The Riches are in The Niches
Related: The New Real Estate Niche
Many people think that a large amount of action in many different markets is the way to make the biggest impact, and produce the best profits. This is a misconception that many different investors, entrepreneurs, business owners and real estate professionals fall victim to. The truth is that the people that win within a market are the ones who put all their effort into that specific market and conquer that niche.
The Shiny Object
I know that there are times when you are talking with someone at a real estate meetup, a conference, social gathering, or a real estate investors meeting and that person starts telling youtheir story of what their business is and what their profits for each deal are, or the profits they receive within a year. Once you hear the storyyour brain starts to think immediately about howyou can change your business plan to their niche and create the same type of profits within a matter of weeks or month. There should be one of two things done by youwhen your brain starts to run through these thoughts. Option one, would beto kindly walk away from the person to make sure you do not change your thoughts, or option two would be you freezing your thoughts and do not let yourthoughts deviate from what your business is focused on.
The shiny object that distracts us in these conversations is the profits and confidence the person is telling you what it is they do and how successful they are at that niche. In reality this person has been within that market for years andit took them just a five minute story to convince you to change your whole business plan. It's a long hard road to get to becoming successful within a market, which includes many hours of studying, testing, and researching what the best strategy is to survive in that market. Typically it takes two years and a lot of times evenmore than two years to break into a market and be as successful as that same person.
Related: Find Your Niche In Real Estate Investing
It's a Trap
In any endeavor the fatal trap is switching from one market to the next chasing the money that possibly could be within that market. There is not enough time given to fundamentally understanding that specific market to create the wealth and profits that mirror a true master of that niche. It's not as glamorous as everyone that you may meet makes it out to sound, the years of hard work and long days are what gets those people to reach that success.
Everyone hears the same things, direct mail does not work in any market, door knocking is too hard since everyone does not want to answer the door, or marketing on Facebook costs money and has zero ROI for the company. It really just depends on the market that you are investing time within that those statements can ring true. In one market there maybe someone that has success with direct mail because it's a bedroom community that does not like salesmen coming to their door, but they love getting the mail and reading every little piece of the mail. In the next market 20 miles away it could be the exact opposite where a high percentage of millennials live and they have no idea where the local post office is located. These are reasons for testing, studying and really getting into that market to become successful.
As those switches from market to market continue you as a business owner, investor, or real estate agent reduce your chances of winning. One of the biggest lesson of markethopping is that you are not within that market long enough to build brand trust and equity with those people. Do not get succumb to this bad practice.
Stay Focused
It is hard to stay focused in a world of so many distractions. When the itch comes on to change your sights onto something else, that is when you should realize that you need to refocus onto your own strategies. Keep your head up and your sights on your business because this isn't a one or two year game, this is a long term lifetime game.
What markets are you in and what are your strategies that are working within those markets?
Have you tried different markets because someone else had luck in them?
Comments (6)
I have always worked in niches, but it was always important to me that there is/was something that I really enjoyed doing and not just make money.
I started out in renovating old Victorians in a historic neighborhood in Atlanta. All properties that other investors bypassed, because those homes usually need major rehab and most prefer light updates. I enjoyed decorating and I really liked the drama that Victorians had. People looking for those homes always citing 'character' as one of their main criterias. It allowed me to not do cookie-cutter renovations, but use my creativity. I knew the neighborhood inside out and would go to open houses on Sundays to compare houses and see how quickly some of the got under contract.
Then I 'fell' into wholesaling vacant lots to builders in another neighborhood. Many dilapidated homes had been torn down by the city in the 90's and the neighborhood had become a 'war zones'. Owners had moved or died and didn't see value in the lots or didn't realize that they still owned them after the house was torn. Demo liens only survive 7 years and by the time I was working these, they had been forgiven. Same with old water or tax liens. Because there had been low values attached, the city didn't try to auction. In the meantime the neighborhood had picked up steam and builders were working left and right, construction new homes. I had so much fun using my detective skills, tracking down old owners or heirs and buying those lots (That later also got me into unclaimed funds). And I sold them pretty inexpensively to builders with double closings.
When the market crashed I was living in California and made good cash with unclaimed funds, but real estate prices were too steep. I ended up buying lots of 10k houses in that neighborhood with the vacant lots, sight unseen, just with pictures on realtor.com. All REOs. That neighborhood had been ground zero for mortgage fraud and when the sh.t hit the fan, all of the banks wanted to wipe their hands of it and threw those houses onto the market. I had extra funds and snapped them up.
I still own and buy in that area and those 10k houses are now worth 50k-60k and rising, because of some major development next door.
Right now my niche is having bought several duplexes on the same block, having everything fenced in, with one big gate, which is closed at night. Same neighborhood as above. It has a stigma of crime and being dangerous. I crated an artist community here. I get artists/creatives from all over Atlanta, who feel comfortable and safe, because of the fence and they're willing and able to pay more. They're drawn to the community aspect. We're only 2 miles from Downtown Atlanta and anything in a perceived safe neighborhood that close would be much more expensive. But we're getting more than the neighborhood in general. And we're getting better tenants, who's help getting rid of the stigma, by talking to other artist friends, telling them that it's pretty cool here.
I see myself doing this again: picking up a small, vacant multi-family in a so-so neighborhood, close to Downtown, and fencing everything and creating another artist community.
Michaela G., over 7 years ago
Michaela! Thank you for commenting on my BLOG post!
It sounds to me that you hustled very hard and stuck to that one small niche. The duplexes that were on the same block and knowing that area like the back of your hand. This is good because the more people see your face the more they feel comfortable to confide in you to tell you things as in information about properties they want to sell, bad neighbors that are in your properties that you may need to get rid of at of lease, or anything else.
This types of facts can make you super successful! It takes time, but as long as you are good with having patience you can win big!
Peter Mckernan, over 7 years ago
I hate to say it but this my life. I have succumbed to this way of thinking many times. Wether its switching to cold calling from direct mail, there is always a dip when trying something new. Theres the rub no matter what, it takes time and consistency. I have found that it going from a amateurs mind set( Shiny Object Syndrome) to a pros mindset like a carpenter actually sitting and being ok with the time it takes for mastery. Great article.
Seth Taylor, over 7 years ago
It is the consistency and focus that wins every day! When you hit that dip and keep moving through, that is when you win! Keep up the good work and you will get there even after that switch to a new market!
Thank you for commenting Seth!
Peter Mckernan, over 7 years ago
Some really great points! Many investors that are in higher priced markets think they need to look out of state. I have seen many investors find much success in high priced markets....... Like you said, focus on the success. A comparison look at the lower priced markets, where a 4 family is $100k or less for an investment. Typically, the values of those properties stay the same or drop years down the road, and they are profiting monthly, but in CA the profit margins can be much greater! Say someone is looking ifor a primary residence in Newport Beach and want to purchase a 4 family, they could go just above a $1.2 million limit! Yes, with Freddie Mac they would need 20% down and Fannie requires 25% down, but if the tenants are paying the mortgage and they are living in one of the units, nearly free, they could have appreciation on top of a property worth over $1.2 million. Or better yet, they could purchase a property with FHA and only 3.5% down on 2 units, worth up to $800k and the tenants will help pay the mortgage. 3-4 unit FHA financing can be difficult in high cost areas, but are not impossible. I just see a lot more profit potential with my CA clients most times.
Jerry Padilla, over 7 years ago
Great points @Jerry Padilla !! Thank you for commenting. As a people looking properties anywhere in the nation they need to realize that calculating the numbers, seeing all loan options, and knowing what their comfort level is the best way to make each deal work!!
Peter Mckernan, over 7 years ago