@Account Closed Generally I don't think Milwaukee is much of a market for rapid appreciation. Based on what I've read, seen, studied, etc., we've never experience the valuation swings such as markets like Phoenix, Vegas, Boston, San Francisco, etc., where speculators could make substantial amounts of money depending on their timing. I imagine one to three years would be insufficient for any kind of meaningful refinance in our market, but perhaps I haven't been at it long enough.
That said, @Rebecca Knox and @Scott Schultz, who have certainly been in this market and paying attention longer than I have, are probably on to something only experience really shows. Duplexes I thought were high last summer now look like great deals, and just running numbers on lots of properties I am shocked at what some properties are selling for, especially in the A to B markets where the not so careful money thinks prices go up forever. Running numbers conservatively (and fairly), it seems that about 90% of properties don't cash flow, and that other 10% at a few bucks a door. (And to qualify, I'm talking about A/B markets. The C stuff in Milwaukee will cash flow all day, even with slightly higher prices, but as Rebecca pointed out, you'll basically have zero appreciation).
Two other analyses back up their opinions: 1. An examination of sales in stated areas between 2010 and 2012 -- some of these properties actually sold for 1/3 to 1/2 of what they're trading for today. I understand that was the bottom, but it makes you wonder; and 2. While I'm not an 'appraiser' and don't have numbers hard and fast, distressed to retail sales are not at all impressive, making the common idea of foreclosures and short sales always being good buys simply idiotic. (By contrast, J. Scott says in his book on flipping houses that his first 29 of 30 projects were short sales or foreclosures bought directly off the MLS).
The majority of the investors I know no longer pay any attention to the MLS. While deals can be found there, foreclosures and distressed sales are seeing ten offers in 2 to 3 days before they stop taking them. I had a short sale listing (which unfortunately fell apart) that we had under contract for what I thought was a stupid number relative to the property's condition. Still, the bank thought they could get more.
All that said, I'm closing on my first four family in two weeks, and my strategy is simple: buy with some equity, and make sure it cash flows well no matter what the market is doing. I like Buffett on the subject: the best time to sell is never, so I'm planning to whether a few storms and cycles.
Still, and I'm trying to boost my savings rate and take this to heart, when banks are hesitant to lend, foreclosures are up, and there's blood in the streets, having cash will make you a fortune.
And Scott, I still serve and bartend part time! Lol. Anecdotally, while none of my coworkers seem to know anything about stocks, everyone thinks the real estate market is kicking *** and wants to buy a house...
Great thread.
Best,
JTM
