New young investor in Wisconsin. Any advice?

24 Replies

Hello BP community! Young (20) and married. Just moved to Madison, Wi from Seattle, Wi for a job. Work for a healthcare field position that’s very flexible in my time but I can’t do the 9-5ish much longer... Just not in my blood. Also, can’t justify renting $1,350 for a 1 bedroom. Lot of investors wished they had started earlier. I want to get my foot in the door with (2-4 units) small multi family RE. Wondering what some would have done if they could go back. Been trying to digest everything BP videos on YouTube and Forums but I’m still overwhelmed to take the leap. Have a small savings saved up (15k-30k). I want to replace my current job with RE.. one day. Really interested in the brrrr, house hacking...... Buyjng your first mutlifamily 1. Is Wisconsin a good market to invest in for a beginner? 2. Conventional rehab loan vs. 203k FHA Loan? 3. Any tips on Madison, Milwaukee, Janesville area? (Banks, real estate agents, good (GC, GM, PM?), 5. Any cons or things I should be aware and alert to being a beginner? 6. What’s one of the best ways to get my foot in the door? Let me know if I need to clarify or give more info.

Wisconsin is a great place to invest. If I were advising my younger self I would say to house hack a duplex (or if you can find a 4-plex, great!) to start. Borrow with as little money down as possible (3.5 percent). Live there for a year. Then either house hack another duplex or trade up to a larger building. 

Even if the first deal isn’t perfect, you’ll learn so much in a year from house hacking that you’ll set yourself down the path to financial independence. What matters is action. Take that first step. Good luck!

Hello Yuriy! I am a newbie as well currently working on my first deal as a house hack, I can’t really give advice yet but can encourage you to get in there and don’t quit! Also welcome to the area and best of luck to you and your family!

Welcome to Madison! It's pricey here, but compared to Seattle, well, I think you'll find bargains! There's a local investor group in Madison that meets every other Weds. Attendees range from beginners to more established investors. All sorts of strategies. Some flippers and some BRRR, some buy and hold. Some folks go to every meeting and some go once every couple of months.

Not sure if we're going to meet July 4, but I'll tag one of the organizers @Hussain Harun who will know!

@Yuriy Mulyarchuk , Wisconsin is def a great place to invest! The Midwest generally speaking def beats the coasts for rentals. Anyways, there are def pros and cons of the various locations in Wisconsin as well as different strategies.

You should def check out the BP meet up that meets every other Wednesday in Madison at Brink Lounge downtown. The next meet up is July 11th. Then July 18th. After that it'll meet biweekly every other Wednesday. 

Shoot me a message if you want more info! :)

@Hussain Harun @Tanya F. I'd love to go to one of your meet ups but I live in the Northwest Suburbs of Chicago. Milwaukee is very appealing to me but I have no idea about the neighborhoods other than crime maps. Any suggestions on how to break down Milwaukee and figure out the good and the bad. I also work 9-5 and am trying to build up a portfolio so I no longer need to do this as I LOVE real estate. 



@Jack Medford and Dave C. any advice on where to start in terms of neighborhoods in Milwaukee? Obviously close to campus is probably good but where else can I research to narrow down the location?

@Gina Smith definitely start with Dawn Anastasi's e-book, as well as her website, Her e-book does a nice job of breaking down the neighborhoods and gives a good intro to the city as a whole. In addition, her website provides recommendations for various contractors. Each reference I've used from her site has worked out well for me. 

I also suggest using Trulia crime maps to get even more info about the various zips and neighborhoods. When first starting out, I compared Dawn's neighborhood grade with Trulia's crime map. If both lined up with what I was looking for, then I added the neighborhood to my target area. 

Being from out of state, are you planning to stick to the A and B class neighborhoods, or are you ok with dropping to the C's as well? I definitely recommend avoiding the D's, although even some zip codes classified as D have ok pockets. 

To give you a general sense, Dave and I focus on 53209, 53215, and 53218, but we also consider "worse" areas like 53210 and 53212 if we get the right neighborhood. We target neighborhoods that classify as B on the high end, and C- on the low end, so some of these may not be right for you depending on your goals. 

This is getting kind of long, so I'll give one last starting out advice for now... Don't chase returns down the rabbit hole. A 2 bed in a nice neighborhood wont go for much higher than a 2 bed in the hood. This leads to a lot of newbies (including myself) to chase deals into bad areas. Luckily I didn't buy anything, but I did waste some time driving to Milwaukee and analyzing deals that were only going to be a long term headache. 

Happy to help more if you have any questions. Send me a message or ping me here. :)

@Gina Smith , if you want to pick our brains, it will be pretty slim pickings.... :)

I second everything @Jack Medford said -  Dawn's e-book has some great info on the city, and Jack pretty much summed up our approach.  I'd also recommend reaching out to a few realtors and property managers, and making a trip up to Milwaukee once you think you have an idea of what you are looking for.  It is a very interesting city with a nice variety of properties, and it is close enough to Chicago to be a very reasonable day trip - you aren't much further away than we are from Madison.

Best of luck - maybe we'll see you there some time.

Wisconsin is a great place to start! I got involved in real estate (Milwaukee) when I was 25 and single (no family in the area, no real estate experience or mentors yet... just a ton of online research). I used WHEDA to purchase a duplex (great program to look into for a duplex or 4-unit in Wisconsin). I lived in half (with a roommate) and then had tenants in the other half. WHEDA requires minimal down - which helped me since I didn't have much savings yet (3.5% down). I quickly learned how to fix things myself, how to manage tenants, how financing worked, etc. Even better, I quickly saved up enough money for another property since everyone else was paying my mortgage. Bought a condo for 60k with 15% down with an in-house mortgage from a local bank (3/1 Arm). I later refinanced out of my WHEDA loan (must owner occupy) into a conventional so I could eventually rent it out... The cash flow from the three units I mentioned enabled me to buy two more properties recently (1 investment SFH and 1 owner occupy, which I plan to rent out after a while). I'm now looking at my next opportunity - hopefully a multi-unit I can purchase with some cash, some equity and some financing. My strategy is slow and steady, but all properties have very healthy cash flows with minimal down. Have to keep in mind your debt to income ratio for the long-term though if financing - that would be something I wish I understood in the beginning. Sorry for the ramble! Your strategy may be very different if you plan to do this full time - I have another FT job I love hence the slow and steady mentality.

I  haven't read all the replies so I apologize if my answer is redundant...

Wisconsin is a great place to start investing. If you are a little turned off by Madison prices, I suggest trying for a rental outside of Dane county first (Dane county also has additional tenant-protecting laws that can get a bit tedious). You'll see a significant drop in home prices, property taxes, and still get cash flowing properties.  I suggest feeling out different realtors also... we have found that having a great relationship with one realtor has been lucrative to us vs using different realtors each time. 

Our first mortgage was a 203(K) rehab loan... it was a..... unique process? We had an issue with the lender who I won't name on the forum, and the underwriting for the 203(K) requires the construction contracts to be worded very specifically so the initial contract we had from the general contractor had to be revised I believe 5 or 6 times.  Other than than, it's a great way to build in instant equity if you can manage to be smart about the type of improvements you make. 

My advice would be to identify up front what work you are willing to do yourself and what work you want contracted out in you are doing BRRR's to save you time and sanity. We love the BRRR concept, especially for the rental units that we have with a commercial bank, which carries the value and equity as a portfolio (so you can draw on combined equity).

I also know that opinions vary greatly on this topic, but I also suggest when accepting bids, to not immediately go with the cheapest guy, but rather the guy with the most reliable reviews and references... going cheap every time is a sure way to lead you down a much more expensive path in both the mid and long term. 

I suggest using LexisNexis Community Crime map for neighborhood research (I'm not sure if Madison participates in that, but I know Janesville does). We also ensured we stuck by our screening criteria and were consistent with our rental paperwork, and could afford a few months of vacancy if need be.

@Hussain Harun what time are the bi-weekly meet ups held? I live about an hour from Madison, but currently working on a building downtown. I’d like to take advantage of this opportunity and attend the meet ups before going to a different job location.

@Jonathan M Peters Hey there! No new acquisitions since the post, but I did end up renting out the 1 owner occupy I mentioned after living in it for a year! I'm actually renting an apartment now close to the twin cities trying to figure out my next move (maybe buy something up here, but prices are high atm). I also SOLD the condo in MKE - the cash flow was great, but it was a studio so turnover was just too much for being an out of town investor. I made a return of about 30% on that investment though since the market was so hot! I invested that in stocks & index funds. Not so much real estate related, but I've also upped my contributions to my retirement funds to get a healthy mix of investments. Still aiming for that multi-unit though! 

@Casey Kooiman

That's Awesome, I still am trying to grind out that multi-family. I have been networking a bit to see about bringing in a partner in the area I'm thinking of investing in. Who knows if it will develop... But, at least it is fun and educational working out the deal to see what I am looking at realistically.

I am struggling with a property now that I do not make any money renting it.

 I love the location and over the last 5 years they have started REALLY developing with-in walking distance to the property. It being a 2 bedroom single bath seems to make it rent for almost exactly what the mortgage is plus taxes. 

Maybe I can take my profit from the sell and throw that into some investments... Might be a solid idea. :)

@Jonathan M Peters Might be worth dropping the property if it isn't bringing in the return you want. If it is financed, it will also hurt your debt-to-income ratio if you seek future financing for additional properties. I think MKE is still a seller's market...  

What has been your biggest struggle with moving forward on your own? Financing? A down payment? Maybe the BP group can help you get past any hurdles!

So I figured out a way too. Squeeze cash out of the property. I am going to add a garage and see about getting 100 more for rent.  making a 150 month profit that way... I'm planning on having it paid off by this time next year. I appreciate the help!

@Jonathan M Peters Did you ever add that garage? I thought about doing that on a property but could never get the numbers to work. $50/$100 extra would mean it takes many many years to pay off... and by that time the garage needs to be repaired or replaced! Also garages always seem to give me the most headaches at the properties that do have them (generally broken doors).

Originally posted by @Casey Kooiman :

@Jonathan M Peters Did you ever add that garage? I thought about doing that on a property but could never get the numbers to work. $50/$100 extra would mean it takes many many years to pay off... and by that time the garage needs to be repaired or replaced! Also garages always seem to give me the most headaches at the properties that do have them (generally broken doors).

 @Casey Kooiman I didn't add the garage. I did talk to the tenant and we worked out a deal. He has a general contractor business. So..... this might be a sketchy idea but I plan on adding a bathroom to the current sq footage and a carport on the back access to the property.

My cost is materials and permits etc. Labor is going to be 2 months rent. But we will do the work when he plans to move out. So I can raise rent close to 400 a month. Each room in the house would have it's own bathroom.

Let me know what you think! 😉

Would an extra bathroom raise it that much? I think it definitely can in some markets - for me, it would help in resell but not in increasing rental prices. Where are you investing again? I would look at the total cost of the reno and see how long it would take to recup that based on expected cash flow (not total month's rent since you still have other fees to cover on a monthly basis like insurance, taxes, etc). 

Is that tenant planning to eventually move out? Sometimes I like having long-term tenants who pay a bit less but are great at paying on time and taking care of the place.

Remind me of your long-term goal with this property? I think I recall it wasn't cash flowing as well as you'd like. Are you checking comps in the area on what is possible? Where is yours priced comparatively?