Silver Spring - Milwaukee

[Alex Landau]

Hi everyone, I was wondering if Silver Spring in Milwaukee is a good area to own rental property. Will it rent quick? Any insight appreciated. Thank you

[Jason Bott]

@Alex Landau depends on where on Silver Spring.  Silver Spring starts @ Lake Michigan and runs West the entire length of the city. 

Anything East of I-43 is a very desierable part of town,

[Alex Landau]

@Jason Bott it's west of Havenwoods forest and east of the 181 highway. 

[Marcus Auerbach]

@Alex Landau not the finest area, elevated crime levels. It will rent, it will cash flow, but it will come with a set of specific headaches. Usually properties in that area come with a substantial amount of deferred maintenance, that tends to eat up you cash flow after a few years. Make sure your major capex items have a good amount of service life left. How did you pick it?

[Rebecca Knox]

If it's the Silver Spring NEIGHBORHOOD you are referring to, that is a very popular area for investors/rentals. 

Silver Spring Dr as a whole is pretty decent street in my opinion.  Many landlord investors in this area. 

[Mike Lowery]

I agree with Rebecca Holmes I own a single family just to the south east of the neighborhood you’re referring to and don’t see many issues. Again, it’s all personal preference and how risk averse you are. If you want something warm and cozy, bank and appreciation, higher cost of acquisition, etc. then there are a lot of people who like those areas. For the most part, that will be hard to find inside the city limits. Will you have properties in need of maintenance and capital expenditures, sure? If you do your due diligence, factor in those costs up front, do a conservative analysis and properly screen your tenants, it shouldn’t be an issue.

[Rebecca Knox]

There's always a lot of conversations on BP on where to invest in Milwaukee and building a team.  In my opinion, find good property managers, many are actual investors too. Their business is to know demographics as it pertains to rentals. They are also realtors and a source for contractors and more deals as they have clients switching out portfolios. I see many people start out in more challenging areas to build cash and then move in to the better areas where Marcus invests.

[William S.]

@Rebecca Knox

"I see many people start out in more challenging areas to build cash and then move in to the better areas where Marcus invests."

Do people sell their rentals in less desirable areas? If so, to who? If not, how long do investors last in C-class areas? How can the low rents / crime sustain major repairs? Maybe there's someone on BP who has held this class of investment for 10+ years that can chime in.

[Rebecca Knox]

Yes, people buy and sell rentals in less desirable areas all day long.  There are probably more off market deals that sell in 53206 than any other zip code of Milwaukee.  They are paying A LOT less for those properties though and in my opinion investing in these areas is more of an active income play to be able to move in to truly passive which would be where Marcus invests.  

Here is a deal that we are closing on in 53218 at the end of the month and we are getting financing, Trulia Green, off N 76th & Hampton, 4-bd, attached 2-car garage, purchase price $42k, seller pays closing, roof, furnace & WH less than 3 yrs old, the AS IS value just formally appraised at $81k. Property needs $9k in work-formal contractor bids completed. Previously rented at $1200/mo to tenant that was there for a year--the only reason they moved was owner wanted to sell and thought it would be better. 

[William S.]

@Rebecca Knox

What do you mean by "active income?" Does that only apply to those who do not use a PM?

[Rebecca Knox]

Active income is like a W-2 job. 

Even if you have a PM, there is still a lot more communication and time required when when investing in challenged areas. 

[Alex Landau]

Thanks for all the great insights. 

Im also looking at Indianapolis and noticing that as an investor you get a little more for your buck down there (vs Milwaukee). Looking at the Rent/Home value ratio. 

Are prices overall higher in Milwaukee than Indianapolis? 

[Mike Lowery]

William S. I believe I’ve reached out to you to chat about your goals. I think you are a little off-base with a lot of your analysis of the Milwaukee neighborhoods. I get it, it’s not Tosa, but as Rebecca eluded to people are buying and selling all day long. I’ve also seen you account for appreciation in your assessment of valuable assets to acquire for investment. Personally I look at it like this. I’ve got a 6 and a 1 year old. If I can buy a property for $80K that returns over 10% annually on cash invested then I don’t care if in 12 years when my kid goes to college if I sell the house for $80K. At the end of the day, it’ll be paid off and that’s $80K in cash that I’ll have for my kids. That’s not including the $200 or some odd dollars I’ve made monthly, the tax savings to off-set my w-2 income. The cash flow is including accounting for vacancy, cap ex, maintenance, property management, etc. Given my employment as a firefighter I also feel that I can handle situations better than others and feel like I’ve seen the worst of the worst. At the end of the day it all comes down to personal preference but I do think there are many areas of Milwaukee that would sustain your goals and help you grow your portfolio.

[Dawn Anastasi]

Originally posted by @William S.:

@Rebecca Knox

"I see many people start out in more challenging areas to build cash and then move in to the better areas where Marcus invests."

Do people sell their rentals in less desirable areas? If so, to who? If not, how long do investors last in C-class areas? How can the low rents / crime sustain major repairs? Maybe there's someone on BP who has held this class of investment for 10+ years that can chime in.

 I'm not at the 10-year mark, but I've been investing in 53223 and 53218 since June 2011.  The key for me is getting longer-term tenants.

[Rebecca Knox]

My point...Dawn is legit...she also was a PM...and she is investing in 53218. 

After seeing hundreds of transactions over the past 4 years and interacting with a variety of investors in our local market, why reinvent the wheel? The majority are investing in the same zip codes along with the top PM investors here. Following success is the easiest way to get there yourself.  Successful investors aren't going to keep buying in the same zip codes if they are not doing well in them, plus it's nice to be in areas where you know that investors are taking pride in their rentals.  I wish we could all band together with our buys and just take over blocks, cleaning them up :)

[Marcus Auerbach]

I think thats a great idea @Rebecca Knox! If I look at different neighborhoods in Milwaukee the difference is not in the houses or streets, they often look the same, it's the people that make the neighborhood what it is. Any effort to clean up a block will benefit everyone. 

My sister in law did that, quite literally in Washington DC. She bought a home in a not so great area close to H Street for only 300k I believe 5 or 6 years ago and would start to pick trash every weekend on her street, clean up the jungle in the front yard. At first people told her she is crazy and it's dangerous (probably was), but neighbor started to talk to her and then follow her lead. Once the street was clean of trash, people stopped throwing their trash away as they walked, neighbors started to clean up their yards. People started to take a little bit of pride. I was out there in December and I could not believe the transformation. Also, her home appraised for over 600k last year. A lot of it is the market, but I am sure the curb appeal helped too.

[Mike Lowery]

@Rebecca Knox I hope as well that investors will start to think bigger picture and realize that we can change the way people think about city of Milwaukee, the housing it provides and the people that reside here. I would definitely be willing to pool my resources with others to target specific neighborhoods, investing time and money there to help them flourish. I feel like its an honest investors duty. We are not slum lords, we are people looking to make a little money and change the landscape. 

[Rebecca Knox]

That's a great story Marcus. Dona Myers from Summit united a bunch of investors to do that in a neighborhood of Dallas.  We should have a meetup and see if she will give us the logistics of how she set that up.  It seems like a win-win for everyone, the values go up, you change a neighborhood and improve quality of life and you're on the same block as your friends and can watch out for each other more.  

I agree Mike, there are some bad seeds just like any other industry, but the majority of the investors I meet in our market really have a genuine love for Wisconsin and find joy in improving the community. 

I think we all just hi-jacked this post but I don't know about the Indianapolis market at all to be able to compare. 

[Marcus Auerbach]

Haha, agree: post got hijacked; I also have no clue about Indianapolis, sorry @Alex Landau

I wholeheartedly agree with @Mike Lowery, we do have a social responsibility and it's not only what we owe to society, but it also in our own best interest!

[John Reynolds]

@Mike Lowery, I’d be interested in doing something like this. From years as a contractor and parent, I’ve at least gotten pretty good at cleaning up after people.

@Rebecca Holmes, please let me know if this meeting is scheduled. Thanks for all that you do.

[Rebecca Knox]

@John Reynolds sure thing

[Rebecca Knox]

Good Morning everyone. Dona Myers, owner of Summit LDS Title, has agreed to speak at the April WINGS meeting. This meeting is the last Thursday of every month and is normally reserved for women only but this particular meeting is open to everyone. Dona is a successful entrepreneur and investor. Beyond owning Summit LDS Title which is known for being able to get tough transactions closed, she is also working on a large apartment development project in Racine.  

Dona came here from TX and during her time there, she successfully united a group of investors to all invest in a certain neighborhood and in turn, they changed the landscape of that neighborhood and raised property values. She will be discussing how she structured this at the Meetup. A formal event will be posted in BP, REIA, WINGS & Brew City REI soon.