Definition of "What is SWOT Analysis?"

Joel Sheesley real estate agent

Written by

Joel Sheesleyelite badge icon

Coldwell Banker Sea Coast Advantage

Developed by a successful management consultant in the ‘60s named Albert S. Humphery, the SWOT analysis is still in use today at management level. It starts with a goal in mind, a measurable objective, and then a piece of paper is divided into 4 squares - strengths, weaknesses, opportunities, and threats. It answers one particular question: do you have what it takes to achieve your business goals? A SWOT analysis should not be confused with a business plan - it is only a small part of a business plan which creates a strategy for the business.

In real estate, a swot analysis can help, on the one hand, real estate brokers and agents, and on the other hand, investors or developers.

For Realtors® who want to increase their sales, for example, learning how to do a SWOT analysis will help them understand what is the path to follow in order to have more happy clients and more money in the bank account.

Strengths will reveal what the real estate broker excels at and what makes him better than the competition. Weaknesses are areas that need to be addressed soon in order to overcome the competition.

Strengths and weaknesses refer to the business itself, are interior aspects that can be controlled.

Opportunities and threats are external forces, usually hard to control, that could make a business plan to succeed or fail if not recognized and addressed in a timely manner.

Among the strengths, a real estate broker may list:

  • Fluency in Spanish or Chinese
  • Years of experience
  • Familiarity with the neighborhood
  • Good reputation

What weaknesses may a Realtor® have?

  • Computer illiterate
  • High levels of debt
  • No marketing team
  • Being a rookie

Threats for a broker:

  • High interest rates
  • Unemployment in the city
  • Cash flow problems

What opportunities are there for Realtors®?

  • Gentrification of the neighborhood
  • Invitation to write for a local newspaper
  • A large employer to open a new facility in town

For real estate investors, a SWOT analysis may be performed when evaluating a new investment. Investors will find the missing pieces of their strategic puzzle.

A good capitalization and a loyal customer base are important strengths - a foundation to build on. However, wealth generation means teamwork for both real estate brokers and real estate investors. Without a good team of attorneys and of experts in accounting, marketing, and rental management, you should be more reserved. When it comes to opportunities, investors must look at consumer’s unmet needs/demands and use those to come up with new product ideas. But new opportunities could come through mergers and acquisition as well.

External threats could be regulatory (higher taxes, legislation), environmental (air pollution, water pollution, radioactive pollution), social (urbanization, globalization), and operational (liquidity risk, credit risk). Risk management in real estate must be taken seriously, whether it’s only a small residential building or a commercial property.

SWOT analysis is a tool that must be used as often as needed, so take the time and be honest. Then you will have a clear understanding of your business, and you will know where it stands and where it should be headed.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Questions

Popular Real Estate Glossary Terms

An individual or business that buys someone else's equity in property but may not assume any responsibility for a loan balance. ...

In any field, from the corner store or long-term rentals, the potential gross income is the expected revenue earned from a sale or the rendering of services. The potential gross income ...

The maximum depth to which the ground normally becomes frozen in a given geographic area. The depth of the frost line is an important consideration when placing or installing pipes or any ...

Lease agreement having level payments during the contractual period. It does not have an escalation clause to allow for increased costs due to increases in inflation, taxes, or other ...

In real estate terms, many consider having corner influence an extra financial advantage when it comes to transactions in most cases. Usually, enjoying a corner influence brings an ...

Created by law usually for the right to travel to landlocked parcel of land ...

Analysis of the risks and rewards to an individual in making a particular property investment. Investment analysis considers the cost of the original investment, the investment return over ...

A legally transferable debt instrument by which the issuer agrees to pay the payee within a certain time period. Note usually pay a specified rate of interest tied to the market rate of ...

Unincorporated combination (roll-up) of limited partnerships in a real estate together as a group. It is usually more comprehensive, financially sound, and marketable than individual ...