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Hey Moguls, Steph Davis here…
Let’s start with the basics for this lesson. “Farm Areas” are small neighborhoods that will meet your buying criteria. This is an area where you can focus your marketing and your attention. This allows you to become an expert in that area. You can become easily recognized and your presence can become established.
Sounds good, right?
There is a problem though. Oftentimes, when an investor first starts out, they are in a quandary of where to begin and how to choose their farm area. Those high-end gated communities can look very appealing. Is that the best place to dive in?
Yikes! Well, not so fast… these are valid questions and concerns, but certainly not cause for alarm.
First, you’ve gotta think about exactly why you should pick a farm area. When you’re getting started in a large metropolitan area, if you were to learn the entire city it would become so overwhelming, you’d end up cashing in your chips before you ever get started.
It’s just not a workable plan…
Look for Investor Activity
Instead, stick with one or two zip codes within the city.
Find out;
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Where there’s a lot of investor activity;
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Where there are a lot of cash sales from investors; and
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Where there are a lot of wholesalers doing deals.
Once you’ve found one of these, take the time to get to know that area really well. Find out who the buyers are; what they’re looking for in deals; and what prices they’re willing to pay. Have a real estate agent help you look up the recent cash sales – possibly in the past 60 to 90 days. Also make notes of the price ranges.
Check Out the Neighborhoods
Go into the neighborhoods and look for these properties. Drive by and see what they look like. Get a feel for what’s going on in that neighborhood. If you spend time doing this, you’ll get to know an area really well and it’ll make things a lot easier for you.
If you spend time doing your market research first, then you’ll know the property values in the area as well. This will give you a lot more confidence when you’re making offers.
So start choosing your area by finding out where the action is. As a wholesaler, you’re selling to cash investors, so you’re looking for where these transactions are going down. Again, one way is to go on the MLS, or have an agent do it for you, and do a search for cash sales.
REIA Meetings and Cash Buyers
Here’s the “How To” part based on my personal experience…
When I first moved to St. Petersburg, I was new and didn’t know the area. I didn’t know where I wanted to focus my efforts. So I went into the MLS and looked at the past 60 days of cash sales. Then I sorted those in zip codes to see which area had the most cash sales. From there, I just picked the one that was closest to me.
Early on in my career, I attended REIA meetings where I met and talked to other investors. I found out the areas where they were looking to buy, and that was where I focused my efforts.
Make personal contacts with active buyers in your city and start asking questions. Find out what they’re doing. Get on wholesalers/buyers email lists so when they send out deals, you can see where they are. From this, you’ll start to see trends…
You’ll see that they are predominately selling in one neighborhood and that’s where you want to go.
Higher End vs. Blue-Collar
As to whether or not you should target higher-end neighborhoods, just remember that your core buyer is probably going to be substantially less. My advice is to stick with the blue-collar, bread-and-butter neighborhoods. I don’t mean the war zones where blocks of houses are boarded up – stay away from those. Go a step or two above that. Typically, this is where the most cash sales will be found.
One of the biggest mistakes I see beginners make – and I did the same thing – is to choose the farm area as a place where you personally would want to live. Nine times out of 10, this will not be the best way to choose your farm area.
The time you invest in choosing and developing your farm area will pay off big time, so jump in and get started ASAP.
Thoughts from Moguls…
If you’ve had experiences in this area, or if you have any questions, please feel free to leave your comments below. I love hearing from you.
Determine that you will definitely select your farm area and begin to work that area.
Run a search on MLS to locate recent cash sales – find the largest concentration then choose a zip code close to you.
Visit the neighborhoods – check them out and become familiar with the area.
Research selling prices – know what’s being paid for those properties.
Steph Davis
started wholesaling in October of 2006. At the time, she had been stuck at a job bartending for the past 10+ years. She was broke and miserable, and desperately wanted out of the bar scene, which I had been stuck in for the last 10+ years.
She ended up closing four wholesale deals by the end of 2006.
Since then, she's closed more deals than she can count, has written two best selling wholesaling courses (Flip This REO and The Cash Buyer Ninja) and continues to teach others how to wholesale with videos, interviews, and as much useful information as she possibly can, because she knows what it’s like to be a broke beginner, struggling to get that first deal.