Milwaukee, WI · Member since 2015 · 30 posts · 5 votes
Hi all!
New to the BP site and excited to network with like-minded individuals about investing in real estate.
A little about myself: born, raised and have lived my entire life in Wisconsin. Married with no human children but with two cats. Currently working in Information Systems at a prominent life insurance company but will need to become my own boss. Why? I'm just built that way.
On to my topic. I am reading "The Book on Investing in Real Estate with No (and low) Money Down". Excellent read, so far.
I was wondering if anybody has any experience with the scenario described on page 83 where the author describes a situation where a hard money loan was obtained, then refinanced.
I have very little capital and zero experience in investing and was wondering if I were to obtain a hard money loan, how long do I have to wait to refinance. For a LTV mortgage, do I need to have a down payment? Does anybody else have a success story for this type of scenario?
Any help you could provide is greatly appreciated!
Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
11y
Hi @Steven Scheer
Welcome to BP! I am a Milwaukee investor as well. There are quite a few investors from Milwaukee on the site.
In regards to your question, while I have no experience using hard money, I'm fairly certain you can refinance into a conventional loan whenever you want to repay the hard money lender (assuming there are no prepayment penalties). The biggest concern will be that you will need to buy at a large enough of a discount in order to be able to refinance. Most conventional lenders are not going to lend at more than 75% or 80% LTV. Therefore, when the hard money loan is due, you will have a big problem if you don't have enough equity or if you cannot come up with enough cash. Most hard money loans are short term--a few months to maybe up to 12 months for a ballpark average. You can read some threads on BP on how people successfully use the strategy that you are considering.
Also, just make sure you know what you are getting into if you start investing in the lower income areas of Milwaukee. You will need to be very hands on and will have to do a great job of screening tenants among other things.
Greendale, WI · Member since 2014 · 4 posts · 1 vote
11y
@Steven Scheer, Welcome to Bigger Pockets. This is an awesome site, as you can already tell from the feedback you've gotten so far. Like you, I also work at a prominent life insurance company in the area. I have been listening to the podcasts and checking out the forums for a little while now. Still working towards getting my first deal. Anyway, there is a meetup this Saturday on the topic of tenant screening, which was brought up earlier in this thread.
Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
11y
I don't want to be a Debbie Downer here, but starting out with little money and little experience is very difficult despite what all the books and gurus tell you. In the real world, I've only ever seen three paths to success when starting with very little: 1) Some forgiving friends or family backing/money 2) Accidental landlords who wind up with a property (move and don't sell, inheritance, etc) and become real estate investors (house hacking is a subset of this) 3) Super ambitious all-or-nothing types with a lot of guts (1 in a 1000)
I think you need to step back and ask yourself what value-add you can provide that other players in your market (with 100 times more experience and capital) need or lack.
All you bring to the table is sweat and energy, so think about ways to leverage that. @Patrick Jacques had an excellent suggestion of partnering with someone who's in the game. You can find those people either here on BP or at your local REIA. Successful investors always have a need for door knocking, cold calling, etc.
The wonderful thing about real estate is that there are unlimited approaches, niches and angles. And it's, by definition, local. So there is always some value in being able to go to a property physically whether it's to market or do due diligence.
Broker, Investor, Property Restorer · Fox Point, WI · Member since 2012 · 288 posts · 120 votes
11y
Steven, I know a few people who have made great, even close to ridiculous money-99% cash flow, little shot at a lot of appreciation-on the north side of MKE and I know a few seasoned, experienced landlords with fairly deep to deep pockets from other areas, who lost a lot there before finally selling for what they could get quick out of whatever they had and then split back to where they'd made their original money. Now, its what some call a "war zone" but I don't like too much to simply plaster that label all over the place, even if its "high crime" according to even our local paper's "crime map", "murder map" etc because what's interesting is you will find some blocks that live up (or really down) to those terms, dudes hanging out all over, checking me out to see if I'm there to buy "something" from them, etc but then you'll find other blocks that will have many well cared for homes on that block or blocks and as it turns out, many long term owner/occs or long term renters and you just have to go and scope it out to see each area.
I never found a cohesive secret to finding great tenants there, other than "older people" was maybe the closest, BUT it sounds like you have a good or great IT job going, while I applaud your wanting to jump out on your own, be your own boss, etc and say to keep thinking that way, I'd HIGHLY recommend saving up a lot more $$$ reserves first, unless maybe as @William Hochstedler mentioned above, your the 1 in a 1000 superman, but that's hard for anyone to predict for themselves.
Also, one thing I've warned out of towners about buying here when I hear these people raving over our low entry prices and what looks like GREAT cash flow (assuming you get paid your rent) is to figure the city of MKE into your plans BIG TIME and that's double the reason why I'd say to get a much larger reserve, unless you find some new line of credit to tap that's at a LOW % rate, because the city inspectors are usually just fine to work with, BUT the city govt has a big beef with anyone coming here who thinks (and NOT meaning you here!) they can buy in cheap as hell, collect their rents, but do the bare minimum or even be halfway cheap on upkeep and sure as heck tenant safety issues, basically sucking the life and money out of an area that needs some help and contrary to the opinions of many who spend zero time there, is NOT just an orgy of drugs, crime, violence, etc but has a majority of decent people there who likely grew up there, its home to them and even for many who could afford a "better" (ie pricier) area, its still home.
I'd hate to see someone with good intentions like yourself, who is forced to scrimp on something or things due to flat out lack of funds then be labeled a slumlord, since the city has a MASSIVE hammer to whack the heck out of anyone they think of that way, as code just for exterior is basically a like new structure, down to the paint not chipping etc and they can rack up 20, 30+ code violations instantly and then take that "slumlord" to court, get a civil judgement so you can't even just walk away then, it will hurt or ruin chances for any other mortgage, they don't want that happening and I've seen it happen to people who most of the time, did deserve it. $5k won't even cover a cosmetic rehab and the city also hammered the biggest mega banks on REO homes they let slide, forcing them to hire crews I knew to spend $15k, $20k or more JUST ON EXTERIOR WORK, insides still trashed in areas where nothing sells above $50k or $60k, using same tactics. They were going to get the civil judgements and then go after the banks ability to operate in WI eventually, but it of course never got that far and Citi, BOA, etc gladly spent hundreds of thousands, maybe millions on homes that are likely still vacant, just with new paint, fixed porches, windows, etc!
Build that reserve, keep the spirit and then jump in there, its worked well for many!
My first reaction to your post was "Yikes! Milwaukee isn't that bad." but then I realized the context is buying with no money down. That does sound like a bad idea especially when buying your drug rep neighbor's beat up house with no extra cash to fix it. I would highly suggest having a local person to advise on rehabs who knows what inspectors are looking for- cracked driveways, railings, peeling paint, sagging gutters, etc.
@Dawn Anastasi don't forget Mehran's interview about how awesome you are. Episode 73:)
Broker, Investor, Property Restorer · Fox Point, WI · Member since 2012 · 288 posts · 120 votes
11y
Well @Mark Shaffar when you mention if whether or not Milwaukee is really "that bad" or not (and this is the CITY of Milwaukee I'm referring to, NOT anywhere in the entire metro of nearly 2 mil people and maybe 30 or 40 cities and villages, etc but the CITY is only place where you'll find many or maybe 75 to 90% of these "incredible buys with awesome rents" I keep seeing people from mainly the coasts getting all hot and bothered over!) but I've been around this market first as simple of a landlord as you'll find, buying the duplex I was renting in in 1999, then jumping in on someone else's coattails who taught me a LOT (and someone HUGE here-or WAS huge!) and while I've had an up and down number of rentals I'm holding (right now just one single fam)
I've settled in on high end rehab/flips since I have the good fortune through no work of my own to have access to a nice pile of avail cash to buy them and after running into some issues after taking on several that aren't too high end ($200k to $280k fixed up prices) that will likely now net me a little bit at most or maybe even lose a bit, I'm sticking back with my bread n butter, high end, screw the rest too much hassle for too little even half "guaranteed" net profits. Main focus now is one that had to sit for the 4 months due to IRS lien, but its 4000+ sq ft castle in one the most A+ prime burbs here on 2.5 acres, so I had to slum it here for a bit and I'll post pics when it lists in I'd say early August for probably $1.3 to $1.4M, barring some massive crash or doomsday between now and then.
I'll be curious to see how some of these out of town people as well as any in the metro area do, since several people's #'s I've seen sound like a recipe for disaster to me, since once you piss off the city of MKE and they brand you as another bloodsucker (whether relly true or not!) who's going to be another big net negative for MKE, they'll smash anyone like a bug in your kitchen, trust me I've watched it unfold at least 6 or 7 times now and a few were HUGE here, including the guy who taught me the ropes and who basically dominated the local auctions here, he had hundreds and hundreds of mainly single fams and duplexes all rehabbed and rented out, not dumps and he's now wiped out, rebuilding from nothing or trying to.
Another one who got BIG and then was wiped out by the city publicly targeting him with the mayor (still the mayor now) going on tv and saying he was the #1 slumlord, a criminal, etc (he wasn't perfect but sure as hell didn't deserve THAT!) and saw him go from an incredible totally self made success story who in maybe 10 years, went from early 20's and trying to rub two nickles together to his newly built mansion on Lake Michigan, just down the road from my flip now, brand new Ferrari 430 spider in front of it, plus more nice cars in garage, etc and he said he was lucky as hell to have set up an IRA with a few hundred grand in it they can't get, other than that he had the clothes on his back when they were done there!
I'd just say be careful as heck and don't get over extended money or time wise, since either one can make anyone look like a slumlord and once that happens, you're already circling the drain! When I'd see people talking about buying some duplex for $30k, $40k, etc and then setting their "rehab/repair" budget at say $10k or $15k, I'd think "wow, better hope NOTHING goes wrong" which is unlikely as hell in a beat down, 100 year rental property. Even J Scott, who had great success in ATL before on flips and his website shows the VERY well run, tightly managed operation to shoot for and who several people I'd deem totally credible said did top quality rehabs here had his issues with ridiculously picky buyers, even if rentals are somewhat different you're still rehabbing or at least keeping in decent shape and having too low of a budget or just biting off more than you can handle is a recipe that I've seen first hand wipe many out here! That said, I still know more who've done fine, but they live here!
Milwaukee, WI · Member since 2015 · 30 posts · 5 votes
11y
Thanks @Robert Taylor. That's good information to have. After doing some extra research, I'm probably going add the 5k to an account that has been earmarked for a house down payment. We'll probably go with a duplex to gain experience and raise capital. Also, I'm not sure if you saw, but I am originally from Milwaukee. I currently live in Waukesha but that's due to my wife's work situation. Would an investor living in Waukesha be considered an out of towner?
Broker, Investor, Property Restorer · Fox Point, WI · Member since 2012 · 288 posts · 120 votes
11y
For some people, heck yeah Waukesha, either the city of Waukesha or anywhere in Waukesha county might as well be Greenland as far as they're concerned, while for others I'd say not as much to not at all. Again, I DO NOT want to convey the idea that I'm saying one wrong step or even half wrong step and they'll make your life hell forever, not at all and I honestly can see exactly where they're coming from, they've had many slumlords come in over the decades and for any inspector, or anyone dealing at all with neighbor's complaints. For some over here, even their personal politics are a huge barrier, I've heard it myself MANY times last few years when I'd mention I grew up in Waukesha Cty, but have lived in MKE Cty for most of last 20+ years. (although city of Waukesha is the one (and really only) spot in that county that's pretty even that way, but some people are still foaming at the mouth 24/7, while guy in next cubicle couldn't care less! I think even living in a much more well off part of the city of MKE is out of town to many too!
Also they'll have the MPD coming over yet again saying "Hey 2264 N 43 Pl is a hell hole, he's got dealers in both units, cars parked all over the lawn, blah blah blah" that ticks them off to no end, especially if it was a recent purchase from previous landlord who watched the place like a hawk, heck yeah if I had their job I'd want to send that landlord back to wherever and hopefully with a (figurative!) black eye as well, so if he gets any more bright ideas for MKE RE gold mines, he thinks twice and stays away!
I totally understand WHY many are like this, we have some spots that numbers wise, are as violent as ANY other city in the US of any size and they see their role here as #1 overall priority is keeping ALL slumlords or even just cheapskate landlords who are cheap as hell yet sure as hell better get their rent dammit, OUT of there or else so scared that they straighten up! Plus, even though residency for city workers was abolished by state legislature a year or two back, I think its still tied up in court since MKE sued and almost certainly will eventually lose from everything I've heard, but for now residency is still 100% in effect, so these workers are protecting THEIR CITY!
Get in good with several and show them you're a good or even great guy, which doesn't take ridiculously deep pockets, but in my opinion sure as heck takes more than 5 g's ! You've got a good job though, save up and you'll be golden real soon!!!
I'd just step cautiously and give same advice especially to anyone from outside WI, be careful as heck,
Self Employed · Milwaukee, WI · Member since 2015 · 135 posts · 45 votes
11y
I've bought in D neighborhoods and have loved every minute of it! For one, its an adventure(isn't that what life is about?) and I got refinanced on a property on 24th and Hopkins by Rob Seetan at Brewery Credit Union. Realistically, you only need to collect 50%-70% of rent to get an awesome return on your money so it's just as safe of a risk as a place that you need to collect 95% of rent to make a desired return. I definitely recommend being active and showing your face 2-5 times a week. If you don't have time to do that, they will take over. Everyone can tell horror stories about everywhere. You just have to push past that and make your first move. Do you want to keep living the way you have been or do you want to take a chance of making the life you want? That's the real question. Good luck! Feel free to contact me.
Broker, Investor, Property Restorer · Fox Point, WI · Member since 2012 · 288 posts · 120 votes
11y
I think @Nathan Schoenborn nails it when he mentions about showing his face, being a pro-active landlord, etc and that plays into both what the tenants think, the neighbors AND the various inspectors, etc from the city all will soon surmise as to who the new landlord is for whichever house on the block is.
One thing that bothers me on a whole different level is when people from outside of these areas make comments basically saying the entire area is a cesspool of drugs, violence, etc since the truth of the matter is even in the "roughest" part of town, there's still a MAJORITY of people who are not criminals whatsoever and many people who choose to live there because its home to them and not just "all they can afford".
If you are the pro-active landlord, you'll meet the many more good people in these areas and often, they'll clue you in to some good tenants (still requiring a full screening process both for doing the right screening and for legal reasons, you really need to screen people equally no matter what) and the city will see that you're not another replay of what they've seen too much of, the out of area (could be just living 5 miles away or 2000 miles!) landlord who wants to suck every cent out and stick as few back in as possible. Even if you live in CA, it is possible to be the "great landlord" with the right PM, but then you better be darn sure you have the right PM!
That's also why I've recently decided to avoid using terms like "war zone", etc too, I think it stigmatizes the entire area and makes us as landlords look like we're over-generalizing in a very negative way and is an insult to the majority of good people who live in these areas, some of whom I've met over the years. Just as I can sound very negative about the possible dire consequences for anyone thinking they've just found a magic cash machine by buying in the lowest priced areas here in MKE, I think the flip side of that is that a landlord who gets a great rep with both the residents AND the city as a decent landlord could have all sorts of great opportunities fall into their laps over and over again!