Moving family to Milwaukee area and looking for REI

[Jeff Thompson]

Hello!

I just started looking through posts on this board and it's really encouraging to see how many people are willing to offer advice to new investors. My wife and I would like to join the REI club and we are moving to the area in June. It's been a challenge because we are doing everything virtually (from Phoenix,AZ), but we have an amazing realtor that has been really helpful. I would sincerely appreciate any insight this board can offer!

We are looking to purchase a home that we'll live in for a short period (2-3 years) and then either sell or keep as a rental. Ideally we would find something that needs cosmetic work and maybe some remodeling that can be done over the period we are living there. We were very excited about the idea of an owner-occupied duplex, but we need 4 bedrooms (or 3, plus an office) and there aren't many of those that exist. We've explored the idea of a 2/2 duplex and converting it to a SFH while we're there, but that sort of defeats the purpose.

The issue we're running into, like everyone else, I'm sure, is the market being so strong that even houses needing substantial work are selling at the upper limit of what they'd be worth after renovating. And if we look at SFH in desriable family neighborhoods, the asking price is putting the PITI at or above what it seems the market rent would be.

So I think my specific questions are:

1. Should I be looking outside of the MLS and Realtor.com for these goals? Is there a better resource for finding properties that need a little TLC, but are livable and can turn a profit.

2. How can I research the rental market prices? The only way I know at this stage is looking on Zillow for available rentals, but when I set a filter for $1,700+ I get a total of 17 with the map spread to Mequon, Waukesha, and Mount Pleasant. 

I'm obviously very newbie here, but I'm very willing to listen and learn. I appreciate any and all advice!

- Jeff

[Marcus Auerbach]

@Jeff Thompson you are arriving at the same conclusion as everyone else who is moving here and is thinking about combining investing and primary residence: it is a tough compromise to make, if you try to force it you end up with a not so great place to live that is also a not so great investment.

While you can find an off market deal, that's a long shot. Most off market I see is at price points that are below what agents can cover profitably. There are still some at higher price points, but I don't see many (as an investor I still buy most of my deals on MLS, even now...)

If you are thinking about house hacking with a duplex you can look up some YouTube videos on the topic, link is on my BP profile page, in particular the third one gives an overview of Milwaukee's duplex inventory and the different types we have, both the old style 1920 and the newer style 1960s. But neither comes with more than 3 bedrooms.

Rents are higher than you think, there is only so much you can tell from Zillow. Our properties rent on average over $1,600 and signifcantly over what zillow or rentometer would indicate, simply because of the condition. If you go into the suburbs or downtown there are a lot of (new) rental properties between 2k and 3k, there is even a market over 3k, however much smaller in volume.

I work with a lot of relocation clients and have been through your scenario many times before, my recommendation is buy a middle class single family home with good size (large!) and update it while you live there. 

Milwaukee RE prices have been going up over 10% last year, you can see the data in my monthly market updates, and it seems like we are on track for at least +1% per month this year. I am writing a lot of offers these days 20k or 30k over asking, waiving both inspection and appraisal contingency in hot neighborhoods, and often times that is not enough to get an offer accepted. A few years ago we would write 2k over asking and people would say this is like CA (they don't know how crazy CA is..). We simply have more people than homes, no vacancies and very little new construction. Unless something dramatic chnages we will keep going this direction.