32 unit (Lower Income) in up and coming neighborhood

12 Replies

I am looking at a 32 unit right now in Milwaukee, the buildings (there are 3) and units are older, but the place could be spruced up a bit.  It is right on the edge of a neighborhood that is up and coming, median incomes are on the rise, and it seems that the demographics for the surrounding single family homes are beginning to change for the better.  However the apartment complex is in kind of a bubble - its surrounded by a school, police station, and social security office, and is right next to another lower-income apartment complex.  What we are trying to determine is if the surrounding neighborhood continues to improve, how much will this impact (i.e. rents, and the kind of tenant living there) the 32 unit we are looking at.

My question is: has anyone had experience with a lower income multi-family building that had its tenants improve over time as the surrounding neighborhood did as well?  Or do these types of complexes stay 'stuck' as the surrounding area changes?

What is the neighborhood?  Cross Streets?

North and 51st. On the edge of the city by Wauwatosa

@Nate Culkin

I am fairly certain I know the property that you are referring to.  I don't have any experience in a deal that large so I'll leave that to others.

As far as the neighborhood, it's definitely on the fringe.  It's kind of on the wrong side of the fringe at present day.  It certainly doesn't hurt that the large police administration building is right there though. 

Definitely a tough call.  If you go west 9 blocks, you are in Tosa, which is an A area.  If you go South of North Ave, you are in Washington Heights and it gets progressively better as you head south--at least a B type area.  The problem is if you go North of North Ave, the neighborhood definitely gets worse, although the further west you head it gets better almost block by block.  And if you go East of 51st and North, the area starts deteriorating as well.  It doesn't turn into what I consider a D area until you head east of Sherman Blvd (about 43rd st.).  

Very tough call.  Hopefully the area transitions into a diverse, vibrant area like the east side of Tosa. 

Make sure to stop into McBob's on 49th & North for a Reuben if you are in the area!

 @Nate Culkin I'm leery of that one AND you could be very well opening a MASSIVE can of worms since the codes are different once you go over first 2 units but especially 4 units, you could end up getting whacked with the city mandating repairs or upgrades that end up coming with a monstrous price tag. The city building inspectors have been fine to work with in my experience BUT as I mentioned in an earlier posting, if anyone ticks off or gets in bad with the city of Milwaukee, they have no qualms at all dropping their hammer on them and can and sometimes will wreck financial havoc on people and they're especially worried about absentee landlords (which I totally understand since we've had a lot of clowns who chase down their rent $$ like bloodhounds, but somehow when it comes time for major $$ repairs, they are harder to find than DB Cooper! Yes, Tosa starts at 60th St in that area and some parts of Tosa are great, but do some searching like on the jsonline.com site (our crappy local daily paper) or there's at least two small Tosa based mini-papers and you'll see a LOT of articles about the many issues people living just west of 60th in Tosa and being strong arm robbed, or armed robberies in their driveways, back yards, etc. I personally have TWO friends who over the last ten years bought in that area and sold and left within 2 or 3 years due to the numerous car break ins, garage break ins and one had his home burglarized. He finally left after getting into a brawl with 3 teen thugs who were strong arm robbing his elderly neighbor in the neighbor man's driveway-in broad daylight! Luckily this guy is a pretty physically intimidating dude who can handle himself very well and after tussling with him for couple of minutes, the kids ran off seeing my buddy wasn't going down at all and might take them down instead, or at least hold em till the cops soon arrived. 

That's another difference in city of MKE, unless there's gunshots or its a ridiculously slow crime day, don't expect a quick response for a small fist fight or anything else. I have all of the respect in the worlf for the MPD street cops (most are cool or at least decent guys too) but we're way understaffed and our mayor, who I used think was a decent guy even if I don't agree with him on a whole lot is out to lunch, like on a permanent basis! That doesn't mean there aren't areas of opportunity though, I'd highly suggest looking up the Walkers Point area and areas around there, where you're between the 3rd ward, where had any of us speculated on some of the then mostly vacant 10 story warehouses in time for the condo boom of the late 90's and 2000's, we'd be well on our way to the Forbes 400! South of the Walker's Point area is Bay View, which has become another totally booming area and now many of the longtime residents or new residents who want to live in a cool area for cheap are raising hell about any new development, so that area in the middle just might be the perfect next spot to fill in and its close to downtown, where for the CITY of Milwaukee at least, many of the higher paying jobs are located, so its a great commute for residents who work downtown. 

@Darren Budahn is right about Mc Bob's though, great corned beef, although you can also get that at Benji's deli in Shorewood and Fox Point, where I'm often camped out, slobbing down a 1/2 lb Benji corned beef sandwich. One last thing, as I've said before I don't do those ABCD grades myself, but even in the best parts of Tosa like the Highlands, if that's an "A", then what are places like River Hills, Chenequa, Elm Grove or especially Indian Hills in Elm Grove where they've got teardowns selling for $700k and being replaced by 12,000, 15,000 or even a 20,000 sq foot home?? Is that an A++++++ or?? I guess I'd put Tosa as a B in most parts, maybe B+ for the Highlands, but also come C's too. Not trying to start an argument at all, just curious?

I also place Wauwatosa in the B grade area.

" a lot of clowns who chase down their rent $$ like bloodhounds, but somehow when it comes time for major $$ repairs, they are harder to find than DB Cooper "

Absolutely agree

@Nate Culkin

 I'd be hesitant to invest in that area. I have 3 duplexes in that area and each are a different story based on location. THat area can change in a few blocks for better or worse. For me, that specific property would not be an area I would feel comfortable having my wife walk around. As was mentioned above grades are hard to quantify, but suffice it to say, not the best of areas, thought you can find worse in Milwaukee as well.

This would probably be one of those questions that would best be served by a phone call where you can more easily communicate the nuances of a location like this. If the numbers work and you are willing to have tenants that may be looking to take advantage of you, this could be a fine place, however if you are looking for a "set it and forget it" investment this is probably not it. 

Feel free to give me a call if you would like and I can share some of those feelings. 

Best of luck either way!

@Robert Taylor undefined

There is definitely a problem with spillover crime in that eastern part of Tosa.  61st and North definitely isn't an "A" area.  The grades are obviously very subjective.  I think our opinion of the area is very similar.  I'm comparing Tosa mainly to Milwaukee in regards to a rental market.  Those areas you mentioned with million dollar plus homes are obviously A+ areas but they are not rental type areas obviously so I am not even considering these areas. 

I agreed with basically everything in your post so, like I said, the grades don't matter too much since I think we are on the same page regarding the area. 

I'll have to check out Benji's--never been there.  I still think Jake's on North is the best in the city.  And I think we would both agree that's a "D" area :)

You need to go to McBobs. Best rueben in town.

Ok, I gotcha on that then if you're just referring to those grades as far as rentals go, in that cse I'd certainly place some of the nicer parts of Tosa as reaching into an "A" grade. As far as corned beef goes, of course there's always Jake's on North Ave too, although having lived on the east side for years I'd usually go to Benji's in Shorewood and now that I moved north a ways, Benji's new location on Port Rd in that little shopping area with the Best Buy etc is less than 5 min away and is now my new corned beef stop. (As you probably have guessed, I LOVE corned beef!) I have one more though too, the House of Corned Beef on around 60th and Silver Spring is darn good too! Although last time I stopped there, I think they morphed into a House of Corned Beef/some pizza place too if I remember correctly, but its on the north side of of Silver Spring around 60th, next to Popeye's. Maybe BP needs to start a new "corned beef forum" for all of this though!

@Darren Budahn

@Nate Culkin I should definitely say that I like your line of thinking assuming that what you're thinking is to try to work both the cash flow angle as well as potential for future appreciation there, but I'm not very bullish on that neighborhood, which I know fairly well. There's a Wendy's just to the east, must be about 46th or 47th and North Ave and north of there things get sketchy pretty quickly. You're right in there where as others like Dave Carpenter mentioned, going not far at all in certain directions gets you into some areas that crime statistic wise at least, are very rough. One you start getting into predicting some of what the future may hold, a lot of factors beyond anything just realty related become involved as well. As I said before too, I'd REALLY REALLY emphasize that you and if you have any partners, that you check with the city of MKE as far as the work you mention this place needs and try to nail them down as to what they're going to require as far as fixing whatever in the place because one example I can give you is one home I'm soon to put on the market where it came (as an REO) with a 4 fuse fuse box and the ancient knob and tube wiring inside and while these days you really can't get ins coverage on anything with fuses, so they've been updated to breakers, you do still have a lot of knob and tube wiring around here as we have a fair amount of housing stock that's very old.

Well, basically the city wants that knob and tube replaced with romex and for my rehab of a 2000 sq ft 1905 home on the east side of MKE, where the values are the highest in the city for sgl fam's it was certainly not a small expense, but worth it considering that it cost maybe $2500 to $3k to totally rewire the place, which included adding outlets to the 4 bedrooms, which had ONE outlet in each when I bought it, so that's a great selling point and $3k on a $275k house isn't much, percentage wise. Conversely, if that 32 unit building needs rewiring or anything else along those lines which wouldn't surprise me since a lot of the owners that caused the city to be so leery of the suck the $$ out, never put the $$ in landlords would cut off a couple fingers of they had to, to avoid updates like that. Point is that unless this place has been totally run through an A1 rehab, you might end up getting shoved right into some MAJOR repairs, MAJOR $$$$ repairs! 

How far away is the nearest Starbucks? If you walk through the complex at 1pm on a Wednesday... Is over half the complex at work? How about the neighboring complex? What does the crime map look like? How many police calls in the past 24 months? Transitional neighborhoods are a risk and the reward can be huge but you need to be realistic. Very few neighborhoods turn without a big catalyst. A major employer moving in, an arena, stadium or university campus, etc.

@Darren Budahn described this area perfectly.  It is a total tweener kind of area.  Its not in the warzone, its close to some nice areas, and I consider the police station a plus.  However it is definitely not associated with those nicer areas, and no local who is seeking out those areas would look at a place in this location.   Its in the corner of a larger neighborhood (Sherman Park) that is more "block by block" than probably any neighborhood in the city.  I personally would buy a rental in this location.  But addressing your original thought that this might be up and coming, I'd say no way, I would definitely not buy here expecting to see dramatic appreciation or improvement in the tenant applicants.  Milwaukee like the rest of the rust belt just doesn't have the kind of growth that creates large pockets of dramatic improvement.  And to the smaller degree that it does see areas that improve, this is just not a location I see this happening.

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