Milw/Tosa border - how would you rank it?

Question

I'm looking at a multifamily on 72nd & Center that you would think is in Milwaukee but in fact is in a tiny pocket of Wauwatosa that juts north along the irregular border. It's not clear to me whether I should value it more like a Tosa property or more like a west side Milw property.

What I like about the neighborhood:

- In Tosa school district

- Near all the cool North Ave retail activity

- Might attract tenants attached to the Medical College

What I dislike:

- Proximity to rougher areas of Milw

- Immediate area is mostly scrubby retail like nail salons

Your thoughts?

Marcus Auerbach · Answer

@Nick L. I would put less weight on school district for 1 BR and 2BR - your target audience will not be a family with kids in school age, maybe a baby.

Approach it from the other side: how much is your target audience bringing home net every month? You can probably get 25-35% of that for rent. That's the affordability. The other side is how much they like it. I am a firm believer that people are willing to pay a little more rent every month for a nice place as long as it is within their means. That factors in the curb appeal, the neighborhood and certainly the finishes, especially bath and kitchen. Your tenants are going through the same thought process as you would when they are shopping for a place - how much can I spend and how much do I like one place over another.  So to answer your question I think you can get $700 for a 2BR if you are able to provide a good value for the money.

Jason Bott · Answer

@Nick L. I have lived on Swan (92nd) and North for 8 years, and that area should be viewed as West Side Milwaukee.  We also have relatives in Enders Park neighborhood, which is still strong, but they are fighting off the crime North of Lisbon.

I believe the area has momentum in the right direction with all of the commercial influx on North Ave.

Ramon Jenkins · Answer

I would suggest west side Milw property value/rental income

Dave Carpenter · Answer

@Nick L. I would say B class neighborhood. That's a pretty solid area both because it's Tosa for schools but also, you benefit from Enderis Park to the north. Enderis Park in my opinion is a bit of an up and coming neighborhood for young professionals who are first time homeowner. My insurance agent and his young family lives right near there.

That should be a pretty decent area for you. What type of property is it?

Marcus Auerbach · Answer

@Nick L. that's always a crap shoot. The school district is a plus, but a mom's instinct when picking out a home will be more based on the "feel" of the area. Proximity to shopping is overrated - people don't care, anything further than walking distance doesn't count. Once you get in the car you drive anyway. My two cents: treat it like Milwaukee and run the numbers accordingly. If it meet's you requirements this way, you have a little upside potential.

Nick L. · Answer

Thanks @Brandyn Dietman Marcus Auerbach.

This is a well maintained multi with rents around $580 for a 1BR and $660 for a 2BR. Conservative actual cap rate of 7.5, rising to 8.5% if I can get rents to $620 and $700.

I feel like those rents are achievable but I don't know the area well enough to be 100% sure. If the area is moving from C to B then it's all gravy.

Nick L. · Answer

Thank you all for your thoughts.

I ended up picking up a very similar building on 78th & Center, in Milw right on the edge of Tosa. 6 units, all 2BR 1BA with garages. Building in generally solid condition. Should rent around $700/unit.

I got it for $253k which is about the price of 4 unit buildings in that area, so I feel like I got 2 units for free.

At a minimum it can continue with C+ tenants and make good cash flow. But I feel like it will pull in people who want to be near the Tosa strip on 70th & North so I'm hoping to push to B tenants in the next couple of years and really raise the rents and value.

Nick L. · Answer

@TJ Plotkin I meant that heat and parking are included in the rent. I would pay for them as hydronic heat. Sorry if I wasn't clear.

@Dave Carpenter Good comp, thanks. CL is a bit thin this time of year.

Nathan Schoenborn · Answer

Rentometer.com is also a good source for area rents but I don't think they factor in heat included or not in their calculations.

Dave Carpenter · Answer

Nick, Craigslist should give you a good sense of rents. I have a duplex on 60th and Lisbon. A very average 2 bedroom 1 bath duplex that o have rented for $775 not including heat. It is 1200 soft though, so fairly large.

I would say you could do between $620 and $700 assuming it's reasonably sized.

Good luck!

Milw/Tosa border - how would you rank it?

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