All Forum Posts by: Matt Maurice

I'm sure there is already a precedent in place if you check with the WRA.  My gut reaction is no, offering a referral fee to another licensee would not be illegal but to Tracey's point, it may need to be paid to the brokerage rather than the individual.

Have you already modeled out the CAC into your financials?  We see this type of referral arrangement far more often in higher price point markets where the ACV (annual contract value) of said client tends to be much higher.  Depending on your fee structure, paying out 16% of your management fee revenue could easily mean that client is break-even at best for the first year.  If you have additional ancillary fees that can certainly dilute the % of the referral fee, but to @Marcus Auerbach point I'm not sure you need to offer the incentive.

We've found that other realtors working with investor clients love having a reliable PM to refer to business.  Without it, their client won't purchase more property.  The key is often arranging a system that when that client is ready to buy again or sell, you point them to work with the referral source first (in the event you offer in-house brokerage services).  If the agent did their job creating value, there should be no reason why that client wouldn't work with them again anyhow.

Other PMC's we've talked to around the country generally resonate that same ideology, great service > referral fee and PM is too small a margin of business for a high CAC.  

If someone has ample free time to go back and look through posts about Denver or other cities that have seen a huge growth boom in the last 30 years they can validate the claim I'm about to make...  or maybe @Scott Trench feels like chiming in with his analysis.

Local's of every entry-point market will always be the first ones to say stuff is overpriced, you can't cash flow (anymore) and the next market downturn while wipe everyone out. I'm positive you will find locals from Denver in the '90s, '00s, and '10s that said the exact same thing. Yet, the market has risen and despite the local's expectations on COC returns, the newbies faired extremely well.

Now, of course, that being said... I don't recommend investing with no money down, or in a poor starting financial position.  Every house built on a poor foundation will fail eventually.  

I know most about Milwaukee in regards to REI in Wisconsin, but @Jack Medford can tell you all about the Madison area that's been exploding for years.  

Milwaukee is sitting on some of the most affordable housing in the country, is adjacent to one of the largest freshwater lakes in the world, has entertainment & food that rivals every major metro, it's sports teams bat way above average for a small market which attracts hundreds of thousands if not millions of people here annually, economic development has been happening at a level unprecedented since the '50s (we are breaking ground on the world's largest mass timber building in June), has a tech ecosystem on the ground floor of attracting major talents with partners from the fortune 500 companies in town... this run-on sentence has gone a bit too long, I'll stop here.

If you are looking for the days of the 2% deal, they are over.  If you are looking for a market that could "Denver" over the next 20-30 years, look no further.

My 2 cents.

@Kevin Auyong I don't have the data to back this hunch up.... BUT I generally feel if you ever rent a property out of leasing season (generally April to July) the chances of having more transient tenants increases exponentially.  

If you think pure mathematically, the amount of tenants out there who are going to stay 5+ years and move during "normal" months is always going to be drastically lower than the folks who move ever 1-2 years and all months of the year.  You have to get a bit lucky in the process to nab the best ones (albeit attractive properties at reasonable rents are a great start), and you almost certainly have to be leasing the right time of year.

For a few years when we had properties hit the market in fall or winter, we would give the option of a long term lease but default to a short term to avoid vacancy days stacking up.  This would get the property back to a normal cycle and then we would renew 12-month terms moving forward.  It's astonishing the frequency that people would sign a 4-6 month lease, then move out at the end of that term.  We did not change the terms of the lease other than the length, and around 70-80% of tenants would leave after that initial term.  We no longer offer the short term option...

Hope that adds a little flavor to your experience.

@Pete Woelfel I'm sure you are already aware but since the no winter move out topic came up, I wanted to chime in quick.

When you use a MTM lease with a no winter move-out clause, it's actually a modified term lease that will change how you the landlord can provide notice or ask the resident to move-out.  During the winter months as established per your agreement, the tenant is actually in a term lease which means you the landlord can't ask them to leave via 28-day notice and have to serve a 5-day notice to pay or quit prior to sending a 14-day non-curable notice.  

It's a relatively small change as you are unlikely to ask them to move out during winter anyway, but the way you can handle non-rent payment changes slightly and is important to understand.  

It is not illegal to offer a lease greater than 12-months in Wisconsin.  It does, however, change the timeline for providing breach of lease notices unless specifically called out in your lease.  

In a lease 12-months or less, if the tenant doesn't pay their rent on time you would provide a 5-day pay or quit notice.  If the tenant doesn't pay during that period of time, you can file for eviction.  This is considered a curable breach.  The second breach of lease in the 12-month period you have the option to serve a 5-day curable notice or a 14-day non-curable notice stating they have to move out.

On a lease greater than 12-months, you need to provide a 30-day notice to pay or quit, and if memory serves me correctly, you have to do this every time rather than being able to serve the 14-day on the second failure to pay as stated above.

If you are using the Wisconsin Legal Blank lease, you will need to add language manually to accommodate for the ability to serve 5-day notices on leases greater than 12-months.  If you are using a different format, make sure you have language in their allowing you to do so.

We had attorney Tristan Pettit draft our lease (he drafts the lease for Wisconsin Legal Blank) to make sure this language was present as we often do leases over 12-months to avoid winter expirations.  Our leases always expire the end of March through the end of June.

**I'm not an attorney, do your research and talk with legal professionals before believing some guy on the internet** 

@Matt Jones oh boy that would be too far for us. Maybe a local real estate agent could help you out with showings and leasing if you aren’t local?

@Matt Jones which Suburb?

Hey @JJ Espinoza,

I found some more photos online, I agree with Marcus that the $5,000 budget in initial repairs might be low.  The building looks to be winterized, and these older West Allis homes usually still have galvanized plumbing which is notorious for rust build-up and issues, particularly when winterized.  

Did you pull rent comps from rentometer.com or get them from the seller?  $1,800 might be aggressive depending on the level of renovation you plan to do... but if you are planning to keep things to $5k, you likely aren't going to get $1,800 on this one.  I'm guessing the upper unit, while listed as a 2-bedroom, is pretty small and will rent for $700 - $750.  The lower can range anywhere from $850 - $1,000.  Not sure on the parking situation, but these homes that are set back on the lot with the front yard being the only green space tend not to be the most popular.

The water will be on you as the landlord, but gas/electric will be paid once you get a resident in place.  Most often the residents will share lawn/snow responsibility, but that can come with some increase in management duties on your part when it isn't done on time.

You can shift the $100 / month for electricity over to your cap-ex budget and likely be in pretty good shape. We find that most duplexes around Milwaukee average $225 / month in cap-ex if you break everything out over a 20-25 year period of time. The $50 you have budgeted for garbage will be on your tax bill, so that you may have doubled up on. The $100 / month on the water is probably about right, of course that depends on the occupants and their usage. Your repair budget I think is likely healthy, of course depending on the amount of upfront rehab that you do. Generally speaking, it is always my recommendation to do more renovation on acquisition as it can be built into your financing (BRRRR). Trust me, buying roofs and furnaces a couple of years from now feels WAY more expensive. Oh and replace anything that water touches now, plumbing related issues are by FAR the most common service call we deal with.

Hope that helps!

As someone who's business is quite literally built with out of state investors, to this day it remains my first recommendation to always try and buy locally whenever possible.  My second recommendation is to buy locally whenever possible. My third... Ok you get it.  

Technology has made it easier than ever to purchase property 1000's of miles from where you live.  That strategy can make a lot of sense when you are looking to market diversify, or purchase a vacation rental somewhere you'd like to travel (but that doesn't seem to be the case in your scenario per your comments).  Many folks underplay the amount of work building a team across the country can be, particularly when dealing with an STR.  

I'd like to push back on your Milwaukee STR comment a bit.  I've compiled a quick list of publications pointing towards Milwaukee as becoming a tourist destination for your reading pleasure :-)

https://www.eater.com/2020/1/7/20961410/best-places-to-eat-travel-2020

https://www.forbes.com/sites/laurabegleybloom/2019/12/19/best-places-travel-us-2020/#5e5d9bae4898

http://www.vannuysnewspress.com/2020/01/05/milwaukee-to-be-americas-most-showcased-city-in-2020/

https://www.bizjournals.com/milwaukee/news/2020/01/16/viking-to-add-great-lakes-cruises-bringing.html 

Hey Stuart,

Zipcodes often are much too large to look at for many of these metrics, even neighborhoods can drastically vary from one end to another.  Below is a list of neighborhoods that our clients tend to be focusing on these days, most of which should meet your expectations (might not be able to find 1% properties in Bay View anymore though...).

• Washington Heights
• Nash Park
• Grasslyn Manor
• Sunset Heights
• Capitol Heights
• Story Hill
• Silver City
• Johnson's Woods
• Bay View
• Brewer's Hill 
• City of West Allis