All Forum Posts by: Nick Harrington

Hey Elijah - I have alerts set up whenever someone mentions the word Milwaukee in a post, so here I am! I live in Milwaukee, have househacked in two different properties, am a realtor, and almost all my business is working with investors (house-hackers, out of state buyers, flippers, etc). 

In general, you can househack anywhere, and the most important part of househacking is living in a location you want to live. It doesn't have to be a duplex / multi-family, it can be a single family home that you rent rooms out to friends / strangers. 

I am (to no-ones surprise) very biased on the Milwaukee area for a lot of reasons. First off, I live here and love it here- but for more of the numbers / data side of things, the average duplex price is $200k (in more desirable areas you are looking at $300k - $450k), super consistent and steady appreciation (right around 8% YoY for the last 4 years), 2nd strongest renters market in the US this year after Miami, 3rd most duplexes of any city after New York & Chicago... the list goes on 

On Facebook- there's a group called Milwaukee Off Market Deals (or something along those lines). It's a pretty active group / community and a lot of wholesalers and people in the industry will be on there

Hey Jalen - 

I work with a lot of investors in Milwaukee, and also am an investor myself here too. 

On paper and in practice, the BRRRR strategy is great. Phenomenal CoC returns, recycle your money, ability to scale, etc.

For Milwaukee specifically, the most difficult part of doing a BRRRR here is finding the deal. For any property purchase, the deal is made when you buy, not when you sell. The majority of inventory in Milwaukee that is listed on MLS as an "investor special" or with "value add" etc, typically does not have enough spread to exit a deal with no money down post refi.

The common rule talked about with BRRRR is the 75% rule (you want your purchase + rehab costs to be 75% of the ARV). If you find a deal like this, typically you can leave no money in the deal post refi.

Where I see most deals priced on the MLS now are going to be 85% - 95% deals, meaning that post rehab, you have created about 5% - 15% of equity.

Your best bet to find a BRRR deal (or even a flip deal) is to connect with off market resources (wholesalers, agents that specialize in this space), or to cut these people out and source deals yourself. Door knocking, postcards, cold calling, etc. are going to be the best bet for finding something that is going to hit the numbers you need.

Hey Dan - 

I think it all comes down to what your short and long term goals are.  I know not the answer you are looking for, but this is where any real estate conversation normally starts. If you don't know what those short and long term goals are for yourself financially, it's hard to reverse engineer to what type or how real estate investing fits into those goals, and I would start by clearly writing out what those goals are for you. Is it leaving the restaurant biz? Is it retiring early? Or is it simply just building your net worth? 

Taking a quick look at the financial picture you provided - a couple things come to mind: 

- Your financial picture is solid
- You have a lot (enough in savings as you put it) for retirement already
- Your restaurants probably pay your living expenses and then some 

Are you looking to step away from the restaurants and build something passively? Are you wanting to stay engaged in the restaurants but diversify your portfolio? 

Without having a full picture, it's tough to say what that "best" next step is for you. However, from what you've said, if another property is that next best step for you, I would lean towards a property that is in an A or B neighborhood in Milwaukee to take advantage of the appreciation that Milwaukee has seen, as these are the neighborhoods that tend to appreciate at a faster rate than others in the area. 

If we just look at Shorewood for instance (an A neighborhood in Milwaukee), the average sale price in January of 2021 was $381k. Today, the average sale price is $463k. While your cash flow in this neighborhood will be marginal, your return in 3 years from equity (if the trend continues) would be around $80k.

@Robert Damato That's amazing! Who is the group that is doing it by chance? 

Hey Dzung - 

Milwaukee attracts a lot of out of state investors for four main reasons in my eyes: 

1.) The average duplex price is $185k
2.) Strong renters market - as Marcus mentioned, we are in the top 10 in the US in terms of renter demand
3.) Landlord friendly state of WI
4.) Amount of duplexes - Milwaukee has the highest percentage of population living in duplexes at 20%

Mix these together - you have a market with cash flowing properties. On top of this, Milwaukee is a consistent market in terms of appreciation... we don't see the significant swings in pricing like a Boise, Austin, LA, etc is seeing now. 

In terms of neighborhoods - would be happy to have a deeper dive into areas I see out of state investors succeed in. My general rule of thumb is being out of state, I would rather your first deal in Milwaukee be a single / double in terms of return, but it gets you comfortable with the market and your core team (Agent, PM Company, GC's), and most importantly, it leaves you with a good taste of investing here. A lot of this will boil down to the location you invest in, the condition of the property, and the PM company you choose to hire. 

Hey Evelyn - 

Milwaukee attracts a lot of out of state investors because of the lower average price points, cash flowing properties, and number of duplexes (though inventory has been tight). 

I agree with Marcus' thoughts - are there cash flowing duplexes under $200k for sale? Absolutely. Are they good buys? That really depends on what your goals are as an investor.

I think the most important thing to understand when buying duplexes in MKE for < $200k is there will be additional expenses that you will need to budget for in the short and long term. Often times we see duplexes with years of deferred maintenance pile up, it becomes a can that gets kicked down the road for the next owner, and then this repeats. 

When investors don't understand these additional costs on the front end is where we  can start to see investors become frustrated and not succeed.  

With the budget of < $200k, I would hone in on a property that is structurally sound, could use cosmetic repairs, but it appears that ongoing maintenance has been performed consistently on the property. If it is an old property, your upfront repair & ongoing maintenance / cap ex costs are typically going to be a higher.

There are deals on the MLS now that on paper have a COC return of > 12-15% - but always keep in mind maintenance costs are going to be higher because of the age and condition of the property, eating away at these returns if you don't budget for it.

I always recommend a first deal to be a "base hit", especially being out of state. The returns might not be an outrageous deal (obviously the numbers have to work), but it will be a safe first property that will yield return, and will not leave a sour taste in your mouth about rental property investing. 

Hey Victoria - 

I'm a real estate agent here in Milwaukee and work with a lot of out of state investors. I find most out of state investors are attracted to Milwaukee because of the lower price points, strong rental market, and cash flowing properties. 

Here is my two cents on out of state investing, specifically in Milwaukee. 

- I always recommend to invest in a market you know, and ideally in your local market. Investing in NYC poses it's challenges, which is probably why you are looking out of state. The fact that you have 7 years of knowledge of Milwaukee, a network here locally, and frequent the city helps you to make a confident decision when it is time for you to purchase.  

- As far as property type, it depends on what your short and long term goals are. From a buy and hold perspective, I would lean towards multi family properties, as this will yield the strongest cash flow. Milwaukee has a lot of duplexes in the area (granted, there has been a shortage of inventory recently). There is a decent air bnb market here as well if you are thinking the STR route, which lends more towards single family homes, but the buy box for an ideal Air BNB is going to be much more specific than a multi-family property that will cash flow.

- My personal experience investing here has been great. My portfolio is made up of multi-family properties predominantly in the East Side and Riverwest area, which I like because there is a strong demand for renters here, and rents YoY have been steadily increasing. 

- As always, you want to be sure you have a strong team in place you can trust including a lender, an investor friendly agent, and a reputable property management company. Happy to provide you some recommendations if needed. 

Reach out if you have any questions and want to have a more specific conversation regarding the benefits / risks

Hey @Robert Damato- 

I currently own a duplex in the east side, and I have a group that is performing air bnb arbitrage on my duplex. Essentially, they signed a 12 month lease, furnish the property, list it on air bnb, and they handle all the logistics of the air bnb. They pay rent, and then take home the difference between air bnb revenue and their rent. 

With this, I get above market rents, am locked into a 12 month lease with guaranteed revenue, and they act as a property management company to a sense: they are there cleaning the unit during turnover, it's in their best interest to keep the property pristine so they can get good reviews to get future bookings. 

It's a better return than I get with a standard 12 month lease, completely hands off for me, and I have a built in PM company that needs to keep the place looking good. 

So far, it's been the best scenario for me to be hands off but get higher returns that I can find. 

Let me know if it's something you'd want to talk more on, happy to connect you with them. 

My personal opinion on tools.... get a cheap one the first time you buy. If it breaks, it's probably because you are using it a lot, so then get the nice one of it! Worst case, you're only out the cost of the cheaper tool.