Help building a team

[Josh Scroggins]

I'm looking to invest out of state, but will be waiting 3-6 months to build up a little more cash reserves.  Right now, I'm looking at Columbus, Milwaukee, and Boston...but am heavily leaning towards Milwaukee because of two things...first, there are tons of duplexes there and the cashflow is great (even after figuring a higher than normal maintaince)...like $300-$350 per unit.

The other main reason I'm leaning towards Milwaukee is that I already have two great guys there to build a team with.  One is a lender and the other is a real estate agent.  Both are investors themselves and have lived there all their lives.  They have both been incredible so far and I like the idea of working with them.

My question on here is, what roles are the most important to your team and what order is it best to aquire those people?  I'm planning to interview property managers in Milwaukee this week to get a better idea of vacancy rates, maintenance costs, etc.  I'm hoping that those managers will either have their own contractors or be able to refer one.  What else do I need?

Also, when do I need a CPA and do I need to get one there or can I use one where I live?

[Marcus Auerbach]

For some context: I have been investing in Milwaukee for almost 15 years and if properties like this would work, I would buy as many as I could get. We are way behind our acquisition goals for the year, but I hope we can get caught up in fall before we head into the winter market. 

3005 W Stain Paul has been on the market since July with no offers. We have currently an average of 6 days on market here, so that tells you something. No interior prictures and the tenants pay currently $650 and $825, so you are looking at a huge increase in rent. There is a good chance they will not leave volunteringly. Based on the neglect you can see on the outside, it is safe to assume both units will need extensive rehab: kitchens, bathrooms, flooring, probably doors, definitly paint. If you don't know anything 25k per unit is a fair assumption if you are local and can supervise contractors, if you want the PM to rehab, budget accordingly. The building is from 1885, which is very old, even for Milwaukee. The basement is probably fieldstone and timbers, questionable footings. When you look at the sales history, it changed hands quite a bit - properties that perform well don't do that. Based on the purchase prices I doubt that any of these owners invested in a new roof, new furnaces, new plumbing, new electrical etc unless it became absolutley necessary. Looks like the siding was done at some point, so that's one thing you don't have to budget for. No garage and a busted up slab in the back. 

We have seen steady appreciation over the last 8 years in Milwaukee, currently 8.9% August YoY. It adds up, Milwaukee is not cheap anymore. A quality investment grade duplex in Milwaukee starts at 250k-300k. Anything lower is in questionable condition or a challanged neighborhood, typically both, because owners don't see the point of investing a lot of money in a property like this. They try to milk it until it get's so bad the DNS (department of neighborhood services) get's on their case and then try to sell it. OOS investors are removed, I have seen it more than once that someone called me for a rescue project and after I have seen the property I tell them they have to fly in, they see (and smell) the property for the first time in person and are in absolute shock. When I ask why they bought it, I always get the same answer: the cashflow looked great on paper.

My team works quite a bit with investors, most of us ARE investors. Locals get it, but for OOS we ask them to book a flight and spend a weekend in MKE, so we can get on the same page as far as neighborhoods and condition to prevent situations like I just described.