Lead Generation

Critical Step for Your Real Estate Business

Choosing a profitable target market may be the most critical step of building your real estate business. However, most real estate agents just randomly pick an area that is close to where they live, spend lots of time and energy marketing in that area, only to fail at their efforts and wonder “what’s wrong with me?” or “what am I doing wrong?”

If you want to skip the hassle of wasting time and effort, then you must take some time to study your area and find out which possible markets will be profitable for you. Don’t base your marketing efforts on assumptions. Use the data in your MLS and do some real market analysis.

This process will help you with your HyperLocal expertise as well.

Once you find some possible target markets, make sure you narrow it down to the target market that is best for YOU (based on your unique characteristics). Also choose marketing activities that are a good match for your natural personality. This will help you actually ENJOY your marketing activities and prevent burnout.

Learn How to Use Your MLS First

Before you can study sales data in your local market, you have to know how to use the MLS software. Sign up for your MLS training classes as soon as possible. Take all the classes available: basic and advanced. Take online tutorials (if available). You really should be a PRO at using your MLS—it’s one of the best (and exclusive) tools we have as real estate agents. The information contained in the MLS is what gives you a key differentiator in your market place.

When you take your classes, make sure you learn the skills listed below.

• Search by geographical area: by city, ZIP Code, subdivision, building, etc.
• Search an area by using a mapping tool (if available with your MLS)
• Obtain sales statistics for a geographical area within a specific time range (6 mths, 1 year, 5 years, etc.):
  • Number of Actives on the market
  • Number of Solds
  • Cumulative Days on Market
  • Median sales price
  • Lowest sales price
  • Highest sales price
  • Median price/sf
• Create charts and graphs for Stats (if available with your MLS) for various market areas (city, ZIP Code, subdivision, building, etc.)
  • Five- or ten-year sales price trends
  • CDOM trends
  • Quantity Sold trends
• Create custom searches for home buyers and set up automatic notification system for them (if available)
• Print a map of a set of homes you want to see on a home tour
• Print information sheets for buyers, per house (for home tours)
• Print information sheets for agents, per house (for home tours)
• Access the tax records for a specific owner’s name or address
• Access lot details about a specific home, including flood zones (if available)

Study Your Primary Market: Area & Property Type

Understand How Your Local Market is Segmented

When you sell real estate, you are selling both a location and a home. Real estate is associated with land, and land is divided into countries, states, counties, cities, neighborhoods, ZIP Codes, etc. Then on that land, there are different types of homes for sale or lease, such as single-family homes, townhomes, high rise condos, rentals, etc. Every area is different. You probably won’t have a lot of Country Homes & Acreage properties in downtown Los Angeles, and you may not find any High-Rise Buildings in Tupelo, Mississippi.

Your MLS will be set up to search for homes by type, including some or all of the following:

• Single Family Homes
• Townhomes/Condos
• Country Homes & Acreage
• Farms & Ranches
• Mid- and High-Rise Buildings
• Rentals
• Empty Lots

Your MLS will segment the area in multiple ways, with multiple fields:

Regardless if it’s in a neighborhood, a building, or a townhome community, all properties have a Subdivision field in the MLS. They will also have a Legal Subdivision field that is more exact. Get to know how agents list homes in your area on the MLS…it can be “tricky” for some neighborhoods which may also be part of a Master Planned Community field.

There are multiple ways to segment a local market, depending on the type of homes you want to sell and the area in which they are located:

• Primary Market: Large geographical area (such as city or ZIP Code) plus type of home (single-family, high-rise condo, townhome, etc.). Example: Single-family homes in Tulsa, OK

• Secondary Market: Specific neighborhoods, high-rise buildings, or condo complexes in your primary market. Example: The River Oaks, Garden Oaks, and Water Gardens neighborhoods in Dallas, TX or all Inner-Loop high rise buildings in Houston, TX

• Farm Area: One specific neighborhood, building, or complex in your secondary market. Example: The Continental High Rise Building in Atlanta, GA

• Niche Market: One specific type of client or home such as First-Time Home Buyers or Waterfront Homes in your primary market. Example: Golf course homes in Palm Spring, FL

Define Your Primary Market

A primary market is usually an entire city or ZIP Code. However, in metropolitan areas and very large cities, it may be only a specific portion of the city (such as several ZIP Codes within the city). In rural areas that are not densely populated, the primary market may be an entire county or region. In a small state like Rhode Island, the primary market could be the entire state.

In what type of primary market will you work and serve? (check the one that applies)

___ Metropolitan – several areas or ZIP Codes within metropolitan area

___ Urban – large city

___ Suburban – town or city on the “skirts” of a larger city or metro area

___ Rural – country area outside of a city or suburb

Fill-in the following table with information on your primary market…the primary area in which you sell houses. If you serve only one city then you may have only one ZIP Code.

You can do an Internet search for “zip code map for YOURCITY” and then click Images to find and print a ZIP Code map for your area. Keep the map handy.

What types of homes are available in your primary market? (check all that apply)

___ Single-family

___ Multi-family

___ Townhomes

___ High- and mid-rise condos

___ Farm and Ranch

___ Country Homes with Acreage

___ Other: ____________________

Different types of homes have different characteristics. Selling high-rise condos is different from selling single-family homes, which is different from selling farm and ranch properties. To generate the most leads, you should try to focus on the predominant type of home in your primary area (unless you want to focus on a niche).

During your first year, learn everything you can about the predominant type of home in your area. Become an expert in that type of housing. Learn the INs and OUTs of buying, selling, and living in that type of property. Have a list of home inspectors for that type of property. Your clients are going to rely on you to help them buy and sell houses, so you need some expertise in the type of product you are selling.

Study Sales Data in Your Primary Market

Use the How to Find a Profitable Target Market worksheets, and your MLS, to study your primary market based on sales data from the past 6 mths (for large areas with many sales) or 12 months (for smaller areas with fewer sales). This will give you a general understanding of your area. It will also help you to know which areas are the most and least profitable, so you don’t waste time focusing on unprofitable markets.

You do not have to analyze every type of property. If you don’t plan to handle rentals, then don’t analyze that column. If you don’t have Country Homes and Acreage, then don’t waste time on that category either. However, it never hurts to have a complete understanding on what types of properties are selling best in your area, and which ZIP Codes are selling the most.

What types of property are predominant in your area? Which areas have the most sales? Focus on no more than two property types on the next page.

Study Top One or Two Types of Property in Each ZIP Code

Sometimes it is very obvious that there is only one property type with the most sales in your area. However, there could be two or more property types that have similar sales activity. Use the How to Find a Profitable Target Market worksheets to look more closely at the sales data for the top two types of property (single family, townhome, high-rise, etc.). Your objective is to find the one most profitable property type and area to focus your business during your first year.

Which ZIP Codes have the most sales? Start narrowing your focus to find a “hot” target market, but make sure it has enough activity to meet your business goals.

Study Your Secondary Market: Top Neighborhoods or Buildings

A secondary market is the top-selling neighborhoods/buildings within your primary area. Once you know the type of property and the area (such as ZIP Code) that you want to focus on, then use your MLS software to find the top-selling neighborhoods/buildings in that area.

Using your MLS, search for Solds in your chosen city or ZIP Code(s), over the past 6 to 12 months (depending on the size of the area), and then sort the MLS results by Subdivision. Then scroll through the results, and write down the names of all the neighborhoods/buildings that seem to have a high quantity of sales on the table on the next page. This will create a list of subdivisions (neighborhoods/buildings) for you to investigate in order to find the top-selling neighborhoods in your area.

Study Top-Selling Neighborhoods/Buildings

Scroll through the MLS results for Solds in the past 6 to 12 months (depending on the number of sales available in that period), for the type of property and area (city or ZIP code) that you plan to focus, and look for Subdivisions with the most sales. Write the names on the How to Find a Profitable Target Market worksheets.

Use your MLS to collect the stats for each subdivision, and write that information on the worksheets. Then copy the applicable table to a Word document so that you can sort the table in different ways (see below) to identify the top neighborhoods/buildings in your area.

Identify Top Neighborhoods/Buildings

Find the top five neighborhoods/buildings in each of the following categories:

• Most Popular (by number of sales)
• Luxury (by median sales price, high to low)
• Most affordable (by median sales price, low to high)
• Fastest Selling (by CDOM, low to high)
• Lowest amount of Inventory (by Months of Inventory, low to high)

Think about the results and understand why. Why are certain neighborhoods the fastest selling? Why do certain neighborhoods have the lowest inventory?

– Schools? – Location? – New Construction? – Price? – Age? – View?

For help, discuss these things with a mentor or experienced agent in your office.

Evaluate Possible Farm Areas

Some agents, not all, choose to “farm” a specific neighborhood as their marketing strategy. A farm area is one specific neighborhood or building in your secondary market. Targeting a specific neighborhood/building can be a lot easier than targeting an entire city or ZIP code. It is much easier to become the “hyperlocal real estate expert” for a farm area than for a large city.

A farm area needs to be small enough that you can affordably advertise in it on a consistent basis (monthly advertising is important), but has enough active sales to be worth your attention. It should be a neighborhood/building that you will enjoy working and one that is a good match for you demographically.

If it is a very large neighborhood or building, then you may want to start your direct mail focus on one section of about 100-200 homes first and then expand as your budget grows. Expect to spend at least $300/mth on direct mail and other advertising in the beginning of your career. Remember that it may take 10+ months of consistent, monthly advertising until you see results.

Now that you have analyzed your secondary market, do you see any specific neighborhoods/buildings that may be a good match for you to farm? Top-selling neighborhoods are often a good choice, but it depends on where you want to focus your efforts.

Possible Farm areas:

Now transfer the data from the previous worksheet for your possible farm areas on p. 7 of the How to Find a Profitable Target Market worksheets. Does one neighborhood stand out as the most likely to be profitable?

Evaluate Possible Niche Markets

Active, top-selling neighborhoods or buildings are usually the best type of target markets in real estate. However, some real estate agents may choose a “niche” market as their target market. A niche market is a specific type of home buyer or seller.

Just like farming a geographical area, targeting a specific niche can be a lot easier than targeting an entire primary market or even a secondary market. However, you need to make sure that your niche is large enough (number of Solds) to be profitable.

When selecting a niche market, you should consider your personal passions and hobbies, but also make sure that the niche exists in your market. If you love playing golf, then golf course homes may be a fun niche for you…unless you live in the middle of a large city where there are no golf course homes available. Or, if you live in a predominantly Oil & Gas area, then energy-efficient Greenies may not be a good niche market for you…even if it is one of your passions. And if you live in a retirement area with very high sales prices, then first-time home buyers may not be a good focus for you, even if you like that niche.

When choosing a niche, make sure:

• Your niche is available in your market area.
• You have commonalities with your chosen niche.
• Your niche is big enough for you to meet your financial goals.
• Your niche is a good match for you, given the demographics of your niche.
• You have the right skillset to generate leads for your chosen niche.

The following lists show common types of real estate niches. Check only those that you have something in common and only if they exist in your market. (If your market is downtown Atlanta, then don’t choose farm and ranch.) Keep in mind that you will need the right skillset to advertise to the type of niche market that you choose.

Niche Market Summary

You can only use the MLS to analyze some types of niches, not all of them. There is no MLS field for “first time home buyer” but there are fields for: Private Pool, New Construction Home, Golf Course Lot, etc. Use p. 9 on the How to Find a Profitable Target Market worksheets to get an idea of what’s available in your market, so you can evaluate if it may be a profitable niche.

Select a Profitable Target Market

Once you understand your market, then you should select a “target market” to focus your marketing efforts on. Of course, you will help clients buy and sell anywhere in your primary market, but that area may be too big (and expensive) to “target” your advertising efforts…especially your first year. So it is wise to select a secondary market, farm area, or niche market to set as your “target market.”

For example, your target market may be:

• One favorite neighborhood/building/subdivision (farm area)

–Or–

• Top 5-10 selling neighborhoods in the city (secondary market)

–Or–

• Top 5-10 selling high-rise condo buildings in a ZIP Code (secondary market)

–Or–

• One niche market in the city (golf course homes)

–Or–

• A combination…one farm area and one niche market

The size of your target market is important. It must be active enough (with a high number of sales) to provide enough sales in order for you to reach your business goals, but small enough for you to cover effectively. If you live in a metropolitan area, such as Chicago, you probably can’t cover the entire metro area, so you will need to “drill-down” to a secondary market, niche market, or farm area. However, if you live in a rural area, you may have to cover several small towns in your region, or an entire county, in order to meet your income goals.

Write Down Three Potential Target Markets

List the top three possible target markets for you on p. 10 of the How to Find a Profitable Target Market worksheets.

Do the Possible Target Markets Have Enough Sales?

Before you waste time focusing on a specific target market, double-check to make sure it has enough sales to support your income goals.

*Market Share Percentage: This varies depending on how much market share you think you can obtain in the neighborhood. If you think you can get 20 percent market share, then multiply the number of homes sold in that market per year by .2 (20 percent), and make sure the total is greater or equal to your goal for the number of homes you want to sell each year.

If a potential target market does not have enough annual sales to support your business goals, then you should either select a different target market or combine several neighborhoods in your target market (such as the “Top Ten Neighborhoods in YOURCITY”).

Are You a Good Match for the Target Market?

It is often said in real estate that people want to work with people they “know, like, and trust.” The more two people have in common, the more likely they will “like and trust” each other. So it is important for real estate agents to focus on markets that consist of people similar to them. For example, if you are a single, 20 year old, driving a 10 year old beat-up car, with only a high-school education, then you may have a hard time getting affluent, well-educated couples living in luxury neighborhoods and driving luxury cars to hire you. Or if you are a 60 year old who has a hard time with technology and hates to text or participate on social media, then you may not get hired by many Millennial first-time home buyers.

To make your life easier, and your career more successful, you must double-check yourself with your target market. If you are a mis-match to your chosen market, then select a different target market or discover ways to overcome the obstacles that you will face.

Research the demographics of your potential target markets and complete the table on p. 11 of the How to Find a Profitable Target Market worksheets. Some of this information may be difficult or impossible to obtain at a neighborhood or niche level, but the thought process is very helpful.

Your Target Market: ___________________________________________

Summary

Selecting the right target market is one of the most important steps in building a successful real estate business. Without the right target market, you are likely to spin your wheels, waste time, and waste money and then wonder “What’s wrong with me?” when your marketing activities don’t work.

Taking a careful study of your primary and secondary markets, as well as possible niche markets, will enable you to choose a target market that will be profitable for your business. Double-checking to make sure that there are enough sales in the target market to meet your business goals is another way to ensure that you don’t waste time on the wrong market.

Finally, it’s important to match both your target market and your marketing activities to YOUR unique personality. This will help you be more effective at marketing your business, since most people want to do business “with people they know like, and trust.” Plus, choosing the marketing activities that are a match for your personality will help prevent burnout and make it easier for you to enjoy your lead generation efforts.

DOWNLOAD WORKSHEETS

Zero in On the Right Area – Dominate Your Local Real Estate Market

Too many new agents jump into the business without a clear strategy—and end up spinning their wheels in areas with little activity or profit potential. This guide changes that.

Go through the step-by-step process with the worksheets in this guide and you’ll find the perfect target market for YOU.