Multi Family in Milwaukee ? Yes or No ? Why ?

Question

Hi everyone,

I am from Toronto Canada and I am looking for my first investment property in U.S.

I'd like to hear your opinion about Milwaukee , WI.

What is your experience ?

Thanks,

Mojdeh

Marcus Auerbach · Answer

Your best market is always going to be your backyard, where you have the homefield advantage. Your second best one is where you know people and maybe have lived in the past.

I don't think there is a single best market in the US to invest, many of the top-XYZ lists are generated based on one or a few key indicators, like job growth or population growth. Milwaukee often does not come in high, because they are looking at either Milwaukee proper and most of our economic growth is happening in the surrounding municipalities. The city flatlines, because it is a large see small dwellings (mostly 1 and 2 family, some 4 fam) mostly from either the 1920s or the 1960s and you can only fit that many people in those houses. The growth happens around the city, where you can still buy land.

The greater Milwaukee Metro Area has a lot going on economically in the last 5 years and I am glad I landed here. Downtown has developed a skyline. The suburbs are growing and businesses are doing well and there is a general sense of (very moderate, midwest style) opportunity here. If you look at it strategically as a geographic location it is environmentally safe (no hurricanes or tonados, no rising sea levels, no earthquakes, no forest fires) and probably most importantly for the future, it is sitting on the shore of one of the largest fresh water bodies in the world.

I am only half kidding when I say climate change may benefit Milwaukee. We have not seen winters like we used to in the last years. We barley had frost and just a couple of inches of snow until mid January this year. Now end of Jan we finally have some frost and about 5 inches of snow on the ground, but talk to the snow mobile guys about how much of a season they have seen the last years... personally I think it's a wash compared to the south, where you can't leave your AC for the summer, at least I can dress for winter.

Jack Medford · Answer

@Mojdeh Toyserkani I've only been investing in Milwaukee for a little over a year, so I'll present my numbers, but don't want to make it sound like this is standard or guaranteed. Just what I've observed so far.

My first property (duplex bought in December of 2017) is producing between 18%-27% CoC return. The property was bought for $32k, I rehabbed and then it appraised for $65k. I took out a loan for 80%, leaving 20% ($13k) in the deal. I say 18-27% because this number will solidify over the long term. Our conservative estimates of long term maintenance, vacancy, and CapEx have this property closer to 18%, but our experience so far has been closer to 30%. My expectation is for our overall return to drop closer to 18% as time goes on and new CapEx items come up.

My second property (duplex bought in June of 2018) is producing around 10% CoC return after puting debt in place. This one was more of a learning experience than the first, both with location and rehab expectations. Long story short, I bought in a worse area than I thought and then it cost more than I thought to fix. I expect that return to actually increase a little because it took longer than expected for it to stabilize. However, this will depend mostly on our vacancy rate, and whether or not we can keep the property occupied (this goes back to learning areas to avoid). Looks good for now, but we'll see.

Third property (triplex bought this month) is the newest, so returns are harder to give. That said, we are expecting around 16% CoC return, which should be very doable. Again, financing 80% of the value.

Combining all three, it looks like our total CoC return is somewhere around 14-15%. I wish I could say how confident I am that these numbers will hold true (or even end up better) but as I mentioned, I'm still new. I don't want to come off as if there is anything guaranteed about what I've done and/or what I've observed. Hopefully this helps.

Jack Medford · Answer

@Mojdeh Toyserkani I moved to Wisconsin from California about a year and a half ago. I've since bought 3 properties in Milwaukee and have had a very positive experience. While I live in Wisconsin, I'm actually 1.5 hours from Milwaukee, so I treat it like a semi-long distance investing since I do not make regular trips to Milwaukee.

If you want to move forward with Milwuakee, I highly suggest talking with a couple property management companies and getting a sense of what terms the offer and where they like to manage. Milwaukee has a number of areas that you should avoid. The good management companies in the city will be able to help recommend solid neighborhoods. I've worked with two different management companies, and both have been a tremendous help identifying potential areas for investment.

Another resource in @Dawn A.'s e-book, which you can get from her website www.coreprop.biz. Here is the direct link if you are interested. (For the record, this is not a referral link. I am not being paid anything to recommend her book. I found it a great help when I was starting out, so I'm just passing along info.

Mojdeh Toyserkani · Answer

@Jack Medford thank you, this is great help. Do you mind if I ask what ROI you are having there and what type of properties ?

Greg Dickerson · Answer

Hi Mojdeh,

Why Milwaukee? It's very niche and you need to know the area well. Make sure to check crime rates around the properties you are targeting.

If you're just starting out you should explore several markets. One thing to consider when looking at markets is the weather and the costs associated with owning large multifamily properties in these areas. Snow removal can get expensive.

Ming Lim · Answer

@Mojdeh Toyserkani - Just curious why you're not considering investing in Toronto? I've been an active investor here for many years and though the rules of the game have changed, I still find cash flowing properties. Also as mentioned by @Marcus Auerbach, investing in your own backyard has it's advantages.

This isn't a knock on Milwaukee, but just curious on your motivations!

Cheers,

Ming

Michael Henry · Answer

@Mojdeh Toyserkani Milwaukee property taxes are high but we have one of the strongest rental markets.  On the other hand, we have one of the highest eviction rates too which makes projected market rent a little off in some areas.

Mojdeh Toyserkani · Answer

@Marcus Auerbach your description about weather is exactly like what we have here in Toronto . I am used to the cold weather and this winter has been ok so far actually ( with the exception of last 2 weeks). I'd like to learn from you about the type of properties you have had more success with.

Greg Dickerson · Answer

@Mojdeh Toyserkani as long as you know what you're getting into and try to account for the added costs you'll be fine. Make sure to analyze a lot of deals in the area so you can get an intimate understanding of the numbers.

Scott Morongell · Answer

Your welcome!

Multi Family in Milwaukee ? Yes or No ? Why ?

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