7 Strategies for a Successful Real Estate FARM
It's getting more competitive out there. With the housing market effectively fully recovered from 2008, now's the time to focus on strategies for a successful real estate FARM (focused real estate market).
Regardless of your geographic area of focus or your preferred property type, successful FARMs for Realtors require meticulous organization, careful diligence, and a penchant for optimism.
Of course, the most successful Realtors who organize their prospects in FARMs also leverage proven tools and strategies to identify nascent market trends, find solid prospects, and, of course, close sales. Let's take a look at seven straightforward strategies you can use to build a successful real estate FARM - and stay one step ahead of the competition.
1. Understand Land Use Around Your FARM
The first step in building a successful real estate FARM is understanding its surroundings. While you might know your FARM through and through - to the point where you can name the ten homes that need a new paint job before they're listed - you must also understand its relationship to nearby commercial centers, protected areas, agricultural lands, and so forth. If your FARM lies within a five-minute drive of a major business park, for instance, prospective buyers may be willing to pay a premium for easy access. If one side of your FARM abuts a large park or natural area that draws significant traffic, that may be something to play up (or down) in your marketing materials, depending upon the situation.
Understanding the nuances of local land use is important too. If you're just getting started and want to focus on a single type of property, having an intimate understanding of your target area can help you steer clear of neighborhoods that are zoned for multiple uses.
If you're interested in developing a FARM for the long haul (often referred to as lead nurturing) look at land use over time. For instance, recently constructed subdivisions near valuable agricultural land can point to rich, decades-in-the-making opportunities if that land is eventually cleared for residential development. In five or more years, those waving fields could be newer subdivisions in which nearby homeowners are looking to move in. PropertyRadar's Explore Maps allow you to see all of this and more.
2. Use Dynamic Lists, Not Static Leads
The days of purchasing static lead lists from credit reporting agencies and other sources are long gone. No matter how reliable its source or how extensive the list itself, a static lead list gives you a picture of how a given territory looked at some point in the past - or, more accurately, over a period of time in the past.
Even once-hot online marketing tactics like PPC campaigns are taking on water. These days, Realtors might find it useful to devote a segment of their marketing budget to paid search ads, but Google is making loads of money on Realtors. Relevant, popular search terms are expensive, sometimes wildly competitive. If you need to broker five transactions per month to break even on your PPC spend, it's time to scale back this part of your campaign.
As the old saying goes, you need to work smarter, not harder, and a dynamic list of leads can be the solution. PropertyRadar's "living lists," which encompass pretty much every property in California, give you a daily glimpse of real estate activity on your FARM, in your market, and across your region. Depending on your preferences, you can use more than 100 metrics to create customized lead lists to which no other Realtor, lender, property investor, or anyone else has access.
A "living list" doesn't wait for you to purchase new leads or make another round of calls. It provides you with real-time transaction updates, including hard-to-spot off-market sales. This generates a dynamic view of your FARM unlike a static lead list, and combines data-driven marketing support that streamlines your outreach operation and enables you to contact new and existing leads via social media, printed mailers, email, and phone before anyone else.
3. Stay on Top of Your FARM's Equity Data
No matter how you generate leads, equity data is a critical component of your real estate FARM. Customize your "living list" to isolate homeowners that have "new" (or low) equity, are completely underwater, or own their homes free and clear. If you prefer, look at all three categories side-by-side. Each could play a valuable role in strengthening your position as the leader of the pack, dominating your FARM.
First, new or low-equity homeowners - defined as those with equity of 25% or less - may be weighing some difficult choices. Given California's recent real estate history, many homeowners who bought during the last 10 or 15 years are still struggling to build equity in their homes, even with loan modifications in place. These folks are tired of putting their lives on hold while the market recovers, and some have long outgrown their current homes. Even those who aren't traditional short sale candidates may be receptive to the idea of selling. As prospects, they can't be overlooked. According to our Real Property Report for California, December 2016, 4.8% of California homeowners (that’s 420,000) are still underwater.
If you think about it, underwater homeowners offer an even straighter path to FARM success with a strategy that is focused on homeowners who need or want to sell, now. Since many eventually walk away from their homes, it's crucial to identify them before they've made up their minds. Customize your dynamic list to single out negative-equity properties, then use marketing tools at your disposal to sell them on the notion of a short sale (and discourage abandonment, which can have an undesirable effect on neighboring properties' values).
PropertyRadar's Property Search feature allows you to sort your FARM's residential real estate however you like. In fact, you can narrowly customize your equity range, expressed as a percentage, to target specific subgroups of homeowners. For example, you can search for "new equity" homeowners with as little as 5% or as much as 20% equity, or for nearly free-and-clear homeowners with equity of 90% or more.
4. Track Area Foreclosure Trends
California's real estate market is showing clear signs of strength – the PropertyRadar report also shows a 40.1 percent decline year-over-year. But foreclosure activity remains well above the state's historical average. Depending on your FARM's location and profile, foreclosure sales may represent a valuable component of your strategy. Of course, you can't take advantage of distressed properties if you don't know how to find them.
You'll need to pay attention to several key metrics on or near your FARM. First, pay attention to local default filings. These offer the first public indication that a home is about to enter the foreclosure process. Each filing contains information about the date of the trustee sale or auction. Homeowners who receive these notices may be amenable to alternatives they hadn't previously considered, including short sales and loan modifications. If these services fit into your FARM strategy, you'll want to find them using PropertyRadar’s Foreclosure Search feature – then approach affected homeowners with an exit strategy as quickly as possible.
It's crucial to follow and analyze foreclosure outcomes as well. To take the "temperature" of your local distressed-property market, look beyond the headlines at metrics like time to sale and discount rate. These metrics juxtapose the winning bid amount for each property with its estimated market value and outstanding loan balance. Over time, changes in these figures may give you valuable clues about the health of your local foreclosure market and help you position appropriately.
5. Pay Attention to Turnover
Few metrics are more important than turnover. Veteran Realtors who manage their FARMs well, gravitate towards neighborhoods with average homeownership terms of between six and eight years, give or take a few months. Higher turnover rates may hint at a market issue that could hurt resale values and premiums, such as high default rates or large numbers of underwater homeowners. If you aren't prepared to deal with these curveballs, it might be best to concentrate on more stable areas. Conversely, areas with very long ownership terms may be too stable for ambitious FARMers; such neighborhoods may be flush with older homeowners who have decided not to downsize.
These days, it's important to note a property's actual date of purchase as well. Regardless of how long they've been occupied, homes purchased in the mid-2000s can be enticing for FARMers who gravitate to foreclosures and short sales. Homeowners who bought at the most recent market top may be underwater (or stuck with low equity) and might not be able to wait for a full recovery. For a full, accurate picture, pair this metric with equity data and pay special attention to the relationship between the current estimated value and most recent purchase price of each property.
If the estimated value is much lower than the purchase price, the homeowner is likely in trouble. You can also use this data to target first-time homebuyers: If your FARM's estimated property values remain below their peak, compare the area's prevailing rents to estimated mortgage payments. On FARMs with high rent-to-mortgage ratios, long-term renters may be waiting for you to convince them to buy.
6. Persistence Pays Off
You can use all the data at your disposal to generate detailed, real-time snapshots of your FARM, but all that work means nothing if you can't close your sales. First, your marketing operation should be just as digitally savvy as your data-collection and lead-generation work. Second, whether you're just getting started or run an established, expanding FARM (focused real estate market), you need a first-rate website that's visible to prospects in your area. It's critical to optimize your Internet presence for searchers, using both organic and paid-search tactics. To control costs, consider talking to a digital marketing expert. Part of "persistence" is keeping your Web presence ahead of the curve.
Of course, persistence is also personal. Don't just send out occasional mass mailers to the same old addresses. Make it data-driven, relevant and highly targeted because you know everything about every single property (and person) in your FARM. Follow up each mailing with a call or drop-by. Likewise, don't be afraid to pair your "snail mail" marketing - use PropertyRadar's printing and mailing services to "stamp" your personal brand - with a promotional email. It's important that your prospects don't feel like they're being rushed to a desired outcome or de-prioritized for a juicier lead. Even if they take time out of your busy schedule (and contact costs money to execute), host regular neighborhood get-togethers and networking events. These help you remain front-and-center in your prospects' minds while demystifying the buying and selling process.
7. Go the Extra Mile for Your Clients
It might be a cliché, but that doesn't mean it's not the right thing to do. If you've been a Realtor for any length of time, you understand that superlative customer service is essential, and the "closing power" of a broad smile or caring pat on the back. "Going the extra mile" is a subtly different art than mere persistence. You can't just send out targeted marketing emails or mailers at regular intervals. For example, a well-placed phone call at a key juncture of the selling process can make or break a client relationship. Is their kid's team heading to the state basketball championship? Did they just welcome a new baby into the fold? Don't overlook details like these.
Clients value personability, but they also value results. Only make promises you can keep. If you tell a seller you'll get them 95% of their ask and then discover three nearby sellers who had to drop their asks by 15%; you'll have some making up to do. "Under-promise, over-deliver" applies here.
Your relations with investors and lenders are just as important because solid business relationships make it easier to keep your promises to your clients. To shorten closing times, cultivate relationships with one or two preferred local lenders. Most importantly, send plenty of business their way, and network like your career depends on it (it does). But don't neglect little things like holiday cards and small talk about the kids. They'll see through these tactics, perhaps, but they'll also give you top priority when it matters most.
To the layperson's untrained eye, wildly successful Realtors appear to have a magic touch. What else could explain the apparently supernatural ability to identify ripe neighborhoods, zero in on seemingly perfect prospects, and close sales faster than others generate leads?
Seasoned Realtors who master their FARM know better, of course. With the proper tools and the right approach, strengthening and expanding a real estate FARM needn't involve an ounce of luck, guesswork, or superstition. Every FARM is different, but the seven tools outlined here will set you on the right course. Before long, your peers might be asking what brand of magic you've been practicing.
Are you working your own real estate FARM? Which strategies do you find most useful?