New to Real Estate · Los Angeles, CA · Member since 2020 · 46 posts · 11 votes
I found a duplex deal in Milwaukee, Wisconsin that costs $3,500 to purchase and $47,500 in essential repairs, for an estimated price of $51,500. I need to show proof of funds. Is this a good deal?
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
5y
Probably not. We are in a market where local buyers pay 10% over asking competing for a 250k duplex. Yet we have a few parts in the inner city that are so undesireable, that a property will sell for less than the lumber in the front porch is worth.
PS: it actually has crossed my mind to buy these properties and sell them for parts LOL
If your actually total cost comes in at 51k, it might be a good deal depending on a lot of different factors. It depends on the rent you can get in that area, do you have contractors to do the work, are you getting a loan and what is the interest rate etc. I purchased a property for 55 and I put about 40 into it. The renovation took me way longer than expected. I don't regret it. I rather learn a 95K lesson than a 200k lesson. Nonetheless, I cashflow nicely on the property and values have gone up in my area. Just assume a lot of things can go wrong, plan to spend more than what is quoted for essential repairs, and if the numbers still work, go for it.
As Chari said, several factors will determine whether or not this is a good deal. First, everyone's definition of a "good deal" can vary. What is your goal? Appreciation? Cash flow? Both? What is your criteria (1 or 2% rule, % cash on cash return, etc.)? With any deal, you need to be sure you are doing your due diligence. Don't take someone else's rehab estimate and assume it to be accurate. Also do your homework on the neighborhood. The cash flow on paper can seem great, but it is just hypothetical. If the property is in a rough area, be prepared for the potential for more problems. If you can share the neighborhood that this deal is in, other Milwaukee investors will be able to weigh in a bit more heavily. Hope this helps. PM me if you'd like to discuss further. I'm an investor/agent in the area.
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
5y
Probably not. We are in a market where local buyers pay 10% over asking competing for a 250k duplex. Yet we have a few parts in the inner city that are so undesireable, that a property will sell for less than the lumber in the front porch is worth.
PS: it actually has crossed my mind to buy these properties and sell them for parts LOL
Lender · Milwaukee, WI · Member since 2020 · 109 posts · 115 votes
5y
@Guillermo Vladimir Robles I've seen a lot of similar deals to the one you just described and they're usually in not so desirable areas. Some things to consider:
What will the ARV of the property be after essential repairs? If the ARV is $70,000+, then it's potentially a good flip. If the ARV is going to be around what you put into it, you're better off just buying a property that's already in decent condition and saving the time/headache of renovating.
What area is this property in? A $60,000 duplex that rents for a total of $1300 looks good on paper until you realize that the tenant class you're renting to doesn't care about the property and the maintenance costs eat up your cash flow.
In general, those properties have gotten to that condition for a reason, and that reason is enough for me to stay away from those types of deals.
Lender · Milwaukee, WI · Member since 2020 · 109 posts · 115 votes
5y
@Marcus Auerbach With lumber prices you might actually make something. And at the very least, the neighborhoods you're buying in would start to look a bit better after some time :)
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
5y
@David Mo - right?? On a serious note: Detroit has started doing this years ago: they raze houses that were unoccupied and tax delinquent, planted a lawn and gifted the property to the neighbor who was still paying taxes. There are blocks that look like a soccer field with only one house. One way to become a land owner! Some day these lots will be bought up by a builders and become all new construction areas in the middle of the city. It's a bold move, but would be a great way to turn around the worst parts of Milwaukee!
Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
5y
Lots of factors you will need to look at to figure out if its a good deal. No way to tell with just that info. I'm assuming it's a D location at that price point so you will want to make sure you set up a good property management plan before buying it. If you're out of state..I'd recommend talking to some local investors about the location of the property so you understand completely what you're getting into.
I am interested to see where this property is located. And i will say if you have to have the work approved by the city it can be tricky to say the least.