How to Calculate the ROI of Your Geographic Farm

Consider the following to evaluate the Return on Investment (ROI) for a farm. You have selected a farm of 600 houses. The farm turnover rate is 9%. The average sales price of a house in your farm is $250,000. You have also determined that there is not an agent currently sending anything consistently to your farm.
Statically 54 houses should sell within the next 12 months within your farm (600 houses x 9% turnover = 54 houses will sell).

Next apply something we call the principles of half. If 54 houses will sell in the next 12 months, half of them will have a brother, cousin, uncle, or friend that is a Realtor and they will list with them and there is nothing you can do or say to prevent this from happening. This leaves 27 houses.

Of the 27 remaining houses, half of them will remember to call you; this will give you 13 listing appointments.

Of the 13 listing appointments, you will list half of those houses. This will generate 6 sales during the next 12 months. You determine it will cost you about $400/month to print, label, and pay for postage on the 600 pieces per month. Your total cost per year will be $4800 to send them 1 piece per month.

You will generate 6 sales during that time from your farm. The gross commission on these 6 sales will be $45,000 ($250,000 x 3% x 6 transactions). So for every 1 dollar you invest in your farm it will return 9 dollars. Not too shabby.

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