Are you a real estate agent who secretly wants to be a farmer?

If yes, then this blog is for you because you can use a concept which is pretty similar to actual farming to get more listings and at the same time fulfill your lifelong dream!

Concept wise, real estate farming is pretty similar to its agricultural counterpart. You plant the “seeds” in an area of your choice and then take care of that farm so you can make money in future. However, for your real estate farming efforts to be successful you have to select the right piece of land which is fertile and can grow crops, till it, plant the seeds, water it, and then watch your hard work, blood and sweat yield sweet, sweet fruit. Similarly, as a real estate agent you have to patiently build relationships with people in your farming area, provide them with value, earn their trust and eventually win their business.

The location of your farm and its demographics plays a huge role in your success with real estate farming. Here are 5 easy steps you can use to find different farming opportunities in your market, analyze them, and then see if that farming area is really as good as it appears on surface.

I highly recommend that you open a few new tabs to follow along with each step and find the geographic farming area which works for you:

  1. Google Map – Open up the map of your city
  2. MLS Websites – For Past Listings From That Area
  3. Google Sheet – For Calculations

Let’s get started!

Step # 1 – Define your Geographic Farm

Ideally, your real estate farming area should be as close to your house as possible. As an agent, your time is precious and door knocking is just one of the few things you will have to do to build relationships with people in your geographic farm. If your farming area is too far away from your house, you will have to spend considerable amount of time and fuel to travel there.

“Don’t pick an area too far from your home because you will have to spend a lot of time and fuel to travel to a network in a farming area that’s far away.”

Picking the right farming area is crucial to your success as an agent. If you are a new agent, don’t be overly ambitious and pick a huge farming area. Don’t bite off more than you can chew. I would recommend starting with a farming area of 500 houses and then, after a couple of months, expanding it. You need to make sure that you are targeting the right demographics when you pick your farming area. Would your experience and skill set really benefit the type of people residing in that area? For example, if you specialize in selling luxury properties, then you should pick a farming area that has luxury clientele.

Make sure you property define the boundaries of your geographic farm!

Step # 2 – Gather Some Intel

Your next step is gathering some critical information, like a spy, about that farming area. You need to find out how many houses were listed from that area in the last 12 months. You should be able to get this information from your MLS. Also take a look at the average selling price of houses in that farming area because we will need that to run some calculations later on.

While you are at it, also take a look at the competition. If there is one agent who got a lot of listings from that area in past, then it might be a challenge for you to get listings as a newcomer.

Step # 3 – Calculate Turnover Rate

Now that you know how many properties were listed in the last 12 months, you have to calculate the turnover rate. Simply divide the number of listings by total number of houses and voila’ you got your turnover rate for your farming area.

For example:

175 Listings / 3500 Houses = .05 (5% turnover rate)

Average Selling Price = $300,000

Now, if you can capture 8% of these listings, it would mean you would get 14 listings on average per year. With 2.5% commision rate, you would be making
$105,000. Not bad, right?

Step # 4 – Review & Finalize

Once you have some data, you need to finalize your real estate farming area. If the turnover rate is pretty low, then it will be more challenging for you to get listings because the competition will be tough. If there already a lot of agents in that area who have already established relationships, then you will need to put more effort to secure your share. You should also look at the area itself, would you want to live there? Are there good amenities available? Is the crime rate low? Are there significant employment opportunities available nearby? Factor in these things because they will define how soon you can sell the listing and for how much.

“Greet all new residents in your geographic farming area, whether they are represented by an agent or not. That’s an excellent opportunity to introduce yourself.”

Summing Things Up

Real Many successful real estate agents have tested the “farming method” out and it has worked wonders for them. To generate positive results, farming requires time, the right amount of effort, and a lot of patience. If you’re able to do all of these things, hopefully, it will generate the right results for you in the long run.

Just remember, to do your research before you put in any effort into farming in a certain area. Real estate farming,

  • Lance Turner

    I am looking at an area of about 250 homes. Nice middle class community with ranch style homes. In doing some research it appears that about 175 of these homes have been sold in the past 3 years. Does this make for a bad farming area due to the possibility of lower equity? The market in my area has been very hot these past few years, so I think it would be hard to find an are without a lot of recently sold homes. Also appreciation has been pretty solid.

    • Tim Grant

      Hi Lance, I think it can be a great farming area if the appreciation in property prices is good and there is a high turnover as well! The challenge in this situation would be staying in touch with everyone in that farming area on a regular basis, building good relationships with people who just move in, and making sure you are known better than any other agent in the area. You will have to hustle, put a lot of hours in networking but in the end, I think it can be incredibly rewarding for you!

      Are you living in the same area? Because if you are that gives you a pretty strong competitive edge.

  • Zach

    I thought turnover is based on solds in the last 12 months? For example solds in last 12 months/total # of houses= TO%. Is that wrong?

    • Tim Grant

      Hi Zach – You are right, that is the standard formula to calculate the turnover rate. I usually use the number of houses listed because that gives you a more accurate idea of how many people actually want to sell. They might not get a good offer, their listing might expire but its still a better way of gauge how much business you can make from that farming area. But rest assured, the formula you have works as well 🙂