It’s cliche time. “If you want to get rich, pick a niche.” Yes, this is said all of the time, but few real estate investors truly know how to niche down their marketing.
First of all, the more specific your marketing, the better your results will be. For example, if I send you a letter that says I’m looking to buy houses in Virginia, that’s not too specific because I’m talking about an entire state.
What about if I send you a letter that says I’m looking to buy houses in Stafford, VA? That’s better, but we can even go more specific than that. How about a letter that says I’m looking to buy houses in the Black Hills subdivision. And what’s the most specific way of all? Sending a letter that says I would like to buy your house at 123 Main Street, Stafford, VA 22222.
Now before you start mailing highly specific letters, you have to first pick your niche. The smaller the area, the better. Don’t pick an entire state, or an entire city. Pick a few key areas. You want to know your area so well that when a seller calls you, you know the exact street the person is talking about. Or, when a seller calls and tells you how much they’re asking for the house, you know the area so well that you know all of the housing prices and can negotiate right then and there.
So what’s the best way to pick your niche?
Well, you want houses on the lower end of the pricing spectrum. Obviously don’t pick an area with all $500,000 houses if the majority of houses in the area are $250,000 and the low end houses are $150,000. You want the lower priced houses because more Americans can afford a $150,000 house than a $500,000 house.
Also, make sure the area has three-bedroom, two-bathroom bread and butter properties. And most importantly, make sure the area you pick is safe! Yes, this is common sense, but I know of investors who’ve tried to make a living in a “war zone” and it doesn’t work. If you’re trying to sell properties on a lease option it’s very difficult to find quality tenants who want to live in war zone neighborhoods.
Once you think you’ve located a good area, what should you do?
It’s time to get in your car. Drive around and check out the neighborhood you’re going to focus on. Make sure it meets your criteria. Even better, go out on foot and walk around for a while. Some of the best deals I’ve ever done were when I went door knocking and was walking around a neighborhood. When you’re in a car you have to concentrate on driving… but when you walk a neighborhood it’s easier to locate the vacant houses and also talk to neighbors.
So let’s go full circle and say that you’ve found your new target market. And that you’re going to personalize your mailing piece. What’s one of the huge mistakes that investors still make? Using the 800 number. When you have your new niche, you’ll want to use a local phone number. People prefer to do business with a local company and not some big, faceless corporation.
Here are a few more personalization tips:
On your mailing piece use the person’s name… don’t use “Dear Neighbor”. And don’t use their last name, such as “Dear Mr. Smith.” Your letter should read, “Dear Mike…” Also, for the best results use their name in the headline. For example, “How Mike Smith Could Sell His Rental Property in the Next 30 Days Or Less Without Having to Pay Any Fees Or Commissions!”
If you take the time to really become a “big fish in a small pond” then you will dominate your area. You will become known as the go-to-guy for that part of town and you’ll get more referrals from other homeowners and investors.
Plus, it just makes the business easier overall. If you know your target area like the back of your hand, then you’ll save a lot of time when researching properties.
By the way, remember how last week I wrote about my latest lease option deal?
First, it was from a referral. Also, someone wanted to know the numbers on the deal, so here they are: With this deal I will have $200 a month in cash flow. The lowest I will ever go “cash-flow wise” is $100 a month on a property. But if I do that, there better be a huge back-end profit.
And speaking of back-end profits, I should make around $32,000 when the property sells. Of course, don’t forget with the lease option deal you also have one more profit center, which is the option money from the tenant and I’ll try and get at least $5,000.