Conquer The Real Estate Industry One Niche At A Time
By JD Esajian on July 21, 2014
There are dozens of ways to make money in real estate. When you are just starting out, it can be very tempting to try to tackle every deal you see. A few weeks here and a few weeks there looking at new deals and soon enough you have been chasing your tail for months. Without a defined plan or a niche to fall back on, this will be your business and the cycle you will follow. You may keep yourself busy from one deal to the next, but you won’t be closing anything and you won’t be making money. Instead of going after every attractive situation that comes your way, focus your attention on one niche and you will see your productivity skyrocket.
Every successful athlete has a fall back plan when things aren’t going their way. A pitcher can throw the fastball if they are having trouble throwing strikes. A basketball player can try to get to the foul line to get themselves going. This may not have been how they envisioned things going, but they have the ability to adjust on the fly and go back to their bread and butter. As an investor, you should share the same mentality. Instead of spreading yourself thin and spending time and resources on deals that are out of your comfort zone, you need to find one area that you can always revert back to. Between new construction, raw land, wholesaling, flips and buy-and-hold rentals, there are many niches that you can make your own. Find one that aligns with your goals and resources. More importantly, make it your area of concentration.
Your niche will be largely based on your network, your goals and your resources. If the realtors you work with have access to foreclosed properties, you may want to look at flips and rehabs. If your investing area has an abundance of below market single-family rentals, focus your attention there. Your niche can truly be anything that you enjoy and see value in. By concentrating on just one area of the business, it will allow you to be more educated and in turn seek better situations. It will also help get you started on actually closing deals instead of researching and window shopping. Even though you may start with your niche and become successful in it, you will also gain the confidence to expand into other areas of the business as well.
It is not uncommon for new investors to get frustrated with the abundance of exit strategies made available to them. Every deal you hear about at investment clubs may seem like something you want to be a part of. The same goes with networking meetings and things you may read online. As a new investor, the business can seem like a blank canvas. However, that canvas is often large and sprawling. When you do decide your niche, it is important that you stick with it for several months and ignore other opportunities that come your way. If you spend a month or so looking at condos and out of the blue a fellow investor calls you about a tax lien auction, all you are doing is spinning your wheels and going right back to square one. Even at the risk of losing deals, it is important that you stay focused on the area you are pursing. It may take a few months to close that first deal, but once you do the floodgates will be open.
If you get good enough at your niche investing strategy, you could potentially become the go-to source in your area. If you start closing beat up single-family homes with a purchase price of $50,000 and under, local realtors will see that and think of you. You can document your actions on your website or through social media and you may catch the eye of a bigger investor who may want to partner up with you in the future. You can create a brand for yourself just by closing on your specific niche properties. This is a valuable tool that, alone, can help your business take off. If you can be the “condo king” or known at tax auctions as someone not to bid against, you will find more deals that seemingly fall on your lap. Niche, coupled with brand, is something that you can use to separate you from every other investor in your area.
As much as you want to give your niche a fair shake, there is nothing wrong with switching things up to find something that works for you. This doesn’t mean hopping from niche to niche every few weeks, but after you have spent a few months and possibly worked on a few deals you can tell what is right for you and move on. This is different and far better than working on multiple different types of deals when you are just starting out. By giving yourself a real chance on a particular niche, you can see if its right for you or what parts of those deals and properties appealed to you. There is plenty of trial and error at the outset of your investing career. Instead of being all over the place, start with a niche. If you don’t care for it, move on to the next one. But always have a dedicated niche in mind.
Working on a niche will change the way you see and execute the business. If you try to become an expert on six different school subjects at once, you will probably not really know any of them. The same analogy can be used with your real estate education. By choosing just one niche at a time, you will be more focused and productive.