Currently reading Anson Young's book and I really like the idea/process of focusing on and farming a particular area. I want to begin as he suggests by establishing a baseline for a neighborhood or zip code. Whats your favorite way to accomplish this? And does anyone track sales in their farm area? If so, what info do you like to track? And in what format? Excel or some other software?
Thanks ahead of time for the help!
Matthew, good morning. My partner and I are STVR investors in a neighboring state in a beach community. We did many months of walking around down there every weekend and learning the developments and rental exclusion areas and the builders and such. We are condo investors and bought our first in late 2017 and have had a very good 2018 rental season (read: positive cash flow after a full gut and remodel). When we were doing our research we kept notes on each development, HOA, fees and taxes, we met owners and renters there simply by walking up to them and saying hello and asking what they liked and disliked about their particular development. When we did buy our unit, I kept up the data collection simply because I like doing it, and it will make it easier for number 2, hopefully later this year.
I have our realtor continuing to send us listings of what we're looking for so I can see what's available and when, and she sends me sold condo's from the MLS so I can compile our own comps. (I know they are always moving but they don't waver too far from a baseline price, depending of course on the development they're in). I print everything and make notes on it and keep it in a sectioned binder so I can page through and see the pics and my notes as I'm going. I will make notes on and track anything I think may be relevant in the immediate or far future...what is this field going to be used for? A condo development? Who can I ask? It's closer to the beach than ours...will they allow Short-term rentals? That sort of info just intrigues the hell out of me and I scribble everything down and keep it.
We are also still very new to the real estate investing game so please wait for more and better responses to your question, much more qualified investors than me will be along soon I'm sure!
Hope this helped a little
@Matthew Creel full disclosure: I am actually trying to begin this farming process myself, so maybe we can learn together but I'll share some of my thoughts here.
First of all, for for what purpose are you farming? I'll assume you are an investor looking for property to flip/hold.
With that in mind, the first place I would start is to hopefully try and find a submarket that is within a consistently drive-able distance from where you live. I would say try and look within a 30 minute driving distance, preferably closer. I find that investing works best in areas where you posses a unique advantage, so in this case it could be a neighborhood that you are intimately familiar with due to local knowledge...growing up nearby etc...
After you find that submarket, I would drive the blocks/streets and get an unscientific opinion on the area around you, meaning how does it "feel." Is this an area you would feel comfortable investing in? Is this an area where homes are being renovated and improved, and new construction is in the vicinity? Are there major employers nearby?
Then I would dig into the numbers. Either get your real estate license yourself OR have a local realtor run comparables in that neighborhood/zip code. See what the trends are in the last 2 years. Are prices going up or down? Are they stable? Look at cash sales as well, and then drive by the cash sales to see if they have been renovated and are being used as buy and holds.
I would also look at rent to purchase price ratios and see if you can cash-flow a good amount. Excel modeling will come in handy when running numbers on a specific property.
PS. I am no expert and these are just methods I would use to start.