A Successful Milwaukee Property Rehab - BRRRR vs Sell

Milwaukee, Wisconsin
Rehabbing & House Flipping
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A Successful Milwaukee Property Rehab - BRRRR vs Sell

Doolan Wesley
Investor · Milwaukee, WI · Member since 2019 · 37 posts · 18 votes

Hey everyone, I just wanted to poll the audience here quick. 

I purchased a home in the Bay View neighborhood of Milwaukee, WI, one block away from Humboldt Park about a year and a half ago. The purchase was with the intention to BRRRR the property. The single family market in Bay View is so hot at the moment though that the valuation after the appraisal outpaces the potential cash flow. I think rent on the completely remodeled 3 bedroom/2 bath property with a two care garage would be around $2500-2800, but the cash on cash return to keep equity in the deal isn't great.

Option 1: Refinance and keep 25% equity in the deal (currently owned in cash). Then look to 1031 the property in the future into something that offers a better cash on cash return to avoid long term capital gain taxes.

Option 2: List it as for sale by owner and considering the prospects of selling. Take the tax hit, but avoid 4-6% realtor fees.

Any input would be welcome.

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  • Charles ClarkBusiness Member
    Real Estate Broker · Milwaukee, WI · Member since 2020 · 306 posts · 209 votes
    4y

    Bom dia @Doolan Wesley,

    I hope all is well with you. My fiancé and I purchased a duplex (3/2) in the Bay View area in 2019 to BRRR. We are currently rent out the upper unit (2br) for $1300. Bay View is a great market to rent, but an even better market to sell in right now.

    It depends on what are you trying to accomplish. Renting is one option, but Bay View is a great area to Airbnb also. If you don't owe too much then it could make sense to keep it and use it as a short term rental. Being able to pull money out, keep the property, and use the cash out to purchase another rental would be my first option. However, if you can sell at the top of the market and get even more cash out to purchase your next property. Again, this depends on what is your ultimate goal as an investor. I hope this helps you with your decision.

    If there's anything I can assist you with, please do not hesitate to contact me.

    Beleza,

    Charles Anthony 

    [email protected]414-719-6090
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  • Ty AshBusiness Member
    Real Estate Agent · Milwaukee, WI · Member since 2018 · 201 posts · 132 votes
    4y

    Hi @Doolan Wesley!

    I agree with @Charles Clark that your choices is going to depend on what you'd like to accomplish/your goals. You're sitting in a good position where both of your options you presented are possible.

    I like option 1 a little more in general because of the area, appreciation potential, and it sounds like you'll be cash flowing. Unless you have another deal/opportunity lined up to use the proceeds for, this seems like a strong option. If you're hoping to be a little more passive, maybe consider using someone who does arbitrage since it is in a good area for STR.

    Best of luck!

    1Reply
  • Doolan Wesley
    OP
    Investor · Milwaukee, WI · Member since 2019 · 37 posts · 18 votes
    4y
    Quote from @Charles Clark:

    Bom dia @Doolan Wesley,

    I hope all is well with you. My fiancé and I purchased a duplex (3/2) in the Bay View area in 2019 to BRRR. We are currently rent out the upper unit (2br) for $1300. Bay View is a great market to rent, but an even better market to sell in right now.

    It depends on what are you trying to accomplish. Renting is one option, but Bay View is a great area to Airbnb also. If you don't owe too much then it could make sense to keep it and use it as a short term rental. Being able to pull money out, keep the property, and use the cash out to purchase another rental would be my first option. However, if you can sell at the top of the market and get even more cash out to purchase your next property. Again, this depends on what is your ultimate goal as an investor. I hope this helps you with your decision.

    If there's anything I can assist you with, please do not hesitate to contact me.

    Beleza,

    Charles Anthony 


    Good input Charles. This was my third deal in that neighborhood, I have two other duplexes that cash flow extremely well. I'm familiar with the rents, but the appraisal came back high enough that the cash on cash return isn't going to be good. I'd leave it in the deal until someday down the road I sell and move the money into a better deal.

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