Milwaukee vs Cincinnati

[Andy Tang]

Hello Everyone,

New investor here. I recently purchased a condo in California and realized it was a “So so” investment. The real benefit, was that it helped build the confidence I needed to get started in real estate investing. 

As I’m saving up for another down payment, I’d like to sharpen my axe by deciding and learning about the next location for my first out of state property. I really like Milwaukee and Cincinnati. 

I want to invest in single family homes and small multi’s around $200k that can cashflow now or at least in a few years. I’m a dock worker for my 9-5 and I’d like to protect myself against possible automation taking over my job by investing in real estate. 

So the question is….does anyone have any thoughts, opinions, experiences when it comes to choosing Milwaukee or Cincinnati? 

Thank you in advance,

Andy

[Mark Sproesser]

Hey Andy, any question I have I go to a place called"utube". Pool pump repair, pool filter cleaning, I fixed leaking shower having to buy special tool . I needed to replace a "seat". My point here is any and all questions can be answered there. For example, I was thinking to sell and then my plans changed but getting educated on real estate was all about a guy named Ken McElroy.  He was telling the good , the bad the ugly, what is going up, what is going down, and the reasons why particular cities were going to make "value" changes.  His comments at the time which was about 1 years ago was that of course there are not enough houses on the market and showed stats and tells you where to get these stats.  It did make a lot of sense as to what he had to say. It all rides on how long government will keep the home owner afloat. All the forbearance loans that will be in trouble once government stops.Once the government stops helping the trickle down effect starts to take place. More houses on the market, property values goes down. Apparently he is big time investor. 

My passion is commercial insurance by the way. 30 + years owning a broker in California. I was a Farmers agent for 25 years. 

Quick example of why I became independent.

Apartment building coverage at $3,000,000

Farmers Insurance cost $6,000 annually

Independent broker cost $4,200 annually  (ever hear of Berkshire Hathaway). Now you have.

Good luck.

[James Konvalinka]

@Andy Tang Hey Andy! Not sure about Cincinnati but I know here in Milwaukee you can do pretty well with $200k for rentals. If you are looking for single families, for the most part you can get rentals in some pretty nice C/C+ areas around $120k - $150k. These on average will bring in about $1200 - $1300 a month for a 3 bed / 1 bath depending on condition. Same thing with Duplexes, for the most part you can get into some really nice areas for $150k - $200k. The only thing with single families is once you start getting over $150k it starts to get a little thin on cash flow depending on where you buy at. Yes, some areas that are a little nicer, C+/B-, you might be able to get closer to $1500 a month in rent but the purchases prices tend to go up pretty drastically as well. ($180k -$250k+)

But it really comes down to what exactly your goals are for your rentals, how much cash flow you are looking to get and if you want to buy in an area that will see more appreciation. There are some really good areas that I believe are going too start appreciating nicely over the next few years due to a lot of money being invested into the infrastructure, small businesses and the area overall. 

The only cavoite is that you really need to make sure you do your research on the market here. I am not sure how familiar you are with Milwaukee but there are some areas that can look great on paper, really lower purchase price with pretty strong rents, However, these can be pretty rough areas that generally have a higher crime rate and tend to have more maintenance calls. If you are going to invest in either of the cities I would suggest finding an investor friendly agent who has worked with long distance investors and has a solid knowledge base on the markets and what to look for and what to avoid. Also, if possible try and take a trip out to both cities to drive around and check the areas out for yourself! 

[Andy Tang]

@James Konvalinka Thank you for your reply! It was thought out and very helpful! 

I’m ok with a property that cash flows JUST enough to cover the property manager, cap ex, and maintenance. Anything extra is just cherry on top. I know it’ll start cashflowing in the future if I hold for a while. 

Do you happen to know how I can estimate property tax when calculating my numbers? I know here in Los Angeles California, I can just estimate it with 1.25% of the purchase price. I seem to be finding different percentages when looking for the property tax rate in Milwaukee. 

[Marcus Auerbach]

@Andy Tang - taxes are higher in Milwaukee County (which is bigger then the City of Milwaukee, 19 municipalities in total) than in the surrounding counties, where prices are a little higher, but taxes lower. Mortgage payments are finite, taxes are infinite - that's why I invest in the suburbs. Listings will always state last years taxes, it's a substannntial factor in your numbers. And yes, YouTube is a good spot to learn more about Milwaukee. 

[Lee Yoder]

@Andy Tang, the only factor in your decision between Milwaukee and Cincinnati should be the difference between your team in those cities. In whichever city you are able to build a good team that you trust, that's the city you should invest in. The potential cash flow and appreciation won't matter at all if you don't have a good team. By "team", I'm mostly talking about your property manager. 

[Jamie Smalligan]

@Andy Tang There are plenty of duplex & triplex options around $200k depending on the tenant class you are looking for. Cincinnati is ripe with 4-families but You would be hard pressed to find something within that price range. Happy to chat if you'd like. 

[Nicholas L.]

@Andy Tang if you haven't already, check out the BP podcasts with Brie Schmidt (for Milwaukee) and Spencer Cornelia (for Cincinnati.)  

Just curious, how did you land on those two markets?

[Andy Tang]

@Marcus Auerbach Thank you for the reply! Would using last years taxes be a good way to calculate taxes into my analysis then? Or would it be inaccurate due to the crazy appreciation we’ve gotten this past year? 

[Andy Tang]

@Nicholas L. Hey thanks for the suggestion. I’ll definitely give those a listen. 

I pretty much just based it off of the slow and steady population growth of each metro area, amount of Fortune 500 companies located there, barrier to entry, rent to price ratio and inventory of single AND multi families. I also did a quick search of property managers through Yelp and looked through some websites. Some cities seem difficult to find a good property manager. 

[Jesse Rodriguez]

@Andy Tang Cincanatti forsure

[Andy Tang]

@Jesse Rodriguez

Can you please elaborate on this ? Would love any feedback and reasoning for your choice. 

[Marcus Auerbach]

@Andy Tang yes you can use last years taxes, they don't chnage that much. 

@Lee Yoder is right, the team is what makes the difference. 

I don't think anyone understands both markets very well and can give you an objective comparison. It took me 15 years to learn about investing in MKE... I don't know much about C.

[Bob E.]

I can't speak to Cincinati but Milwaukee is a solid market.  We have bout a fair amount of rentals in the what I would consider C areas of the city.  The cost to buy a property is up with rents up by a smaller amount.  My advice would be to check rents on RENTOMETER and crime stats on Trullia*.  

*  Note, Trulia is discontinuing this feature soon so if anybody has a replacement I would appreciate an alternate.

[Marcus Auerbach]

@Bob E. - try neighborhoodscout.com

[Brock Mogensen]

I live and invest in the Milwaukee area.  It's a great cashflow market.  Not as much natural appreciation as some of the larger markets, but if you are looking for cashflow..it is a great place. 

[Joel C Inden]

Hey Andy,

I can't really speak to Cininnati, but here in Milwaukee, you should be cashflowing $100-$500/door after all overhead is paid and that is from day 1 and in that price point.

Yes you can make significantly more, but those properties can be extremely hands on, meaning if you want the rent, you have to drive to the home when the renter lets you know they have the rent RIGHT NOW. The renter may not have it in a few hours. Evictions will be higher and wear and tear on the property will be significantly higher. And they will definitely be located in higher crime areas.

With that said, you should also consider 2-4 unit buildings as there are a quite a number of opportunities all over the greater Milwaukee area.

I urge you to google "crime heat map Milwaukee" and you will start to see where the tougher parts of town are.

Best of luck to you.