All Forum Posts by: Keith Schulz

Hi Dina,

Welcome. I'm an investor and broker in the Madison area. I've also got a vacation rental in northern Wisconsin (between Minocqua and Tomahawk). Are you thinking vacation rental or long term rental if you are going north? I don't work as an agent that far north, but I'm happy to share my experience. I would also caution if you are intending on a vacation rental be very cautious of the individual town restrictions. Even Wisconsin Dells and some northern Wisconsin counties are getting restrictive. 

First let me start with, I'm a residential investor and have only done a few small commercial deals as an agent. I'm considering developing some condos. I've talked to a few commercial lenders and gotten a few different answers. In general commercial loans are shorter terms (3, 5, or 7 years) and often involve prepayment penalties if you pay it off or refinance early. 

How would you expect financing to be handled in terms of title and prepayment penalties for a scenario like this...  Let's say a full condo development is 10 million dollars so we borrow 7.5 million against the whole property for development and construction. A year down the road the development is completed and we've sold off 1/4 of the inventory. If we plop down 3-4 million on principal after a year to reduce the debt load:

1) What would you expect for a prepayment penalty each time we pay a chunk toward principal?

2) How do they handle releasing some units from the loan while maintaining a loan on the remaining units? 

Don't think of selling the truck as losing money, or you'll have a really hard time letting it go. Think of it as freeing up about $150,000 in investment buying power that will pay you far more down the road. 

Hi Steve,

You make good money, but could use a little better money management if you are going to start investing in real estate. My advice would be sell the truck, and drive the paid for BMW. Then pay off all of the other debts that you have. This should leave your income wide open to buy something and invest. 

Why not buy in one of the towns you will be staying, and then rent your furnished house out to other people (on a mid term basis) with similar traveling jobs like yours. 

I'm a broker in the Madison area, if you end up looking to buy here, feel free to reach out.

Nice work. Congrats! 

 Hi Tony, 

My wife and I run a small brokerage, Great Rock Realty, based out of Verona. We started as investors and eventually got into sales. We were at 2 different larger firms prior to starting our own. If an office space, in person motivation, and weekly training are what you need, we are not for you. If you are a self motivated go getter, who wants to save on fees, choose what works for you, and have a broker who actually answers his phone, then we might be a fit. Feel free to reach out. 

Definitely check with the local municipality. Madison and many of the communities in Dane County are pretty restrictive (the 7 day min and 180 day max). It's been clear to me in conversations with some of these municipalities that some of the administrators are very anti vacation rental and will restrict as much as the Wisconsin law allows them too. Other areas are pretty flexible. I own a vacation rental in Oneida County WI. Even areas of northern Wisconsin are restrictive. Thankfully mine is zoned recreational, so I was able to get permitting that allows less than 7 day rentals year round, but still need someone within 25 miles. Bottom line, don't buy with short term rental intent without doing your research. 

@Gunnar Conrado I agree with the other Madison locals (Angelo & Lauren). It's a great market, but can be a challenge to compete and find something where the numbers make sense. You may have to look further out of Madison to find a reasonably affordable starter property. I'd also suggest looking off market (even though I'm a broker and would love to sell you something). I've bought 3 of my last 5 deals off market. Here's some examples:

1) On MLS flip deal - it had been under contract but fell apart due to a bad inspection, and I stepped in with a lower offer with no contingencies. The no inspections and cash gave the seller confidence we could close the deal when the last buyer couldn't.

2) Off market short term rental - found through a friend of a friend through Facebook

3) Off market duplex - I liked the location and called a random for rent sign in the yard to ask if the owner would sell. Closed 25 days later. 

4) On MLS rental house - Again a no contingency offer beat out competing offers at a better price, but the seller was upgrading in home and needed to sell to make their purchase work. So again they wanted the confidence to close.

5) Off market 4 unit - I happened to see one unit for rent on Facebook Marketplace via another local agent. I talked to that agent to ask who owned it and if they were willing to sell. It turned out the agent was a partner owner and we worked out a deal.

So the trend is to buy on market if it's a good property you will most likely be competing in the Madison area and need a strong offer. I find it much easier to get an reasonable deal off market (especially if you aren't flush with cash). So, call those for rent signs. Look for those properties that look like nobody cares about them and track down the owner, etc. 

Also, you'll find it easier to make the numbers logical on a house hack type deal that you owner occupy, since you'll get better loan terms. My first property was a duplex that I lived in half, my second was a house that I lived in and rented out the 2 spare bedrooms. This is a great way to start.

Hope that helps, best of luck,

Keith

Hi Tyler,

I know the exact property you are talking about, and a couple of my agents have shown it to other investors. I do think there's potential (since the Madison chain can bring big dollars), but I think it should be torn down and re built slightly higher to eliminate flooding concerns (2018 was a bad year for houses flooding in that area). Also, if it weren't looking at the beltline, I think I'd have more confidence in the comps. In any case, if you are thinking about going for it, my advice would be to get a contractor involved before an offer. Known your numbers on the rebuild side as accurately as possible, and know your comps well. My thought was it would take at least 700k to buy the lot and build a reasonable house. ...but I think 700k is pushing the limits on what it should sell for on the river (instead of the lake) and looking at the beltline. However, there's very limited inventory with access to Monona and Waubesa, so who knows, maybe it will go for a crazy price. Just my two cents. Hopefully it helps, not hurts. 

As a real estate licensee I think you owe the owners an ethical duty to tell them what it would realistically sell for on the market too. I've bought several off market properties, and in each case, I actually tried to convince the seller to list the property with me for a higher price than what I've offered them. ...but these were all situations where someone just wanted out, and they didn't want to deal with prepping the house or allowing showings. 

...but yes, absolutely ask to look at the property, make an offer that makes sense for you, but don't lie to them that this is all it would bring on the retail market. Try to make a win win deal that saves them some headache and work and saves you some money. 

Also, review things with your broker to figure out company policies before getting too far.