IT’S AN AGE-OLD QUESTION that both excites and perplexes many real estate agents: When is the best time to expand into a new market?
This questions is usually then closely followed by ‘How do I decide which areas to expand into?’ and ‘How do I ensure I’m successful?’
On the one hand, expanding your business is exciting; but on the other it may be a tad scary.
It need not be. Setting yourself some clear business goals can pave the way to smooth market expansion.
Once upon a time, deciding where your core market should be was as simple as selecting 1,000 homes and working that area.
The trouble is, not all properties are equal; some suburbs may be tightly held and have low turnover, while others trade quickly. So better questions to ask yourself are ‘What am I trying to achieve, and what do I need to do to get there?’
If you want to sell 100 homes at an average fee of $10,000, then you need to achieve a 10 per cent market share in 10 markets of 1,000 homes at a rate of 10 per cent turnover.
It’s also important to remember that the traditional model of selecting your coverage area, suburb by suburb, is a little tired.
Buyers don’t just shop by suburb but, more often, by the lifestyle they’re seeking, such as beachside bliss or inner-city convenience.
If you want to cater to buyers seeking a sea change, your coverage area might range from Bondi to Coogee; or if you’re catering for the innercity market, your area might be Darlinghurst to Surry Hills.
The key is to make sure you cover the gamut of price points. If you have properties on the market for low, average and high sale prices then you’ve covered yourself if one market slows down.
Once you’ve achieved dominant market share in your core area, that’s when you can branch out and expand the region you cover. If you follow your careful business planning you’ll know when your existing coverage area is no longer large enough to meet your goals.
Some agents will want to take a small slice of a large pie, such as covering an extensive geographical area, while others want to take a hefty chunk out of a small pie, such as electing to be apartment specialists. Either option can work.
Market expansion can also help you raise your average sale price
– but how do you decide which areas to expand into? The adage ‘it’s not what you know, but who you know’ rings true here.
Using a mapping service such as batchgeo.com, jot down where all the people you already know live. Think past market appraisals, past clients, existing landlords and previous clients of your brand. Where the greatest collection of dot points fall, that’s where your new market is.
It’s also vital that you work on getting as many ‘trade-ins’ as you can. Trade-ins cause a domino effect, where a vendor who sells in the lower end of the market buys a home in the medium price bracket, while a seller in the medium price bracket buys a high-end property, and so on.
Sales in the lower price brackets can help you achieve goals such as building a large property management business, while average sale prices keep you in a safe market regardless of economic conditions.
To build your profile in a new market, the key is to network with and put your name in the mind of as many people as possible. Network with the local business owners.
Ask yourself if you manage any rentals in the area? Do any landlords live locally? Have you sold for or to anyone in the area? One great listing will lead to another and then another.
The secret is to focus on one listing at a time and make sure every aspect of that campaign is a success. The more successful campaigns you run, the more social proof of your expertise you will gather. This will give you more tactical evidence to pitch for and gain the next listing.
The pitfalls to beware of when expanding are moving before you’re ready. Make sure you maintain your market share in your primary area before chasing secondary regions. It’s also important to work in markets that complement each other.