Best area within an hour of Madison WI for real estate investing?

Question

Curious if anyone has any experience or opinions on the best areas within an hour or so of Madison, WI for real estate investing?  Specifically it would be for buying properties to rent (probably single families or small multi units).

Madison has a tough market to rent in, as the values are so high that it doesn't seem like there's many deals out there.  Milwaukee seems to have some really bad areas with higher risks.  However, places like Janesville and such seem to be possibilities?  Any others or opinions?  Thanks!

Brian Koz · Answer

@Keith Schulz, thanks for that info as well.  This would ideally be an all cash offer.  I saw that you mentioned Stoughton -- there's some decent prices there, but I didn't know if there was much going on there rental wise or much more going for that area.

And that's awesome on the Verona 1% deal -- that area and Madison in general was where I was originally looking, but there wasn't anything even remotely close to 1%.

Brian Koz · Answer

Thanks for the info!  To answer your questions, I'm looking for cash flow on most likely an all cash offer.  However, I'd be willing to sacrifice a bit of cash flow to have it in a nicer area.  My ideal target, if it was a single family house, would be $200k or less for an all cash offer, but I wouldn't be opposed to some bigger deals if it made sense.

Thanks for the offer as well -- I have some existing plans but can see what I can do.

Keith Schulz · Answer

@Brian Koz it depends on what your goal is. I agree Madison (and the surrounding area) is a tough market to find rentals that meet many of the rules of thumb for investing. If you are after cashflow a lot of the properties on the MLS in Madison and the first layer of suburbs would be negative cashflow without a very significant down payment. However a few layers out, such as Evansville, Deforest, Stoughton, etc the cashflow numbers can look a little better. However, the further out you go, the worse appreciation is. I own a duplex in Arena that has provided good cashflow over the years, but has probably only appreciated 20-25% in 20 years.

There are deals out there if you are willing to do some marketing for off market properties, but there's not much on the MLS in this area that seems like a deal (by most Bigger Pockets standards). I bought an off market duplex in Verona last year by calling a for rent sign. This came close to the 1% rule (.9%) . Also did a flip in Belleville and a flip in Verona that were not on the market. The bottom line is figure out your goals, network, and let people know what your after.

Jack Medford · Answer

Parts of southern Columbia county have pretty good rental markets. Lodi and Poynette come to mind specifically as places where values are similar to slightly cheaper than Madison, yet there is a huge demand for rentals.

To answer your question fully though I'd need to know your goals. Are you specifically looking for cash flow? Are you willing to sacrifice some cash flow to buy in a really nice area?

I'll also throw out there that we have a local meetup group in Madison that meets every other Wednesday. There is actually a meetup this evening at 7pm at the Brink Lounge. If you happen to be free tonight you are more than welcome.

Mike B. · Answer

Good thread.  My experience of the Madison market is that it lends itself towards a "buy and hold" strategy, with steady appreciation over time.  The rent to value ratio from the properties i have analyzed is typically .06-.08 with SFH on the lower end and 2/3 flats on the higher end.  I have 2 sfh in that .06 range now but looking to diversify into some cash flowing units.  Looking at Evansville/Janesville/Edgerton/Stoughton areas

Christopher Wiora · Answer

Hello,

Brian Koz · Answer

@Greg Eftax, Verona is a nice area and very close to Madison (a big plus), but I haven't seen any good deals lately there.  Location wise that would be a more ideal spot.  However, the ones that I've seen are typically $300k+ where you'd be lucky to get $1,500 / month in rent ... maybe $1,800 or so on the upper end from what I've seen.

Greg Eftax · Answer

You have some great advice here and was going to recommend the same areas already mentioned. I work with quite a few investors and the areas such as Belleville, Verona, Lodi, Poynette and Janesville all have some deals. The other one not mentioned is Dodgeville. Lands End is there which would draw in some employees to possibly rent.

All cash with few or no contingencies right now is the best way to secure a home once you found one.

Calvin Ozanick · Answer

I am a property manager in Janesville, and we have clients having great success in the area. We manage in Janesville and Beloit and both areas have been very successful!

Jason Ericksen · Answer

There are still a lot of great properties within an hour of Madison. I live in Portage, and there is quite a bit of potential here. Also, in areas like Lodi, Baraboo, Sun Prairie, Stoughton, Edgerton, and Reedsburg, I am seeing a lot of great properties.

Best area within an hour of Madison WI for real estate investing?

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