All Forum Posts by: Marcus Auerbach

@Account Closed have you thought about moving? Seriousley. People move for jobs all the time. I have been BRRRing since 2010 and I could not have done it remotley - without being on the jobs all the time - at least once a day. I used to buy 30 minutes away from my house, now I focus on areas no more than 15 minutes from where I live and work. The idea of running a serious rehab across state lines seems insane to me. @Shawn Ackerman - respect, I don't know how you do it! I work with several out of State investors and investing can be done, but you want to try to keep it passive. Especially if you happen to have a job as well - not to mention and a life. Also keep in mind, you are probably planning on more than one property - maybe 5, 10, 50? - to run it like a business. it does not pay to have one or two. You need scale. That also means that you multiply the issues which are already amplified by the distance. Did I mention moving yet?

Here are three slides from Gary Keller's 2017 vision speech. How much the market has chnaged in short 4 years!

The greater Milwaukee area is on a 30 month run with exceptionally tight inventory and multiple offers pushing prices up year over year. The Milwaukee market is quite diverse and while we have areas that have seen double digit appreciation in 2016 YoY there are others - especially low price point areas - that have flat lined. December through March where rough as far as inventory - we were down to 2.4 months of supply (6 would be normal) and anything left for sale has been picked through many times. I see now a lot of fresh inventory hit the market, but anything attractive sells within days. Some of my clients don't want to believe it - they ask me to schedule a showing for next weekend and are surprised when it's gone. We have not seen much construction in the last almost 10 years. Many builders went broke 2009/2012 and a lot of trades people have other jobs now - my old painter how used to have 6 crews is now a nurse. Development has shifted dramatically. Nobody is building starter homes anymore. Anything new is 400k and over. The new starter homes are downtown condos or just rentals - in either case multi family developments. Nobody is building 200k homes anymore, profits are just too skinny and land too expensive. We have an almost unprecidented development boom in downtown Milwaukee of almsot $300M in current projects, reshaping the skyline clearly visible from the lake. The inner city areas remain an unresolved issue and many people are moving either downtown or outside of Milwaukee county to escape the high property taxes. Competition amongst investor is fierce and while HGTV flip shows drive a steady flow of new flip "investors" into the market place most give up either before or right after their first deal. The buy and hold market still offers great opportunities, in particular in the medium price ranges and areas with lower property taxes and higher rents a solid mix between cahs flow and potential for appreciation is achievable. While prices have gone up and DOM have come down the market still offers double digit ROIs for investors with capital. For those who don't and have relied on desperate sellers offering 20+% instant equity at closing the pickings have gotten slim. Deals can still be found on MLS every morning, but they are usually gone before the end of the day. If we are going to see inflation (expected as a result of increased money supply) and finally some wage growth across the board we should see a number of good years to catch up from the lost decade 2006-2016 in Milwaukee. Rising mortgage rates and unforseeable knee jerk moves from Washington remain risk factors - we don't know what the next market shift is going to look like.

@Jennifer Sleider do as Greg recommends. You have a good heart and you recognize their loyalty, but this is a business and you have to treat it as such. It's also easier for them to move into a new place and then stay there and not have to move back. Once it's updated and nice you will get plenty of tenants to choose from. It takes me usually 1-2 weeks to sign a new tenant in Milwaukee. 

@Kamaron Perkins you have to take ocupancy within 90 days on FHA products. Not sure if/how they verify your compliance. Discuss details with your lender.

The probelm with any free online data service is the data quality - it's just worth what you paid for it. Zillow will give you a first idea, but most of my rental properties will yield about $200 - $300 more than what Zillow suggests. The data they use is based on many properties in poor or average condition. If you provide prime condition people are very happy to pay a premium.

@Joseph Walsh if you stay outside Milwaukee County taxes are lower and offset your higher purchase price allowing for decent cash flow. The sweet spot between potential appreciation and cash flow income is in most of the suburban markets outside of Milwaukee for a BRRR between 150k and 175k. The trick is to buy something dicounted enough to have the budget for a full rehab. Light rehabs don't work well with BRRR here and you are much better off in buying a property that is already updated and finance it over 30 years without any cash outlays outsie of down payment. This has been pretty much my business model as an investor for the last 7 years. Happy to help you get started.

@Chris Olewinski and @Joseph Walsh welcome on BP. Definitley follow Rebecca's invite to the Brew City Meetups and feel free to reach out to me if you have any specific questions on strategy, rehabs, landlording or finding deals.

@Richard Moore the correct sequence is the following:

1.) Find an agent who understands investing (most don't and have no incentive to learn ***)

2.) Find a lender: simple - the agent who knows investing knows lenders who work with investors

3.) Find a taregt area for your investment - discuss your goals with your agent and develop a strategy

4.) do plenty of drive by's so you know the area and schedule showings with your agent

5.) your investor agent will know contractors, property managers and other ressources you need

As for the pre-approval: it's in your own best interest to have financing lined up and ready to go before you look at properties. Good investment deals are gone within 24 hours. There are many investores looking for deals. I often write offers before I even have time to see the property, so you need to have your pre-approval letter or proof of cash funds ready to go. If your agent does not have that discussion with you, find a new agent.

***) Why there are so few investor friendly agents. It was shockingly hard for me to find an agent who understands investing when I started out. In fact I coudn't find one and made it through my first transactions with a regular residential agent, who was super nice, but had no idea about investing. You want to work with an agent who is also an active investor and therefore knows how the game works. 

Here are a few insights: agents get paid based on comission. Investors like cheap fixer properties and they like to look at many and then make many offers that often get rejected. So, it's a lot of work for very little money. Much easier to find a nice $500.000 home for a family than a smoking hot deal for $50.000 - and make TEN times more in comission. Median price in Milwaukee is about $225k. So why would any good agent want to spend his time with an investor? Would you?? Note: investor friendly agents like agent friendly investors.

@Derk Vander Molen very easy answer: rent. 

Flipping is much harder than most people think and it's easy to loose money, especially on the first deals. Plus it is a lot more work than you would probably think. Renting is a lot more forgiving financially - over time inflation and mortgage pay down will turn even a bad deal into s profit if you just wait long enough and manage it well. It is also much easier with buy and hold to accumulate wealth than it is with flips. 

If your goal is to generate a million dollars you will probably have to do 50 flips. And then pay income tax on your profit. So you probably need another 20 flips to make up for the tax. To do 70 flips in 5 years its almost one flip a month, so you will have to do at least 4 in parallel and need working capital of at least $400k. That does not even consider that you will need to hire staff to handle that kidn of a volume.

On the other hand if you buy ten rental properties for a total of $2M with $400k down you may "only" get $5000 in cash flow per month but your principal pay down and your appreciation generate real wealth while you sleep.

- buy 10% below fair market value = $200k instant equity on $400k down. By the way, that's 50% ROI right there

- cash flow $60.000 per year or roughly $300.000 in five years - without a rent increase

- with 3% appreciation and principal pay down you reach $1.1M in equity in year 5 (from 400k down)

Before someone shoots me here - these numbers are very rough and just to illustrate the principal - play with the BP calculator for details. So you became a millionair in 5 years for doing some property management, which is not very hard on a nice SFR and can be done on the side, while you go to work (W2 income to live on) and do a few other things you enjoy in life.