Real estate niche analysis

real estate niche

If you’re a new agent or investor, focusing on a single real estate niche will help jump start your business. Or maybe you’ve been in the business for a while but feel like your real estate business plan needs a reboot.

Concentrating your efforts on a single real estate niche will help separate the good clients from the bad ones, and help choose the real estate investments that are right for you.

A real estate niche can be an asset class

One way of thinking about real estate niches is to look at the different types of real estate available. Real estate asset classes can be divided into four categories:

  • Residential
  • Commercial
  • Land
  • Special use

There are a lot of different types of real estate that go into each of these four asset classes. To fine-tune your real estate business plan and avoid real estate burnout, you’ll want to break down these big real estate niche asset classes into something smaller.

Small real estate niches make up bigger asset classes

The next steps is to break down the four big asset classes above into sub-classes or smaller real estate niches. Let’s use the commercial real estate asset class avoid as an example.

Some of the types of real estate and activities that fall into the commercial category are:

  • Retail
  • Office
  • Warehouse
  • Industrial
  • Single tenant or NNN
  • Apartment buildings
  • Leasing
  • Buying
  • Selling
  • Property management

You can probably think of more, but you get the idea. Now, let’s take the office real estate niche and break it down a little more.

Office real estate niches

The office real estate niche can be divided up a number of different ways:

  • Size of property – single or two levels, midsize, or high rise office building
  • By class of property – typical office building classes are A+, A, B, and C
  • By how the office building is used – medical, professional services, consumer-related services (such as banking, collections agencies, or telemarketing), and general office use
  • Location of property – central business district, suburban office markets, or mixed-use office/residential

Choosing the real estate niche that’s right for you

The types of tenants and the types of owners for each of these office niches are different.

For example, a Class A office building in a central business district will likely be owned by an institutional investor. The types of tenants in this type of building will be white collar and professional service businesses.

The demands and expectations of these property owners and tenants will be much different from the mom-and-pop bookkeeping firm renting space in a smaller office building in the suburbs.

Successfully choosing the real estate niche that’s right for you means understanding your own preferences, strengths, and weaknesses and selecting the best match that will lead to your real estate success.

Five Real Estate Rental Property Expenses Not To Forget

real estate rental property expenses

Here’s a list of five real estate rental property expenses not to forget about when calculating your ROI. They apply to whatever real estate niche you’re working in.

As a good real estate accountant or bookkeeper will say, ‘Report all of your income and expense as much as you can’.

Tenant Credit Reports

Checking the credit and background of prospective tenants is a must-do and one of the most important tips for a real estate landlord or property manager.

While the cost of running an individual report is small, the annual real estate expense for credit reports can really add up.  Especially if you have a large multi family property or several single family rental homes.

Leasing Fees

Surprisingly, many beginning real estate investors overlook expensing out the finder’s fee paid for leasing the rental property.

One reason this happens is that the leasing agent will collect the upfront monies from the tenant – such as the first month’s rent and security deposit – then remit to the owner this money less the leasing fee paid out of those upfront monies.

The landlord mistakenly only accounts for the money he or she actually receives instead of the gross income from the tenant.

Back Office Property Management Time

The time spent on little tasks like answering incoming phone calls, balancing the bank statement, and endorsing rental checks can really add up over the course of a year.

One way to account for this time spent managing your real estate investment is to use a stop watch or timer on your computer.  Then, log the minutes on a spreadsheet along with the date and a brief description of the task.

Onsite Property Management

Just as with the back office time, onsite property management time can add up as well.  It’s also one of the most overlooked real estate rental property expenses.

This category includes tasks such as driving by or walking the property, meeting a vendor onsite, and checking out the competition.

Market Research

Speaking of the competition, don’t forget to expense the time spent researching your market.

This can include things such as dues and subscriptions, property drive-bys, shopping the competition, and online research.

Common Real Estate Rental Property Expenses

Some of the most common expenses with a real estate investment property include:

Real Estate Time Management Tips

real estate time management tips

Here are two real estate time management tips to help take running your real estate business to the next level.

Emails Take A Lot Of Time

There are certain tasks in any business that are affectionately called ‘time sucks‘.

Time sucks are things that, well, take up a lot of time without giving you anything in return.  Like more income, for example.

Email can be a huge time suck in any business, but especially in real estate.  That’s because real estate agents only get paid when a deal is done . . . and not by the hour or on a salary.

Even for correspondence that is time sensitive, checking, sending & receiving emails should be limited to two or three times each day.  Many people schedule their email times for first thing in the morning.  Then again around lunchtime, and toward the end of the day.

Have A Routine & Stick To It

Another good real estate time management tip is to have a routine and stick to it.

Devote a certain amount of time each day – at the same time each day – to tasks such as real estate marketing & prospecting, or client outreach, and administrative work.

Remember, having a successful real estate business isn’t about how many hours you work each day.

It’s about how smart you work!

How To Make Your Real Estate Business Plan Better

real estate business plan

Having a real estate business plan – or a property management business plan  is crucial if you want to succeed in the business of real estate.

That’s because real estate is about much more than just buying & selling, leasing & managing.

Here are the top two ways to make your real estate business plan better.

Rainmakers Should Make Rain Not Train

Some real estate brokers are rainmakers.  They’re the ones who bring in the majority of the business and are great in dealing with clients.

If that’s the case, bring in a partner or key employee to recruit, train and manage the newly-hired real estate agents.

New agents will be attracted by the broker-rainmaker’s outstanding success stories.  But new real estate agents usually lack experience, skill or motivation.

They won’t be able to perform  and produce without having a lot of hands-on guidance – at least to begin with.  The broker-rainmaker won’t be able to give new agents the attention they deserve because they’re out there making rain and bringing in new business.

A Great Real Estate Business Plan Is Niche Specific

Focusing on a specific asset class for your real estate business is much easier than trying to be all things to all people.

A real estate asset class isn’t just commercial or residential real estate.  A asset class is a specific category – or niche – within those sectors.

If you have a residential real estate brokerage, concentrating on specific zip codes or neighborhoods is one example of a niche.  Another is focusing on a certain product type such as small multifamily or fix-n-flips.

Commercial real estate brokers could identify high-tech industrial property, medical office buildings, or STEM tenants as their niche.  Or they could concentrate on finding replacement property for 1031 tax deferred exchanges.