Single Family student rental near UWM

[Mike Lauenstein]

Investment Info:

Single-family residence buy & hold investment in Milwaukee.

Purchase price: $350,000
Cash invested: $130,000

Bought a house on the east side of Milwaukee, near UW Milwaukee to rent to students.

What made you interested in investing in this type of deal?

We had money from a previous deal using a 1031 exchange we used the money for the down payment on this property

How did you find this deal and how did you negotiate it?

Using my sister-in-law, we toured various properties. Most were student housing that was poorly kept up and far from where we wanted. In calling the selling realtor we learned that there was an accepted offer. We asked for the 1st right of refusal if the offer fell through and added our offer behind the accepted offer. The 1st offer fell through and ours was accepted.

How did you finance this deal?

Using money from a previous investment in a 1031 exchange we were able to make the down payment. We financed through a conventional bank with 20% down.

How did you add value to the deal?

Over 5 months we did a lot of work repairing walls and ceilings, adding bathroom and 2 bedrooms. Making a very nice student house or a great single family house with the potential of a 3rd floor apt.

What was the outcome?

We tell our son he lives in a much nicer house then we do. It turned out to be a nice house. The students did help with some painting and other work so they have some ownership and pride in the house. It cash flows nicely and we expect it will be a good long term rental. The important part will be how long our son lives in the are to be the property manager. If after he graduates he moves away from the area we will sell.

Lessons learned? Challenges?

Of course the renovations took longer than anticipated and cost more. I will buffer more time and money in the future. Also I had a friend work on the HVAC system. He quoted me $6,500 and said we would do most of the work. We did all the work except where we did not have the tools or expertise. He came back later and asked for more money. I will always ask for exact clarification as to what is expected of me and what the contractor will do - whether or not it is a friend.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Claudia Graf, Shorewest Realty Milwaukee, Wisconsin