I recently joined BP after having been enjoying the benefits of great information and discussion across the site. My background is in retail banking and I've since moved to a management role at a fintech firm but I'm interested in getting involved with real estate investing.
I'm new to REI but have been working to rapidly grow my knowledge through reading a variety of books, attending webinars, meeting experienced investors, analyzing deals, and finding advice on the BP forums. I started building my knowledge base by reading a number of books about REI in general, landlording, and deal analysis, but have since shifted focus in an effort to learn more specifically about my local market.
The area that interests me the most is affordable housing for low-income individuals. I'd like to be able to strike a good balance between making rent affordable for tenants while also earning a fair profit. It certainly seems like there are plenty of challenges in this area (limited appreciation, troubled tenants, evictions, deferred maintenance, Section 8, etc.) but it is still something I'd like to pursue.
I'd love to hear advice from folks in the BP community on their experiences not just with affordable housing but with REI in general. I've been able to learn a great deal from forum posts but am always open to advice and hearing more about the experiences of others!
I could also use the community's advice on another topic related to getting started. A big challenge I have right now is trying to determine how best to provide value to others who I'd potentially be working with (realtor, GC/handyman, property managers, etc.). I recognize that many experienced folks would be apprehensive about working with someone who is newer to REI and that there is little incentive for them to do so, so I'd love advice on suggested ways to provide value. Bring referrals? Offer to help with manual labor on a rehab? Something else? Thanks in advance for your thoughts and advice!
welcome to the BP community! I am am young in the REI journey myself, bought a single family property couple years ago and got it rented. Started in much the same way, reading a lot of books and BP webinars, and recently trying to shift into more networking. Milwaukee is a market with a lot of potential, but it also has its challenges. I admire that you are looking to target affordable housing, I think that is awesome and having people who want to balance service and profit, that is always important. Your post resonated with me because I am personally really trying to start sustainable development in the city, and one of my goals with that is to affordable clean housing while still having a profit, which I hope to use to invest more in sustainable-affordable goals. In my mind sustainability should be fore everyone, especially for those who feel they can't afford it. Milwaukee has been a very segregated city for along time, its a major challenge here, but I think there is a lot of opportunity to change that if people are motivated and have a mindset like yours. like I said I am young on this journey too, but Its something I would love to chat about more with you and others.
As for bringing value, that is something that I am trying to learn as well. A good book I came across is "long-Distance Real Estate Investing", by David Greene and he talked about creating value, although its title is long distance all the concepts still apply. Basically the way I have been trying to look at it is, who is important to me and why are they important aka how are they bringing value to me. I think if you can determine that then you can start to apply that to people you want to bring value to.
I recently started a new job as a project manager for a contractor so I'm starting to gain a fresh perspective, but I think people value their time, money, and ideas. yet recognizing that isn't something that comes easy overnight. For example I have a friend who is a realtor and when I was starting to look for properties I was looking all over the city and coming up with different ideas or properties all the time. I eventually did buy a property and he helped me, but I realized that I may not have valued his time as much as I should have. Even though he was a friend and enjoys looking at properties, was my value worth his time? I suppose only he could answer that, however when I look back on it I think if I was more concise and decisive I would have saved him more time and effort, making my value higher when I finally purchased a property.
I've noticed this with contracting as well. people want you to bring them business but they don't want you to waste their time with being indecisive, wasting time wastes money and effort. So I believe one way you can bring value to someone is by valuing their time through your decisions and what you are asking.
not sure if that makes any sense, thinking and typing. Another great book if you haven't read it is Extreme Ownership by Jacko Willink. Its not a real estate book, its leadership, but if you want people to want to work with you its a phenomenal read. look forward to talking with you more!
Thank you for taking the time to share your advice and input! I'm currently halfway through David Greene's BRRRR book and had his title on long-distance investing on my list as well. Extreme Ownership sounds like a valuable take on leadership from two people who were in a situation where it is absolutely critical to be an effective leader. I've been fortunate to be able to get my hands on a number of helpful books and Evicted was particularly eye opening for the plight of people living in low-income households struggling to find affordable housing.
You bring up some excellent points about being mindful of valuing the time and energy of others. The concerns you shared regarding looking for properties with your realtor friend are concerns that I've had as well. Given that I'm interested in pursuing affordable housing, I expect I may end up with properties that are less expensive, resulting in smaller commission checks for the realtor. I appreciate your advice on striving to be more decisive and concise in working with a realtor as a way to provide them more value.
You spoke about your main focus being sustainability. What have been the main differences for you in moving from work on commercial properties to residential? What have you found to be the most beneficial areas of focus when it comes to sustainability when doing new construction and/or renovations? Is your priority more on the efficiency of appliances, construction materials used, or different factors? It sounds like your companies cover a lot of areas of sustainability with reclaimed materials, energy efficiency, reducing water usage, and the like.
Thank you again for taking the time to share your thoughts and insight. I look forward to learning more about your work with sustainability in construction and development!
I am getting started in the Milwaukee area as well. I will be targeting transition areas. I am originally from Philadelphia and there are many similarities between the two cities. There is a lot of untapped potentials here waiting for the right people to have a vision. I think the biggest thing you can do is create criteria now and be consistent.
Buy property and wait. Don't wait to buy property!
Thanks for your reply! How did you go about setting your criteria and how has it changed over time as you've made multiple investments? I've been working on developing my criteria but I think I'll need to work with an experienced realtor to refine some parts of it (particularly when it comes to Milwaukee neighborhoods).
While profit is certainly a factor in any investment, I'm looking to balance that goal against some more philanthropic ones so the end result is that I'm less focused on the numbers (cap rate, cash-on-cash return, etc.). I'll still analyze the income, expenses, purchase price, rehab costs and the like on deals but I don't have specific targets for cash flow or appreciation.
I've still got a lot to learn on the many, many neighborhoods of Milwaukee and recognize that making rent as affordable as possible will require investing in areas that may be more challenging. My plan is to partner with an area realtor who has a high level of familiarity with the neighborhoods of Milwaukee that are more affordable and provide the best opportunities to help others. I don't mind taking on a property that needs a significant amount of work, particularly if this can grant greater opportunity to improve the home's quality for tenants. For property type, I'm interested in approximately 2-12 unit multifamily. For financing, my thought is to go in with cash offers and then to finance after the fact (even if the property value hasn't changed greatly post-renovation).
Thank you again for your advice and I'd love to hear any thoughts you have on improving my criteria!
Sorry I just caught that I wrote John on my first post. I downloaded Evicted on audible so I'm very interested to listen to that! Extreme Ownership is neat because they tell the military story, then the leadership theory, then the application to business and its that part I think that is super cool and valuable.
and Totally I enjoy sharing experiences on here, even though I don't have very many yet! I think starting out its hard to be decisive, I listened to one of the BP podcasts today and there were talking about that, but ultimately I think we can provide value in a lot of different ways, so sure it might be smaller commissions, but if you get the ball rolling and make decisive decisions then you might be able to bring in more commissions, quicker even though they are less your still providing good value. Even if its only a couple places as long as your not making it super difficult on people and your respectful I think people respond well to that.
So I am brand new to the commercial world, I left my job as a firefighter in Colorado to move home to help my dad who has been building and working on commercial buildings for along time! I know that my dad talks about getting out of residential because of the clientele and the difficulty they have making decisions. A relative asked us to help with an addition of theirs and just helping get that off the ground has been a large undertaking compared to the few commercial projects I have helped with. Even though they are family each little decision and chaining their minds seems to be compounded where I think commercial clients are more focused and decisive. essentially what we have been talking about, but I am sure I'm going to learn a lot more as I get into the business, Ill keep you posted on what I find!
I think sustainability is challenging right now because it feels like it should be easy, but I think its still early and I have found I need to temper my visions of grandeur. I would love to put solar panels and do storm water landscaping etc but those are big ticket items, flashy and expensive. On this first property I just did non-toxic paint, called ecos throughout, tried to pick low-voc adhesives etc. refinished existing floors, used some materials that my dad had left over from commercial projects, and went to a place called Community Warehouse downtown, which has a lot of excess building materials that have been donated. I also did LED lighting, and looked for efficient appliances, installed a nest thermostat and water sense fixtures, one of the bigger things I did to start was remove and update some of the lead piping in the home and install a whole house water filtration system since the supply lines from the city are still lead. So my residents have really clean water. Not flashy but its what I could do for now. I'm also looking into programs like waste management just started a food composting service so you can get a trash can just for food scraps and they come pick it up just like they do garbage and that's something I would like to cover free of charge for my residents, trying to increase the value of sustainable practices for them. I have some DIY ideas like installing water diversion gutters that have grasses and plants in them and I would like to create more green spaces like moss walls in my properties. These are all long term goals and ideas I would like to do if I can get some momentum. I also wrote my business plan so that I will donate a portion of my rent profit back into the community through local environmental non-profits.
Ultimately my goal is to use as much reclaimed and environmentally conscious materials as possible and make older homes more carbon neutral. less carbon is used to update homes than it takes to build new, so if I can convert and make them more efficient then I can do good for the environment and the community, at least that's my idea. I think sustainability is for everyone and regardless of socioeconomic status we all are better if we have clean water and clean communities, affordable sustainable housing is the goal!
It sounds like you have a solid plan to start with, Keep me posted on what parts of the city you are starting to look in, as I'm trying to find that transition area. I have been keeping an eye on the area between 43 and Riverwest as a potential place to start. Are you planning on using property managers or are you planning on being the landlord? are you looking to BRRR your multifamily property is that why you are looking to refinance after the initial purchase?
@Demetrius Lindsey I think you have some experience with city owned properties? I have been looking at some of those, but I have no idea where to start with that. It seems like the city and the MMSD have a lot a grants available for improvement, I just haven't gotten the courage up to navigate them.
@Conrad Scoville - love your green approach! Every time I land in Munich and drive to my hometown in Austria I am reminded about the German's success with solar panels: literally very home has panels on their roof and you see plenty of pastures that have solar panels on raised racks and cows grazing in the shadow underneth.
The german goverman provided massive tax incentives when they made the decision to exit nuclear. And cost of energy is twice as high. The combination created a huge industry, drove prices down year after year, started new businesses and jobs, which in return created additional tax revenue.
The program was such a success that they were able to power down coal fired plants and delay the scheduled construction of new gas fired plants. And BTW Germany is on the same lattitude as Canada - we have a lot more sun in the US!
@Jon Coleman I admire your spirit and vision, but I am concerned that reality may be very sobering to you. Affordable housing is a tough business and I am not sure if I would recommend that to get started with.
Elon Musk did not target affordable mobility at first when he started Tesla. It is a lot harder to compete successfully at the lower price points and survive. In my former life I oversaw the development of a new line of skid steer loaders (construction equipment). We started with the middle size, which is the bulk of the market, then launched the big heavy loaders and finally the tiny ones. Problem with the tiny modles is that they have essentically all the same components a big loader has: a body, a diesel engine, hydrulics, cab and controls, arm and bucket. And it takes as almost as much time to assemble a tiny one than an XL loader. But guess what, the market would pay 3 to 4 times more for a fully speced out heavy beast than for a tiny one and we had a hard time keeping the little one above break even.
Affordable housing is the same. You really need to know what you are doing. Evictions are very costly and you can't afford many before they eat up all your profit. The houses usually need a lot of capex, but will not provide you much of an ARV opportunity to build equity and scale.
Milwaukee is an interesting market, because you can literally choose the your model and then find a few neighborhoods to match. I would suggest you pick something along like below median and cut your teeth there.
@Conrad Scoville - That's awesome that you've been able to learn so much from your dad! It is interesting to hear that residential clients have been so much more challenging to work with. I can see it being particularly difficult if a client changes their mind in the middle of a renovation and having to make big adjustments to the project!
For sustainability, I can imagine it is an easier sell if there is a cost-savings for the client to offset additional expenses, especially for commercial properties. Have you found that LEED certification is something many retail/commercial clients pursue? When it comes to reusing materials, have you found a reliable source of materials or has that been a challenge? For composting, my wife and I use Waste Not and they offer a service for $4/week to pick up a 5 gallon bucket and have found it to be a great value.
Regarding property management, I would prefer to be more passive in the long run but in the short run I am comfortable with taking on the bulk of it. I recognize that there can be a lot to tackle and to know but feel it would be valuable with getting the hands-on experience before asking someone else to take over. I've read a few books on landlording and I can see why it can be daunting to take on, what with needing to be familiar with so many different laws, fielding maintenance calls, potential evictions, addressing non-compliance issues, screening tenants effectively, and so on. As for BRRRR, I'm just exploring it as an option and trying to learn more about it, particularly since I have little knowledge when it comes to renovations. I like the idea of using financing with mortgage rates so incredibly low right now but also don't want to be overleveraged.
@Marcus Auerbach - Thank you for sharing your advice on affordable housing. You bring up excellent points around the difficulties and expenses of evictions as well as high capex. I hadn't realized how much more expensive capex could be on certain duplexes in Milwaukee until I watched the video you did where you spoke about the level of customization in those older homes on things as random as door sizes! I'd also read your comments the other day on a deal analysis where an investor had only planned to set aside $64/month for capex on a home built in 1890 and I really appreciated the detailed breakdown you shared on the potential for very large expenses. It certainly seems that there have to be sizable adjustments made in calculations when considering properties that could need so much work, particularly if the tenants are lower income.
For pursuing affordable housing, has your experience been that the challenges are greater with the properties or with the tenants?
I should provide a bit more background on my pursuit of affordable housing. My mother is on the board for a non-profit organization in Milwaukee that provides housing, services and life skills training for low income women, particularly those from the 53205 and 53206 zip codes. The women are able to live at the facility for up to 12 months while they are in the program getting on their feet. During their time in the program, they receive training to improve their financial management, maintaining a household and building career skills. The aim my mother and I have is to provide affordable housing for some of these women after they leave the program. Because of the relationship we have with the organization and the training they provide, our expectation is that we will know more about our incoming tenants and that they will be better equipped than their peers to maintain stability. These would still be individuals with many challenges but our hope is that some of the risks would be mitigated thanks to the program.
That being said, I am very open to starting out with below median to get the practical experience needed to be successful. I've been taking a look at a variety of deals as a first investment but my knowledge of Milwaukee neighborhoods is a weak point so I've been working to learn as much as I can to remedy that in the interim. Thank you again for taking the time to share your advice and insight!
@Jon Coleman welcome to BP and investing. There is a great RE Investor Group in MKE, Brew City REI Club run by Rebecca Knox. They do a great job of facilitating meet ups as well as educational material. They are a great resource for both new and more experienced RE Investors.
Near West Side Partners also is a great resource in the City. They have a real handle on affordable housing and the community.
@Scott Krone - Thank you so much for the suggestions! I'd seen Brew City REI mentioned a number of times in the BP forums but wasn't clear on the ability to join as it seemed like it was invite-only. I'd very much welcome the opportunity to meet more folks in the industry and find ways to collaborate.
I hadn't heard of Near West Side Partners but I see that their mission meshes well with my own goals. The other non-profit I'd mentioned is located right in that part of Milwaukee as well so all the better! It looks like NWSP are well-organized and have a variety of issues they are working to tackle in the area. I'll see if there is an existing relationship with the other non-profit and, if not, I'll work on forging some new ones. Thank you again, Scott!
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