Head of IT · Waterford, WI · Member since 2015 · 5 posts · 0 votes
Hi All, I am interested in Buy and hold for cashflow, am trying to educate myself in the market before I jump in. I have read on BP that in Milwaukee, the D class housing has best cashflow, but not sure I am comfortable with sending crews into those neighborhoods. Are those of you investing there using full service property management where they are conditioned to handle the issues that will most likely arise in those areas? And are you using the Property Manager to coordinate any rehab necessary with their contractors?
I like the idea of purchasing multiple low cost rentals to level vacancy instead of one higher priced property with potentially lower net return and more impact of vacancy.
Thanks for the help, BP has been a great resource for me. I drive an hour to work each day and am eating through the podcasts.
@Jim Wollmer I am personally not comfortable buying the "cheep" single family homes in a bad area. The only way I would go buy single family homes is in a college town or in a market where there is a unique opportunity to get appreciation off of holding or adding improvements to the property which usually you only get from the B class properties.
I personally like multi families. I would suggest looking up in the fox valley area in Appleton or up to Green Bay. It is a growing area and much nicer communities then the D class it sounds like your considering in Milwaukee. Remember, if you ever decide you want to get out of the game would people be jumping at a D class neighborhood to buy your property?
Also, listen to the latest podcast. There was an interesting start to a discussion on the type of properties your thinking of buying.
Thanks everyone for the quick response, that is great.
@Dawn Anastasi, I have followed you posts and you are clearly an expert in the Milwaukee area, so I am interested in your feedback. I should not have specified D class specifically as I am not sure I am clear the cut off of classification. In general my questions was more related to cash flow strategy over appreciation strategy. I have read, the lower priced maybe less desirable neighborhoods have higher return on cash, then the more desirable neighborhoods. This is good for my strategy which is not to put all my eggs in one basket with one higher priced property. I live 30 minutes outside Milwaukee in rural Waterford, south west of Milwaukee. Can you give me an example of a C/C+ neighborhoods that I could drive to get a feel for them. And I am assuming in these neighborhoods you are comfortable being onsite?
I think your general comment of cash flow being stronger in lower class properties is generally correct. Having said that though, it also comes with more headaches.
To give you a feel (and Dawn correct me if I am misspeaking) some areas you can buy properties for $30-40k and those may be your B- to C range. For me, I typically look for duplexes in the $100-$125k range and those are typically in B+ areas. For me, with those types of properties (which are bought via MLS) I see anywhere from $175-250 in cash flow per door. Not sure what Dawn is getting, but I'll bet it's higher than that.
I think part of what you need to consider is if the diversification is worth that level of headache. It might be or it might not be.
I typically buy in cash so my results are skewed towards higher net cash flow. Example: $37,500 all-in for a 3-bedroom single family that rents for $875/month. My expenses are property taxes and insurance at $165/month; the tenant pays for utilities and lawn care. I put away $205/month for future repairs/capex and the result is a net cash flow of $505/month.
Dawn, Those are great numbers, I noticed many of your properties are 1 or 1.5 baths, do you have any issue renting them? I have mapped your properties and hope to drive the neighborhoods in the next week or so. Thanks again for your help.
I am sure you all are aware of this but I found a great site Milwaukee has with many statistics I found interesting in evaluating neighborhoods. It is called the Milwaukee Compass project. Here is the link for those who are interested.
@Jim Wollmer I am personally not comfortable buying the "cheep" single family homes in a bad area. The only way I would go buy single family homes is in a college town or in a market where there is a unique opportunity to get appreciation off of holding or adding improvements to the property which usually you only get from the B class properties.
I personally like multi families. I would suggest looking up in the fox valley area in Appleton or up to Green Bay. It is a growing area and much nicer communities then the D class it sounds like your considering in Milwaukee. Remember, if you ever decide you want to get out of the game would people be jumping at a D class neighborhood to buy your property?
Also, listen to the latest podcast. There was an interesting start to a discussion on the type of properties your thinking of buying.
@Jim Wollmer you've got great opportunities right on your doorsteps! You need a thick skin to play in the D class market and you definitley earn have to earn your cashflow the hard way. By no means this is a passive investment. Property Managers are not the answer either: hard enough to find a good one in the first place and even they will not take care of your investment as you would (after all for them it's $100 revenue on the line (monthly), for you its $50,000 or $100,000 of YOUR skin - that makes a difference). Don't even get me started on pig-properties in 30k neighborhoods - they will need a 10k roof at some point or a sewer line and a $30k interior makeover and you will have no property value to support it because no matter how nice your house is the 'hood will dictate the price. Do yourself a favor, play it conservative with your first properties: buy something that close by in a market you actually understand and pick a property where you can ad real value fixing it up and you know it will be easy to sell if you should decide at one point landlording is not for you. Sorry for smacking you with a 2x4 but you asked for opinions LOL. Giving up a couple hundret bucks in monthly cashflow is a thoretical loss, because you quickly burn it up spening hours driving arround takeing care of issues, not even mentioning the emotional pain you could potentially get yourself into dealing with people who just happen to live in a D class area..
@Markus A. no issue with 2x4, it is welcomed, and I am use to it. Property Management is a key for me. One of my next steps is to understand what exists for Property Management options in the area. So if there are recommendations of companies to start interviews with I welcome the input. I am off the D-Class, but interested in B-C where I can leverage under 50K all in investments.
Best case for me would be to find properties in the Waterford, Burlington, Union Grove, Wind Lake area which is close by, but I don't see lower cost opportunities there, and I am having trouble identifying rental demand.
To answer your immediate question. The best way to get familiar with any market, if you are in the same city is to get together with other investors that are doing what you want to do. Look for rentals in the area that you want to jump into, and call the landlords. Find out what they have to say. Find a reia group close and get the real boots on the ground info from the people that can give you the information you need. Sure you can get advice from other experienced landlords on BP, but the best information might come from your own backyard. Best of luck.
Hi All, I am interested in Buy and hold for cashflow, am trying to educate myself in the market before I jump in. I have read on BP that in Milwaukee, the D class housing has best cashflow, but not sure I am comfortable with sending crews into those neighborhoods. Are those of you investing there using full service property management where they are conditioned to handle the issues that will most likely arise in those areas? And are you using the Property Manager to coordinate any rehab necessary with their contractors?
I like the idea of purchasing multiple low cost rentals to level vacancy instead of one higher priced property with potentially lower net return and more impact of vacancy.
Thanks for the help, BP has been a great resource for me. I drive an hour to work each day and am eating through the podcasts.
Michael Lee here. I have heard on BP that you should not do anything that you are uncomfortable with. I don't or have not done anything yet but if you don't feel good about it, do not do it! Do not expect the others to do it either,
Dawn, Those are great numbers, I noticed many of your properties are 1 or 1.5 baths, do you have any issue renting them?
I think you mean because newer properties have 2 or 3 bathrooms? None of these are extremely large houses. 1 or even 1.5 bathrooms are the norm. I have 1.5 bathrooms in my own home and rarely ever use the 1/2 bath.
I have a property management colleague that operates in Milwaukee and runs a very good business. Let me know and I will forward his contact information to you.
We deal with a number of investors/agents where we have developed a relationship that allows us to speak VERY freely about potential investment units.
The upside for you is that there is no incentive to "polish a turd", (sorry, there really isn't a better way to put it). If a property is going to be tough to manage due to it's condition or location, a property manger will say so, (that doesn't necessarily mean they won't manage it, they will make sure everyone's eyes are wide open). This is especially important in the "D" class properties that you opened the conversation with. The spreadsheet always looks very attractive at that end of the market, but as another poster put it, you're going to develop some thick skin.
I would think that most property managers can get units rehabbed for you, (we do), but how much they can do and what it's gong to cost depends to a great degree on your local statutes. In CA for instance, any job over $500 is supposed to be performed by a licensed contractor, which inflates pricing for relatively simple repairs, whereas some states have much higher limits opening the work up to the much more competitive "handyman", market.
Hi all. First time poster here on BP. I'm in a very similar position as Jim Wollmen, I'm interested in buy & hold investments, and I'm doing as much research as I can before I jump in.
Like Jim, the thought of investing in "rougher" neighborhoods intrigues me, especially because I grew up near 30th & greenfield ave (stereotyped by many as a "rough" area) in Milwaukee...and have had some of the nicest, most stand-up neighbors I could ask for.
My question is directed to what Joel Florek said...
********"Remember, if you ever decide you want to get out of the game would people be jumping at a D class neighborhood to buy your property?"*************
That logic makes no sense to me. If nobody wants to buy, then I should be able to buy at a heavy discount to begin with, which makes the low selling price afterward a non-issue...no?
The temptation is strong to invest in these properties...the cash-on-cash looks very good!