Why Buy at Auction

Each and every buyer strives to get the absolute best value for their dollar. Buyers that have purchased at auction will typically testify that they believe this is the best method of getting that value.

The benefits to the Buyer of the "auction" sales method include:
-Buyer knows the seller is committed to selling the property.
-Buyer has had ample time in a non-pressured environment to examine and inspect the property using whatever professional resources they see fit.
-The buyer will know the true market value of the property based on the competitive bidding he or she has engaged in.
-The long negotiation process of "offer/counter offer" is eliminated.
-Purchase terms and conditions other than price are known in advance.
-Buyers know they are competing fairly and openly with other potential buyers.
-The buyer is in control.

Buying at auction is truly an exhilarating experience. It is a fully charged and very competitive environment that is a lot of fun to be a part of. While it is true that everyone wants a good value when they purchase, the purchase process itself should also be a fun, rewarding and enjoyable process. Buying at auction pulls all of these objectives together.


Why Sell at Auction

Today's real estate market is extremely cluttered. Due to market conditions, property inventories are extremely high at all price points. Thus, it is becoming harder and harder for a seller to garner attention for a property utilizing the traditional "listing" method for real estate sales.

The "accelerated" marketing, or "auction" method, allows the seller to rise above the clutter and grab the attention of the potential buyers. Once the buyer is aware of the property and knows the property will be sold, a genuine sense of urgency has been developed with the buyer. This sense of urgency typically creates a very competitive bidding environment either at the auction event or in the weeks leading up to the event.

Other benefits to sellers of the "auction" sales method include:
-Buyers come prepared to buy.
-Offers have fewer contingencies making for a smoother transaction.
-Quick disposal reduces long term carrying costs, including taxes, maintenance costs and utilities.
-The sales process is very transparent; thus the seller can really see the true market value for the property.
-The seller has an opportunity to sell, or at worst case, a point in which to begin a negotiation.
-By selling quicker, the seller can become a buyer with a "non-contingent" status, allowing him to become a buyer that has more leverage in the purchase of another property.
-The seller can determine the timing of the sale.

Sellers throughout the country are rapidly realizing that selling at auction is a legitimate alternative to the traditional "listing" method. If you think your property is a candidate for our accelerated marketing process, or if you want to discuss our approach in greater detail call now.

The Decreasing Core and Increasing Whole: Green Bay population Trends.

The population of Green Bay was estimated by the Census Bureau to be 100,353 residents on July 1, 2006. Surprisingly, to many that estimate showed a decrease of an average 0.3 percent per year since the 2000 Census.

According to the 2000 Census, Green Bay's population was 102,313 residents. That was an increase by 6.1 percent from the 96,466 residents in the 1990 Census. During the previous decade, the city's population increased by 9.7 percent from 87,899 residents in 1980.

So what does this change mean? One can clearly recognize that the metro area of Green Bay decreasing, but what about the county in general? Are places like Ashwaubenon, De Pere, Howard, and Bellevue growing or shrinking? The census data shows that although Green Bay shrank during this time in terms of population, Brown County as a whole experienced a healthy growth rate of 7.3% from 2000 to 2007.

The beginning population of Brown County in 2000 was 226,658 while the 2007 population rose to 243,132. This gain illustrates that Brown County added 16,474 new residents over the 7 year period.

The phenomenon of inner city decreasing population with increased metropolitan population is an illustration of changing demographics, demands, and commuting as a way of life. It will be interesting over the next few years to see if there is a resurgence of inner city demand in property due to escalating gas prices and a shift towards a higher acceptance of diversity and urban culture in the Green Bay area. If you have any thoughts about future shifts please share.

The sky isn't falling in Green Bay

When determining the best strategy for purchasing or selling a home or investment property, buyers and sellers today are barraged with a high level of negative sentiment from the media and ill-informed sources that could convince you that the sky is falling and the end of the world is near. However, like any argument one must back their thoughts with fact to understand the true underlying scenario that is playing out. This becomes a lot like work as each market and form of investment are experiencing different conditions every day.

Green Bay is a prime example of how the national viewpoint has affected a market that is not nearly as bad as one would think. Lets take number of sales and purchase price from 2006 to 2007 as an example. Many people would believe that there are many "steals" in the market and that sellers will take anything since the market is so incredibly bad, but the numbers show otherwise. In fact, they show that business between these two years have gone relatively unaffected. According to the business news online the following statistics are true of Brown County between these two years:

Sales Volume 2006-2007

2007 Total Sales: 2,716
2006 Total Sales: 2,809
Total Decrease: 93
Sales Price 2006-2007

2007 Median Sales Price: $149,750
2006 Median Sales Price: $150,425
Decrease: -$675
These statistics are eye opening in that they illustrate a slight change, but not nearly enough to panic and run to the bomb shelter.

The point is, that before making snap judgements about market conditions view the actual numbers and check facts before making an irrational decision.

How to calculate Cap Rates

When dealing with investment property one will hear the term cap rate often. Cap is an abbreviated version of capitalization, which is a way of determining the rate of return on an investment property. In order to calculate the cap rate one must know the price of the property and the net operating income which creates the following equation:

(to better understand how net operating income is calculated refer to this article: http://greenbayproperty.blogspot.com/2008/05/what-is-real-net-operating-income.html ) ,

Cap rate = NOI / Price of Property or NOI / Cap Rate = Price of Property

To use a simple example lets say an apartment complex sells for $100,000 (cheap I know, this is an example). The NOI on the property is $15,000. If we plug those two numbers into the equation:

15,000 / 100,000 = 15% cap rate

But how do we know if this is a good rate of return? The best way to judge how good the cap rate is, is by reviewing comparable sales' cap rates. If the similar properties have a lower cap rate then the 15% is a higher than average rate and could be considered a deal. Cap rates are also directly affected by interest rates and correllate when they go up or down. Similarly each type of property and each market has cap rates that differ from different property types and markets. It is best to do substantial research into what type of property you're looking to invest and what typical financials are for those that are sold in that particular market and price point.

Cap rates are just one of many ways to analyze a property, but they are a fundamental form of investment analysis and should be done on any investment property to determine if it's worth the asking price.

Northeast Wisconsin Multi-Family unit sales March 2006-2008

Below are multi-family unit sales in Northeast Wisconsin. One can see a substantial decline from 2006 through 2008. Unit sales in March of 2006 (63) were nearly double those of March of 2007 (32).

2006 % of change 2007 % of change 2008 % of change
37 -21.3% 31 -16.2% 30 -3.2%
43 7.5% 39 -9.3% 20 -48.7%
63 -11.3% 47 -25.4% 32 -31.9%
43 -38.6% 52 20.9%
45 -44.4% 43 -4.4%
52 -5.5% 39 -25.0%
51 -15.0% 30 -41.2%
71 2.9% 38 -46.5%
58 -10.8% 25 -56.9%
52 -20.0% 32 -38.5%
36 -34.5% 41 13.9%
41 -39.7% 47 14.6%
592 -20.6% 464 -21.6% 82 -29.9%

What is the Real Net Operating Income?

Understanding the financials is essential when analyzing investment property. Therefore, knowing the terminology and how it reflects any property you own or plan to own is relevant to your real estate success. One of the most commonly used terms is net operating income which directly influences the value of an investment property.

Net operating income is the gross income less the operating expenses.

The following items are often referred to as operating expenses.

-Real Estate Taxes
-Property Insurance
-Repairs and Maintenance
-Interior/Exterior Decorating

The operating expenses determine how much is taken away from the gross income and what is left in your bottom line (which of course is taxed). Therefore, if two properties have the same gross income of say $100,000 a year and one has operating expenses of $20,000, while the other has operating expenses of $40,000, your net operating income will vary from $80,000 for the first property to $60,000 for the second! That's quite a chunk of change.

When looking at any investment property looking at operating expenses is just as important as looking at income streams. However, it's just less flashy and attractive than dealing with cash flow. Smart investors will find properties that have strong gross income, and have room for expense cutting. For example, if you can eliminate the standard 5% management company fees, you've saved yourself $5,000 a year if you used the same numbers as the example above. Therefore, if you can find ways to reduce the operating expenses of a property you could find a diamond in the rough.

Keep in mind that gross income (all cash inflows) is limited in terms of investment analysis. Net operating income is the most important number on the balance sheet and will affect how much you keep in your pocket and the value of the property.