All Forum Posts by: Matt Maurice

Welcome @Christine Rand!  It sounds like you have been taking some time to properly educate yourself prior to diving in which is great, especially if you turned real estate into a career simultaneously!  After 3 years of information, I'd agree it's probably time to jump into the game.  The old saying, it's time in the market, not timing the market.

Milwaukee has a ton of groups, I'm not familiar with the Madison and Fox Valley areas though. Milwaukee REIA, AASEW, and Brew City are the main go-to's, you can talk to @Rebecca Knox to get you into the Brew City Facebook group, the other two groups have websites and regular meetings you can attend to network and learn.

@Adam Gollatz it's easier for me to find the thread if you had tagged me in it ;-)

@Charlene Isoh "Welcome" to Milwaukee!  While no doubt cashflow is important, don't completely overlook that appreciation aspect.  Milwaukee has a ton of great stuff going on, make sure your potential property can catch the upside when the city really takes off! 

There are several great agents to work with, Adam has a great investor mindset as does @Marcus Auerbach.  You'll want to align your strategy with your agent as not everyone can be an expert in all asset classes & neighborhoods, even in a small town like Milwaukee.  

Similarly, property managers all have their niches from low income to luxury, suburbs to city and MF to SFR. At WHM for instance, we handle SFR and Duplexes in Milwaukee county that generally rent for $1,000+ ($850+ if duplex). I'd suggest talking with @Rebecca Knox and becoming part of the Brew City Facebook group where a TON of information is passed about MKE service providers.

@Aaron K. In regards to your tenant concern, my general concept relates to any standard risk/reward scale and you need to decide where you fall.  

A 2% rent ratio house or higher is like a penny stock.  You may hit it big, get a great tenant that pays rent and stays for awhile plus doesn't leave the house a pigsty, but the chances of that happening are far less than a trashed house.  There are ways to mitigate that risk with good management practices, but the best screened residents in these areas still run into life problems.

Conversely, a .5% ratio house may not look sexy on paper but it will be nice and steady, appreciating in value as expected with outstanding residents that pay on time, clean when they leave and won't punch holes in your doors.  Compare this option to a low yield bond, for instance.

You need to decide what risk tolerance you are willing to accept to chase a higher yield, while also potentially requiring you to be far more involved.  In 5 years of professionally managing in Milwaukee, I can think of 5 instances off the top of my head where investors went the risky route, and within 3 years had completely exited the market with a sour taste in their mouth.  

In my opinion, real estate investing is a 6% - 8% return when treated completely passive.  You can achieve much higher returns when you become an active investor (acquisition, management, maintenance) but then you have to ask yourself if those activities are truly the highest and best use of your time.  For some folks, it very much is worth their time but I think for the vast majority of people, they undervalue what their time is really worth.

Hey @Aaron K., awesome you are considering the Milwaukee market I think we have a ton of opportunity here right now (definitely better than Chicago and Detroit ;-)

To piggy back @Marcus Auerbach points, many investors purchasing OOS in Milwaukee are attracted by the low acquisition prices and high rent ratios.  In most of these neighborhoods, you have properties forever in the hands of landlords built in the 1930's or 1950's, that for decades have been slapped together for the cheapest dollar.  Even most turnkey providers that do "complete rehabs" aren't doing the level of rehab a property of this age should receive, and who can blame them?  Why spend $50k on good rehab when you bought the house for less than that?  

Whether it be 2 years, 5 years or 10 there tends to be a cycle of these properties from purchase & "rehab", slow decline in upkeep then sell to the next OOSI who wants to do a "rehab".  A furnace installed costs around $1,600 whether your property rents for $800 or $2,000.  Add in a resident base that tends to be a little harder on the property (doors, paint, cabinets, flooring, screens), the maintenance costs can quickly overrun that sexy rent ratio analyzed on day 1.

When you say you are looking for a decent cap rate, what does that mean?  Are you looking at your cap rate after cap-ex, maintenance, property management and vacancy?  How involved do you intend to be on the acquisition? 

Hey Eric,

Welcome to BP!  Bay view continues to be a strong market, that house should be easy to rent & manage.  Single families are our most popular rental across the board, and because your tenant will be responsible for all utilities (including water), lawn and snow your return can be similar to some multi-family properties.  

3/1.5 in Bayview can still have a pretty large rent range depending on which side of KK you are on and finishes.  I'd suspect you should be between $1,300 - $1700, potentially a bit higher if you have nice finishes.  If you haven't used it before, www.rentometer.com is a cool tool that will help in your rent price selection.  

Good luck!

$10k just isn't enough to deploy either of your strategies.  Cash reserves are necessary with either option, and you will be far too leveraged which can be disastrous.  

Option 1) There are no reasonable deals that you could purchase out of state, with hard money, that will cash flow $400-$600 per month.  You'd be better off putting the $10k into penny stocks, or potentially even watching it swirl down the toilet as the entertainment factor will last longer.  We like to coin these types of properties as fools gold... the look good on paper, and never ever ever ever play out the way you want.  

Option 2) If the money was burning a hole in your pocket and you had to spend it, I like this option better.  But to the other points of folks here, might be stretching yourself think still.  

I think the best option is to wait, continue to save and evaluate deals as they come across your desk.  Be ready to buy when the time is right with a great understanding of what is, and isn't, a good deal.

Never rent to family

Never employ family

Never hire family

Never do business with family

So not really all that helpful thus far, but my father in law adopted this policy years ago, to which I was a bit offended he didn't contact me to sell a house but when explained, I respected the decision and couldn't agree more.

Real estate transactions are complicated and involve often a significant amount of money.  Even the best agents sometimes have a deal go sideways.  Personal relationships are never worth risking over a commission.  

It's going to be uncomfortable, they aren't going to be happy, but you need to have a conversation to discuss going in opposite directions.  When my father in law didn't use a friend of a friend to sell a house, she didn't talk to him for 6-months.  Better 6-months than never had a transaction gone bad...  rip the band-aide, have the conversation, move on.  

I can't say it any better than @Nathan Gesner

Congrats!  The first one tends to be the most difficult, build the team, the system and let the ball keep rolling!

Care for some unsolicited advice?  

If you are on 86 then you have 265 to catch up.  Every episode is at least an hour, factoring in they produce about once a week that means if you spend 10 hours a week it will take you around 30 weeks to get caught up.  

Cut that in half (at least), find the most popular episodes that are applicable to your point in REI, spend the remainder of that time building the basics of your investment business. Evaluate more deals, talk to more sellers, practice negotiation, build your team, network with folks.

Look I love the BP podcast, but don't lose 2/3 of a year just listening to other people crushing their goals... go out and crush yours!