program like RPR and choose the zip code of the area you want to farm. Alternatively, RPR and many MLS systems offer the ability to draw an area on the map. Draw your farm area, and pull all sold listings for the past two or three years. The simply get an 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.
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 recommends only considering areas with a 6% or higher turnover rate.
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. Take note of the top closing agents for the past few years. If 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 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:
Choosing Your Farm Area – Example
|Farm Area One||Farm Area Two||Farm Area Three|
|Total Number of Homes||150||200||250|
|Estimated farming cost per year|
(mailings, open house costs, advertising, etc.)
|Average Sales Price||$300k||$350k||$400k|
|Average commission per sale|
(calculate at your average commission %)
|Total homes sold in farm, previous three years||15||16||12|
(total # of homes divided by total homes sold)
(total homes sold x average commission)
|Average Days on the Market||43||39||61|
|Number of Current Listings||13||3||7|
Based on this example chart, farm area 1 will probably be your best bet. While income potential may be lower, it has a much higher turnover rate, and more current listings on the market. That means more room for you to gain a foothold.
How to Build Authority in Your Farm Area
Once you’ve chosen a farm area that makes sense for you, the next step is to begin making a name for yourself there. Your goal is to establish yourself at the go-to real estate professional for the entire community.
Since you’ve already done the research, you should know your audience like the back of your hand. This makes choosing your marketing strategy much easier than it would be otherwise.
Here are eight ways to start building your presence in your farm area.
1. Direct Mail
Direct mail is one of the oldest and most effective methods to spread your message to a specific community. By using the Every Door Direct Mail service from the United States Postal Service, you can send mailers to everyone in your farm area even if you don’t have a mailing list.
If you haven’t taken advantage of it before, EDDM is a cost effective targeted direct mail service from the USPS. EDDM lets you choose a mail delivery route via their maps, and you can then send your direct mail to every house along that route.
In order to stay top of mind, you can send out just listed and just sold postcards, home valuation offers (How Much is Your House Worth?), coupons, or general market news or market updates. The key to staying top of mind is touching everyone in your farm areas multiple times. You should plan for at least two or three mailings before expecting a return.
2. Door Hangers
Door hangers are another tried and true way to reach homeowners in your farm area. The reason door hangers work so well is that unlike a postcard which can easily get ignored in a shuffle of mail, homeowners have to physically remove your door hanger to get into their home. For more on door hangers, check out our in-depth guide here.
3. Door Knocking
Definitely not for the faint of heart, door knocking is still a great way to get to know homeowners in your farm area. It’s also 100% free. All you need are comfortable shoes and a desire to connect with people.
4. Zillow Premier Agent
Since Zillow Premier Agent lets you advertise to one specific zip code, it’s a great way to reach leads in your farm area online. You also get a free website, CRM, and more.
5. Facebook Advertising
Facebook advertising allows to not only target your audience by zip code, but by dozens of other criteria as well. You can target by age, income, interests, and much more. Facebook even has a category called “ready to move” which is made up of people whose online behavior is consistent with people who are ready to move. To learn more about Facebook advertising, check out our how to guide here.
6. Participating in Online Local Forums
Another great way to build trust in your farm area is to participate in online forums dedicated to your farm area. Look for Facebook groups, patch sites, Nextdoor sites, city data forums, or area subreddits. Find where your farm area gathers online and join the conversation.
7. Local Events and Meetup Groups
Probably one of the best ways to connect with people in your farm area is through local events and meetup groups. Focus on being social first, business second. Once they get to know you, they’ll seek out your services. Look for church groups, fairs, charity events, bake sales, or anywhere else the community gathers.
8. Get Your Website to Rank on Google for Local Search Terms
Google is an incredibly powerful tool to help you stay top of mind with your farm area. For example, let’s say your farm area is Turtle Bay in Manhattan. If you use the words “turtle bay” somewhere in your website’s URL you will come up higher in Google searches for the area. Something like “turtlebayhomes.com” will get you one step closer to the first page of the search results.
Google My Business is a free service from Google that helps you rank your local business site higher in the search results.
If you don’t already have a website, check out our in-depth guide here which shows you how to build a real estate website for $3.45 per month or less.
The Bottom Line
Real estate farming is a tried and true method to become a local expert and close more deals. Taking the time to research your farm area thoroughly before spending any marketing dollars will pay off handsomely down the road.