All Forum Posts by: Alex Witte

@Shawn Ackerman 

Awesome! Keep it up. Next time you're in town we will have to meetup!

I think the background in construction and understanding what the steps are for a given project helps me with writing out scopes of work that make sense to a General Contractor... or to a specific contractor like a carpenter or plumber. 

It also helps me organize contractors (when I am doing the GC work) to make sure all necessary steps are completed before, for example, the plumber shows up to rough in plumbing. You have to make sure all necessary demo and framing is done. Things like that. 

Congrats @Shawn Ackerman on your success! I have heard your name a few times when people ask about investing in Milwaukee C or D neighborhoods out of state. So many people tell investors to shy away, but you are proof it is possible!

I myself got started in September of 2017. I had recently moved to the suburbs of Milwaukee for an engineering position. I realized I didn't want to do what I was doing for the next 45 years so I needed to find alternate ways to make money. 

I also have a past in construction so I really enjoy that feeling when you take something old and make it new! 

I bought 1 duplex with a partner who's a local broker in Milwaukee. He was very helpful to learn the ropes of investing and especially the areas to avoid. 

Then I came into a creative deal involving a guy who was incarcerated and I helped him avoid foreclosure on his SFH.

I have now been growing my portfolio of 1-4 families in the greater Milwaukee area! 

I love it! I also love the reactions I get from tenants when I improve their quality of life by remodeling their unit or lowering their rent. A few of the properties I came into the rents were outrageously high (in my opinion) for the area the properties were located. 

@Jake Ferris I would second what @Jay Helms is suggesting. I partnered on my first deal and I learned so much because of it! Send me a PM if you'd like more details. 

@Nick Portillo I wouldn't say living in California is unfortunate! lol I was in Newport Beach for the CAL Act show and its gorgeous there!

I third REIS

AHHHH Business trip. I'll miss this. If a consensus on a neighborhood is made. give me the deets to help out! 

So this is a continuation of my second deal story( https://www.biggerpockets.com/forums/223/topics/52...)

So I have learned many things from this deal... I will post them at the end along with the final numbers!

The part of the story that I excluded from the last post: in the Option to Purchase agreement we wrote up that I agreed to pay his mortgage payment which I understood to be $800 for PITI. I was told that the owner was only delinquent up until his incarceration in August of 2017. I expected to have to pay 4 months of missed payments, fees, etc.

Also in the Option to Purchase agreement we had written in a clause that if the house were to sell during the option duration (I was given authority to sell, rent, lease, etc) that the proceeds from the sale would be split 75% to me and 25% to the seller. 

Well after a bunch of run around I finally got the lawyer to have the owner sign a POA document so I could talk with the bank and law firm directly. I then found out he had been delinquent since January 2017!!!! To bring his account out of pre-foreclosure it would be $13,700!!!!

Obviously when you take that into account the COC drops significantly. In addition there was a big rain fall in February and my tenants informed me the roof leaks...

I received word of the roof leak and the $$ amount the same week...I was stressed out. 

At that point it was either refund my tenants, apologize for inconvenience, move them out, and walk away from the deal losing all capital invested.... ORRRR dig my heals in and trudge on. 

I went back to the lawyer and shared with him the pictures of the roof leaking and letter from the law firm and told him that I can no longer do this because of the $13k and the $9k for the roof repair. I said if I sell it as-is with a bad roof then I need 100% of the proceeds to just to hopefully make my money back. 

The lawyer tells me that 25% of the proceeds was going to be part of his compensation. He said he would be willing to relinquish his 25% of the proceeds in exchange for $5000 cash now. 

Now I was in a situation where I could set the purchase price and knew what the expected payout would be. I had some good comps in the area that showed it could be valued as high as $150 (there had been some more recent sales in 2017 since my previous post). 

I wrote up an offer of $140,000 and I bought the place!

NOW WHAT YOU ALL CARE ABOUT: 

Purchase Price: $140,000

My Cash to Close: ($29,460.92)

Proceeds from sale: $25,511.51

Cash to Lawyer: ($5000.00)

All Prior Repairs: ($9,905.37)

Roof Repair: ($8750.00)

Total Cash Invested as of 4/12/2018: ($27,604.78)

Financing: $112,000 mortgage (5 yr ARM amortized 30 yrs)

Debt Service: $602

Taxes: $3,350

Insurance: $907

Tenants are responsible for everything. 

GSI: $14,400

Withholding 6% for repairs... or other: ($864)

COC: 7.44%

Percent rule: 1.04%

Tenants have expressed interest in owning this home after just 4 short months of living there. I plan to offer them a rent to own in order to lock in a sale price while the market is high! 

Lessons learned:

Make sure you have all of the FACTS before you spend any $$$$

If I didn't have @Michael Henry there to call on I don't know if I would have gotten through this! 

Thanks man for all the help! 

I am very pleased with this deal though because I now have a relationship with the lawyer who works with some criminal, but primarily divorce. He says I'm his "go-to guy" whenever something real estate comes up!

Who knows what that relationship may be worth! 

Cheers! Sorry for the novel but it has been quite the escapade! 

@Max Gomeniouk what group is having a meetup tomorrow 4/2? 

I am going to the meetup for the Brew City REI on 4/5.

@Tyler Melso you should join the Brew City REI as well! There's a wealth of knowledge on here and in the groups. I moved to Milwaukee area in May 2017 and @Michael Henry has been my go to guy for finding deals. 

Congrats! I think you will find Milwaukee to be a great market to be in! I recently moved to Milwaukee area in 2017 and have purchased two rentals. One of those is in a C- area. As long as you and your PM have good processes in place you will find it to be very profitable! 

Best of luck and Welcome! 

For this deal I just used Zillow, realtor.com, etc. 

I do have good relations with a few realtors and brokers who could do this for me as well, but I don't like to ask much from people without having done a deal with them. 

I simply look up recently sold properties with similar stuff (br, ba, sq ft, etc) in the same area.