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How to Do a Market Analysis and Select a PROFITABLE Target Market

Why Doing a Market Analysis Is Important

It's very important to learn how to analyze your market for three reasons.

The first reason is because the number one question everybody asks you, when they find out you're a real estate agent is, “How's the market?”  

This is a perfect opportunity for you to differentiate yourself. There are the Bozo real estate agents out there who’ll say, “Well, I think it's really a hot market right now.”  Or there are EXPERT real estate agents who are able to say, “Wow! We are in a major housing shortage right now. Last year, we had four months of inventory, but this year we only have one month of inventory. Our median sales price has gone up $60,000 in most of the top neighborhoods. Last year, it might have taken you 14 average days on market to sell your house; right now, the median days on market is only five days. Are you interested in selling a house? Because if you are let's talk I can do a CMA for you.”

Now, which agent do you think that person is going to remember? Which agent do you think that person is going to want to hire?

Another very important reason to learn how to analyze your market, is so that you can choose a PROFITABLE target market. This is what successful businesses and corporations do to run effective marketing campaigns.

Remember, you are not an employee anymore, you are a small business owner. Successful businesses know their target markets and they design their advertising strategies based on those target markets. You can't be all things to all people. If you want to be successful at marketing yourself as a real estate agent, then you need to choose a profitable target market. This will speed up the success that you're going to achieve in this industry.

The third reason that you want to learn how to do a market analysis is because it's very effective information for you to post on your social media to build your CREDIBILITY.

What do you think's going to build your “Realauthority” faster? Posting generic recipes, or posting hard to find real estate market data?

Consumers love market data, because they really can't get accurate market data, just anywhere. It's really hard to find real estate market data, and what IS available is usually at the ZIP Code level. But what if you provided market data at the neighborhood level?! People will love you for that! And they're going to remember you when they need help with real estate.

 

How to Analyze Your Market

Analyzing your real estate market starts with the MLS. You're going to have to know how to use your MLS, so make sure you take your basic AND advanced MLS classes. You want to become an MLS PRO! The MLS is one of your most powerful tools as a real estate agent. You have so much information on your MLS to help you with your real estate business!

You’re going to use your MLS to go through a filtering process:

  1.  Study your primary geographical area (city and ZIP Codes)
  2. Find the top-selling property TYPE and AREA
  3. Find the top-selling subdivisions in your top-selling Type and Area
  4. Find the #1 or Top 5 hottest subdivisions to target

Worksheets Available in JumpStart Workbook, JumpStart Toolkit, and JumpStart Training Course

I fill out my worksheets by hand first, and then I go back and transfer the numbers to a table in a Microsoft Word document. That gives me the ability to sort that table in Microsoft Word to find out:

  • Which neighborhoods have the most Actives? Which have the least Actives?
  • Which neighborhoods have the most Solds? Which have the least Solds?
  • What are the most popular neighborhoods?
  • What are the luxury neighborhoods?
  • What are the most affordable neighborhoods?
  • What are the fastest selling neighborhoods?

Once you have the data in your worksheets, you can start analyzing it by asking yourself, “Why?” Why are the top five neighborhoods the most popular neighborhoods? Why are these five neighborhoods the fastest selling neighborhoods? Is it location? Is it schools? Is it amenities? Start learning what makes one neighborhood more popular than another.

This is something that you might want to talk about with your broker, your mentor, or another experienced agent in your office. This is the type of information that EXPERIENCED agents know, and that you want to learn as quickly as possible. This kind of knowledge builds your confidence and your credibility with clients.

How to Select a PROFITABLE Target Market

There are different types of target markets in real estate:

  • One “hot” Farm area (one top-selling neighborhood/building)
  • Large secondary market (top 5 selling neighborhoods/building in your area)
  • Niche markets (based on property type, buyer type, or seller type)

Probably the best, easiest type of target market to go after is a Farm area. This is ONE “hot” neighborhood or building in your area. It is a small, geographically defined area that is small enough to market effectively, but large enough to produce the quantity of sales that you need to achieve your income goals.

To choose a profitable Farm area, study your Market Analysis Worksheets and look at the five most popular (most Solds) neighborhoods/buildings. Choose a Farm area that has a good median sales price and has enough activity to meet your income goals.

You don’t want to choose a neighborhood that has only 10 Solds a year when you need to sell 20 houses to achieve your income goals!

 

If you can’t find ONE top-selling neighborhood that will Profitable, then you may have to combine the top 3 or top 5 selling neighborhoods in your area. This is a Secondary Market (smaller than a Primary market but larger than one Farm area) and may be more difficult and expensive to market and advertise to. It’s one thing to “farm” one neighborhood. Farming 3 to 5 neighborhoods takes 3 to 5 times MORE effort and expense.

That is unless you implement an Internet Marketing Strategy in which case you can market to a larger area ONLINE for less effort and expense.

 

The third type of target market you can choose is a Niche market. There are three types of Niche markets in real estate:

  • Property types (golf course properties, waterfront properties, farm and ranch properties, etc.)
  • Buyer types (first-time buyers, relocation buyers, luxury home buyers, fixer-upper buyers, etc.)
  • Seller types (FSBOs, empty-nesters, divorced sellers, etc.)

The challenge with Niche markets is that you can't always do an MLS analysis to analyze the size and popularity of the Niche in your area. For example, the MLS doesn’t have a field for Buyer Type or Seller Type, so you can’t do an MLS analysis on “first-time homebuyers.”

However, if the Niche is focused on a type of property, like golf course homes or waterfront homes, then you can use the MLS to make sure those Niches actually EXIST in your area and are popular enough to be PROFITABLE.

FAIR WARNING

You don't want to be like me, when I first got in the real estate business back in 2009! I kept reading about the need focus on a Niche market…preferably a Niche that I was very passionate about. So I chose, the “Green” Niche because, at the time, I was really into “green, healthy living.” I spent a lot of time getting an EcoBroker certification, and I spent a year focused on the Green, Eco-Friendly market in my area…not ever realizing  that my area is a suburb of Houston, Texas (one of the Oil & Gas Capitals of the world!). There are NOT a lot of people that are concerned about eco-friendly living my area! So it was a target market that was never going to be profitable for me. I wasted a lot of time on that bad advice.

 

Check out Chapter 5 in the JumpStart for Real Estate Agents workbook for DETAILED information on making sure you choose the RIGHT target market.

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Once you know you’re target market, then you can choose the best Marketing Strategy for that market and build your Internet Platform to appeal to that target market.

  

 

MORE HELPFUL RESOURCES

Helpful resources for real estate agents:

 

   

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