Getting Started in Real Estate Investing Post #3

Posted by 24 July, 2008

Disclaimer: My real estate investment series will be not be in chronological order, at least as they are posted. They will most likely be random tips or topics I am currently thinking about. I would like to put together an e-book of “How to get Started in Real Estate”, but that is a long way off.

What is a farm area?

A farm area is a defined boundary around a neighborhood you wish to concentrate your marketing efforts for real estate investing.

How large is the farm area?

In order to make the farm area manageable, it should consist of 300-1000 houses. Some people restrict the farm area up to 5 miles by 5 miles, but that seems a bit overwhelming to me. Also, at least in the DFW area, an area can change very quickly over a few blocks. If you are reading this, you are probably just starting out. I’ve learned from my own experiences that one should try not to overwhelm yourself especially at the beginning. You want enough houses so that you have an audience, but not too many so your efforts are manageable and effective.

What does a farm area look like? What types of houses and neighborhoods am I looking for?

A farm area contains the houses you are interested in and would like to target. My first inclination when I was starting out was to target the nicer houses and better neighborhoods. This may sound like a good idea at first, but you have to separate what type of neighborhood you like personally as compared to the type of neighborhood you would like to invest in. The typical real estate investor targets older homes. In the book Buy It, Fix It, Sell It, Profit, Kevin Myers says that you should target homes that are 30-40 years old. I agree with that. Typically, you want to find homes that have the potential of being paid off (lots of equity) and require repairs (leverage for bargaining). A newer home will most likely not have a lot of equity and will require few repairs, and therefore most investors steer clear. The price of homes differ depending on the area of the country, but typically the homes that you would target in the DFW area are $90,000 up to $150,000. This price range reflects a well kept, working class neighborhood – i.e. nice yards, few cars parked in the street, few rentals. When reselling or renting the investment property after the repairs have been made, all of these qualities will make it easier to resell or rent.

Scope of Direct Marketing

How are you going to market to your farm area?

– Signs

– Door to Door

– Door hangers

– Postcards

My next post in this series will explore my marketing plan and what has worked (and not worked) for me so far.

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