All Forum Posts by: Marcus Auerbach

Hi Eric, running comps is a bit of an art and a science. A good agent is your best bet, they run comps on the Metro MLS on a daily basis in all parts of town and for all kinds of properties. The more you do it, the better you get. Make sure you pick an full time agent who has is doing a good number of transactions every year, at least 30-50 deals. The good old 80/20 principle applies also with agents. You want someone with more experience than yourself.

If you want to do it yourself, you can use public data. Zillow has a comp tool and I will argue with every one who says Zillow is worthless. While a lot of the listing info is not very good, their sold data is actually quite solid. And with practice you will learn to spot data glitches. If your subject property is a standard SFR on a street with similar homes you should be able to pin down FMV pretty well. If your subject property is an odd ball, maybe with some land and outbuildings and you don't have good comps close by you need the help of an experienced agent or a professional appraiser.

Thanks for your thoughts on this @Jeffrey Holst. It seem like a given to me that mid and lower price homes will go up in value. My visits in San Francisco and Washington DC last year have definitley opened my eyes to what expensive real estate can look like, even smaller homes that are far from luxurious. How people with blue collar jobs can afford to live there remains a mystery to me. I don't think the midwest will ever get anywhere close to these prices, but puts prices in a different perspective.

I would like to hear someone challenge my thoughts here, what am I not seeing? I can't see cost of construction come down again, even in an economic slow down. And cost of land will not come down either. And demand is not going away. We have not built any substancial quantity of houses in the last 10 years after 2008; more specifically we have not built any amount of starter homes in Milwaukee since the 60s. The Millennials have started buying and they want something that is both nice and small; and priced accordingly. They are not going to buy a $450k single family in the suburbs. The only conclusion I have is that we are going to see more condos. And what will that do to the existing SF housing stock?

I have been looking at interest rate hikes in the past and the last four of them did not lead to a loss in property values. Surprisingly people kept buying and just put up with the higher rates.

@Scott Harper I agree, Q4 is my favorite time to buy, because you are not competing as much with first time homebuyers who have a handy family!

Reading Ray Dalio's book makes me contemplate some more about where real estate is heading. Looking back at the last 15 years everything seems so predictable. New housing starts grew year over year and well exceeded long term averages. Loans became famously available to anyone who could for a mirror. People with no prior interest (or experience) in real estate started flipping brand new homes that were never occupied before. The hogs had gotten too fat, time for a slaughter. In hindsight it's easy too see.

I don't see any unhealthy development, at least not yet. For the last four years we had a stable economy, unemplyment keeps getting lower, continued low interest rates (anything below 8% is low) and a social trend towards renting (although millenials have started buying as of late). And most importantly a huge supply gap. 

Market inventory is well below a healthy supply of 6 months, generally as low as in the early 2000's, in many cases at an all time low. Locally speaking, in the Milwaukee suburbs we have about 2 months worth of inventory in the lower priced segements, which translates to almost nothing avaialble. Construction starts have gone up steadily the last years, we are back in the 1.2 million range, with even more permits pulled as a leading indicator for further gains. However, still well below the growth rates of over 2 million in the years leading up to the crash. Shortage of land and labor have been holding the industry back. 

Cost of construction has gone up so much, about 40% (depending on who you believe) in the last 15 years. Consequently new inventory is almost exclusive in the higher price ranges. What tightens up the market even further is that more rental grade SFR's than ever are being held by private investors and they are not thinking about selling. In other words, there is no new supply in these lower price segements and demand keeps pushing up prices.

The current trajectory will not last forever; the question is what will initiate a turn and how will that look like? At the moment (short of a national/global black swan type event) I see more of the same in the next years, just even more accelerated. Does anyone have some insights on what the long term trends might look like?

Hi @Mike Lauer, appreciate the reference! It is a real pleasure working with you - and by the way congratulations again on the next accepted offer earlier today! 

Who says there are no deals on MLS??

@CJ Berina - that's a big question! It depends on what you want - you can find a good area for almost any investment strategy in Milwaukee. You can go from luxury rentals to strong appreciation plays to focus on cash flow and ROI with little capital. All of the above can be successful. I live in the suburbs and that's what I prefer for me personally. Proximity is a big factor for me, because I self manage and don't want to drive an hour across town just for a showing.

I agree about REIS as a great PM company, time to tag @Matt Maurice. He is a great guy and has a business model that is based on win-win.

I would like to hear some feedback from fellow Keller Williams agents in the commercial division. I am contemplating a commercial career and if I stay with KW I would be the first commercial broker in Milwaukee. Which seems to be both, an opportunity and a bad idea at the same time. I am not afraid of virgin territory and thankfully I don't depend on earned income for a living. KWC is obviously a lot smaller than the residential side, what is your experience? How do you find yourself competing in the market place? Has anyone been working for one of the large players and switched to KWC? Is the commercial training as well developed as the residential side? Appreciate any thought and guidance you might have for me.

@CJ Berina yes sure, what area? PM me.

Julia, your impression impression about rent to price ratios is correct. Of course there is a reason homes are cheap in those areas and are two things you should be aware of.  First, you will be dealing with elevated crime levels, but you are north of the worst parts. Be sure to check out Trulia crime maps. Some pockets are much better than others. And second, be sure to not only assess repairs immediatley necessary, but also look at your capex items for the next years (5, 10,.. depending on how long you want to hold the property). Major replacements can quickly eat up your cash flow. Good luck!