I am a new REI just getting started and I am currently mapping out a farm area to start learning. What size farm area do you recommend for someone just starting?
My thoughts are that I don’t want to limit the size, thereby reducing my chances of finding deals; but on the other hand, I don’t want an area too large where I won’t get to know as well. My initial thinking was to stay within the county that I reside.
I appreciate any input/opinions that you could provide. Thank you!
The farm ‘size’ isn’t the starting point. It’s the quantity and quality of prospects in a given area that define the size/location of a farm.
1. Determine ‘what’ you want to buy/invest in specifically.
-By price point?
-By age?
-By construction?
-By property type?
-By zip code?
-By school district?
-By demographic?
2. Find out where they are, and sift out ‘everything’ else.
a . Search by age, price, construction, type, etc.
-Use title company “Farm Package”
-Use planning commission (not as precise)
-Use property data provider (expensive and precise)
-Use list service (expensive and if ownership information
is important, the date of abstraction is critical)
-Use MLS
3. Find out ‘how many’ qualified properties there are in a given area.
a. Choose the area with the most qualified properties.
If you’re not finding enough properties that fit what you want to buy, then you enlarge the geography, or you select a new geography altogether.
I search by loan balances, purchase prices, dates of transfer, sizes, ages, and finally price points, and let this data define my farm area.
You may want to search by loan balances. alone, to find all the free and clear properties. Or maybe search for absentee owners. Or perhaps by code violations, defaults, or whatever. Let the data define your farm.
Bottom line:
You want to find the highest numbers of prospects, and let that data inform the size of your farm area.
For an extreme example, let’s say you’re wanting to buy six bedroom homes with pools, but not much shows up.
Widening the farm probably is not the answer here.
Finding out where they exist and making that your farm ‘is’ the answer.
You could be less precise about all this, and just start casting your net where you guess the most likely properties you want are located, and depend on your conversion rate (which may have nothing to do with your farm, but everything to do with your offers, marketing, and negotiation skills…etc.) to define the ultimate boundaries of your farm; or move to a new one.
Finally, distance from where you live is important. If you’re doing a lot of hands on negotiations, marketing, rehabs, etc. then you’ll probably want to limit your farm area to within 30 or 40 minutes in any direction of your home.
I find that 1.5 hour round-trips are my limit. Further than that, and the deal has to make a LOT of sense to screw with.
Hope that helps.
Jay,
Thank you very much for the great information! I sincerely appreciate your in-depth and clear response to my question! :beer
My pleasure.
This is why i stress it is alot easier to find your buyers first and then ask them what areas they are interested in buying in. If you find that a lot of your buyers are trending to a certain area, you may just have a good place to start you marketing. Flood the area with signs and start negotiating with sellers. :bobble
Delondon,
Thanks for your input! I agree with what you said except that I am trying to get started with Sub2 and “pretty houses”.
Thanks again and great point about finding your buyers first.