All Forum Posts by: John Franczyk

Pick up a copy of "What Every Real Estate Investor Needs to Know About Cash Flow" by Frank Galinelli. If you can do high school algebra, you can work through the depreciation examples he uses to show how that component affects cash flow in a real estate deal.  

Frank Gallinelli's "What Every Real Estate Investor Needs to Know About Cash Flow"

At the moment, FoxConn in southeast Wisconsin s a bit like the weather - RE investors are talking about it but no one is doing anything about it.

Maybe that's not entirely true. As I've noted in other posts, the FoxConn effect has added 10% to 20% to property values in some areas in and around Racine county. That effect and the prices that it is driving appear to be leveling off. I know that a lot of out of state and even foreign money is coming in to the county. The speculation is that the contractors who will build the facility and the people who work there will have to live somewhere and that the current housing stock is inadequate for that purpose. Racine just had a big announcement last week, for example, about the redevelopment of a warehouse into apartments (see https://www.racinecountyeye.com/gold-medal-lofts/).

The bigger picture is that good investment-grade properties for individual RE investors are getting harder to find everywhere. FoxConn has exacerbated that issue in southeastern Wisconsin. If/when the market transitions to a buyer's market, properties here and elsewhere will become more available. The FoxConn premium might add some support to Racine county prices, but without a crystal ball, it's hard to tell what that premium will be or if it will even materialize.   

For the record, I currently live about 5 miles from FoxConn ground zero. The site currently looks like a construction equipment storage facility. If FoxConn goes all the way through with its plans, the facility will be massive and those employees will definitely need to live somewhere. FoxConn has scaled back its original plans a bit, and at least initially it will not be building the very large glass screens that it had planned to build at the facility, I believe in part because Corning Glass has not yet committed to come in with a sister facility. I've heard that it's still going to build screens up to 37 inches. Industry analysts that have a lot more information than might be available to the general public are likely going to get the greatest benefit from up-to-date developments.  

I'm not a licensed attorney, but I do have experience in this sort of issue. The standard is whether a reasonable consumer is likely to be confused over the ownership of both of the storage units. If a consumer thinks that "Madison Storage" and "Madison Storage Garages" have the same progeny, you have no defense.

The secretary of state will allow any name that is not exactly like another name. You could name a corporation "Madison Storage 1" and the secretary would likely allow it. A corporation and and a trademark are related, but each has its own purpose.

Don't assume that Madison Storage does not have trademark rights just because it has not registered its trademark. Trademark rights develop when you use a name or logo in such a way that it identifies your goods or services. The registration is more procedural. It confers definite advantages and it does give a trademark owner a leg up in legal proceedings, but an unregistered trademark can confer rights upon its owner as well. Even if you don't have a trademark infringement problem, you may well have an "unfair competition" problem.  

Here's a few questions that I would ask:

- How long has "Madison Storage" been in business? The longer they've been in business under that name, the stronger their natural trademark rights will be.

- Has Madison Storage received any phone calls from customers who ask for "Madison Storage Garages"? That's evidence of actual confusion, which is a strong symbol of trademark infringement.

- Do Madison Storage and Madison Storage Garages look like similar or identical facilities? The more they look alike, the more likely it is that there will be an unfair competition problem.

The last issue here is that "Madison Storage" is a generic name for a storage facility that might be located in Madison. Accordingly, it is very difficult to claim trademark rights in that name. 

Trademark litigation can be expensive. You would be well served to spend an hour with an intellectual property attorney (you'll pay $300 - $500 for that privilege) to hash out the issues. If you're not locked into your name, you might try the gambit of asking Madison Storage to reimburse your expenses for changing your name. I know that sounds audacious, but it's not an unknown strategy.

We are in a tough market for finding deals right now. If you can find deals as a wholesaler, you shouldn't have too many problems finding buyers. The key to your success will be to develop a strategy that finds you the deals. If you go with direct mail to potential sellers that haven't yet listed property, you'll incur marketing expenses for letters and postage, as well as your time to coordinate everything. Unless you develop a magic formula for your letters, you'll likely have a low response rate - maybe 5%. That can be discouraging, but if you stick with it you'll build that rate up.

Bandit signs will put you in competition with other wholesalers that put up lots and lots of bandit signs in their target neighborhoods. You'll also need to watch your back in neighborhoods that aren't too fond of bandit signs on public parkways. You won't want the local authorities fining you for putting up signs where they aren't supposed to be.

There are other deal-finding strategies, including just walking around neighborhoods and picking out houses that are less well-maintained than neighboring properties. 

Ultimately the key to your success as a wholesaler is to develop a business model that works for you, and then sticking to that model and revising it to fine tune your strategy as you learn more.

Consider joining the Milwaukee Real Estate Investor Association (Google it) for networking opportunities with other wholesalers. 

I wish you the best of success.

I have good experience with Summit LDS, Inc. in Milwaukee. Ashly Kihlmire met one of my buyers at a coffee shop to handle document signatures and coordinated a wholesale deal without a hitch.

Tailor Rens at Krug & Rens is very active in the Milwaukee Real Estate Investors Association. You can find him with a Google search.

This topic poses a greater question: how do balance money, time, and effort to optimize your sale or purchase?  When I'm negotiating to get a house under contract, I emphasize that the offer price may be lower than a retail buyer, but I compensate for that by pointing out the I can do a fast purchase and relieve the seller of all other obligations that come with property ownership, including real estate taxes, utility costs, insurance and general maintenance.  Sellers focus just on price and inevitably discount or simply fail to consider all of the other costs and all of the time and effort  they will devote to the property before it sells. If the average time on market for a neighborhood is three months and the property taxes are $300 per month, for example, that's $900 less that the seller will incur if the property sells now. A seller can spend every weekend fixing up a house, cleaning it out, and making it look pretty for a buyer, but all that time means time away from doing other stuff. Lastly, when I get a house under contract as a direct buyer, the seller pays no real estate agent commissions. When I'm selling, it's a different story, but then those costs and commissions are built into the calculations I make when I get the house under contract. As investors, we do this as a business and we plug the costs to fix up a house into the business equation. Unless non-investor sellers have all the time and energy in the world, they don't need to put the same effort into the project.

Go to the Milwaukee Real Estate Investor Association meeting on 8/14, in Brookfield. (Look up "Milwaukee REIA" on Google for details.) It's a great place to meet other wholesalers and investors.

We used Chris Cramer at Premier Properties in Ephraim a few years ago when we sold vacation property that we owned in Egg Harbor. We interviewed a few realtors and chose Chris based on his professionalism. We had an offer in under a month and he helped to make the process painless. You can find him with a Google search.