does the 50 percent rule hold up in wisconson still?

7 Replies

I'm asking because I notice property prices are pretty affordable. but the property taxes can be attrocous in some areas of Milwaukee and it's suburbs. so I was wondering if that changes this rule of thumb for evaluating a deal or not. would it matter if I manage my propertys my self. I just moved to Milwaukee so I am still learning alot
Holds up depending where you buy. be very careful in studying neighborhoods, the tenant base, and the prevalence of crime. If you're looking for B class property and the 2% rule, not happening. Certain neighborhoods you might seem stable enough and you can still hit that. We just bought one on the fringe (a line I'm comfortable with - unless experience changes my mind) that actually hits more like 3.5%. good luck!
I was thinking starting in west allis with a houshack what do you think of that neighborhood? I've heard west allis is a pretty working class c area. It mentions you are a wholesaler as well for Milwaukee I'm still in my saving process at about 45k right now probably hit 50k by the end of the month working up to just buy cash do you mind if we keep in contact so when I'm ready I can check to see if you have anything or found anything in areas I'm looking at?

As far as property taxes, you won’t see a significant difference until you get out of Milwaukee County. West Allis is a pretty big city with multiple neighborhoods and demographics, I wouldn’t consider it all the same asset class (C in your example). What is your goal? You mentioned house-hacking and paying cash. That seems very doable. If you were going to pay cash though, why wouldn’t you just buy a rental outright. IMO people house hack as a way to get favorable financing (3.5-5% down) leaving them with very little invested. In return, you’re (hopefully) paying yourself the rent of your unit, keeping it maintained and building cash reserves to do it all over again.

I would like to eventually be able to retire off of rentals we have a ton on money coming in that is all savable as of now due to some lucky cercumstances so I just want the first property we live in to be paid off that way worst case senerio me and my sweetheart can still keep this pace of saving up. really just trying to build a really solid rock if seen some really nice duplexes past 78th in west allis for like 150k. If we end up buying somthing at that price for times sake we probably will just put a massive down payment on it like 100k or somthing. The other think we are thinking of doing is buying a condo cash in German town or tosa then when we save up enough from living frugally sell it use the combined cash to buy a duplex in shore wood or tosa. I really just want our primary residence to be in a great area all of my other rentals can be in working class areas and what not and be more leveraged (not that those are bad areas mind you.) I am just a firm believer in you own were you live with no debt.

We all have been raised with some ideas about money, some good, others not so. Getting some of these ideas that have been in your world as long as you live corrected can take a lot of time and effort. Thats why there are entire forum catergories about the topic of investor mindset.

Investing should not be a matter of believes. It serves you better to apply cold hard logic and math. Most likely your primary residence will carry a mortgage with the lowest interest rate in your portfolio. Your rental properties will require usually half a point higher rates. You want your primary residence at 80% LTV (loan to value - meaning 20% down) to avoid PMI, which is an insurance premium you have to pay for any loan with a low down payment. PMI is an unnecessary expense. If you have additional cash pay down your rental properties first, because they have highter interest rates. It saves you more to pay those down first.

Here is the other thing to think about. If you have 100k in cash and you have the choice between paying down your mortage of let's say 4% or investing or buying another rental property that makes 12% logic dictates to buy another rental property. Your 100K can safe you $4000 a year by paying down a mortgage or make you $12,000 by buying another investment. So you can take the 12k and pay yourself 4k and still have 8 left. 

I'm just concerned with conserving my momentum that is all. I have no problem with debt on non primary housholds and will eventually move my primary residence to a multi family but I will not leverage it. what if I lose my job? get sick or any other terrible thing happens. my lower back is bad from the military what if it goes out and I am paralyzed from the waste down? From what I recall everyone thinks it can't happen till it happens to them. I have many a family as proof to that and I personally refuse to be that victim. having a paid off primary residence weather single family or multi only insulates me from most of the worst of society and allows me to be very stress free and happy and conserve my momentum towards my goals with less obsticals. by having a paid off residence that's is a multi family I could still make progress even if I was only getting paid disability from the government. and make massive progress if I indeed to find a entry level job into my carrer field as a engineer. I acknowledge what you say and mathematically it makes sense in a decent way but by having a paid off duplex I live in my return isn't only the duplex. it's the margages I don't have to pay the income I get to keep and my tenant paying for my utility's and gas allowing me to save 90 percent of my income putting me in a ever more advantageous position. any propertys past this however it makes more sense to leverage. just to me at least I need my primary paid off I have seen to many people struggle to pay there bills
with all that being said I still could get a better return 12 percent like you said by leveraging and not living in a paid off duplex. by paying the property off I've managed to still receive a 8.3 percent return while living there which is ok. I feel that the stress reduction and personal insurance against my own tragity makes the extra first 4 percent worth it in the short term however