Milwaukee is driving me nuts.
Rental Property Investor · Overland Park, KS · Member since 2015 · 492 posts · 234 votes
Milwaukee is driving me nuts.
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Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
9yA couple years ago I had an intern who was working on his Real Estate degree at UWM. He told me about his paper about the role of fresh water as a driver for economical development and why he would choose to invest in Milwaukee over many of the other booming cities in the US, many of them in hot and dry climates. After all, Milwaukee is right on the largest fresh water reservior in the world - the Great Lakes. His research was pointing to an increased importance of fresh water as a basis for economical development in the future. It made total sense to me.
Fast forward to today: Milwaukee has been in the news lately quite a bit - Foxconn (one of the largest manufacturers of consumer electronics with 1.3 million employees) has announced a 10 billion dollar investment in a new plant creating up too 13.000 well paying jobs in Southeast Wiscinsin, probably Racine or Kenosha - close to the lake. The facilities will be 20 million square feet - roughtly three times the size of the Pentagon. And guess what - water is a critical ressource for LCD production and clean room operations. A project this sice has economic ripple effects: it is estimated that the construction alone will create 10.000 jobs. Supporting industries and businesses providing infrastucture and services will benefit as well.
But that's not the only news. Downtown Milwaukee has seen a major turn around and building boom in the last years. The brew city has been voted as one of the most attractive places for enterpreneurs and millenials. And it shows, we have construction going on everywhere!
Among the biggest projects anchoring the boom:
- The $524 million Bucks arena.
- Northwestern Mutual's $450 million office tower and $100 million apartment high-rise.
- The $137 million BMO Harris Financial Center office tower.
- The $122 million Couture apartment high-rise.
- The $80 million conversion of the Warner Grand Theater into the Milwaukee Symphony Orchestra's performance hall.
- The $50 million Westin Hotel.
Large projects already completed over the past year include the $101 million 833 East office building, the $53 million latest phase in The North End apartments and retail development, and the $52 million Kimpton Journeyman Hotel.
Finally, there are several new and ongoing downtown-area developments below the $50 million mark, including apartments, offices and hotels.
Of course, Milwaukee has it's challanges too. The city is among the most segregated ones in the US and parts of the inner city have a bad reputation for crime and violence. It will remain a challange for the city leaders and the comunity to work on this issue. These are the area's where one can pick up houses for 50k, 30k or even 10k - but they come with their own set of issues and are in my opinion not a very good long term investment.
The surrounding areas and suburbs are doing quite well and demand for rental properties is high. While we have plenty of new multi family developments shooting up everywhere, many of the catering to high end tenants with rents around $1800 to $2600 and up, nice single family rental properties remain a rare comodity and are high in demand. The supply of sub $200k SF properties is limited to existing inventory, as new construction starts at about $300k, with the majority in the $300-$500k range. High cost of construction does not allow for new SF developments under $200k effectivly capping supply.
Demand and supply have been forcing SF prices up and will in my opinion (short of a major crisis) continue to do so. All good areas in the Metro area have seen double digit appreciation in the last years (while the inner city has been flat). My personal focus has been on single family homes in middle class areas, with rents typically around $1500.
Rents have gone up in the last years, but there is a limit in affordability based on household income and we make it a point to not participate in the annual rent increases, at least until we see substancial increases in average net wages. I feel it's worth it, based on basically zero vacancy rates and very low turn over (we are typically under 15%).
I expect the market for high end multi family to reach a saturation point soon, probably putting pressure on high end rents, but there will always be a subset of tenants who prefer the life style of a single family home in a residential area over an appartment building, even if it's really nice.
The idea of a backyard BBQ with friends and family is just too much engrained in the American dream.
46 Replies
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes9y
Dawn Anastasi on here likely has some good insight. She is shown currently on top contributors on the upper right of the page.
- 9yJohn FranczykPro MemberWholesaler · Racine, WI · Member since 2015 · 143 posts · 84 votes
I moved to Racine two years ago and have been dipping my toe into the Milwaukee market when I'm not looking at stuff in Racine and Kenosha. I agree with your assessments about the city streets, but that's as much an element of living in the snow belt as anything else (and I grew up in Buffalo, New York, so I know snow). From what I'm seeing, the investment opportunities are much the same as many other places: you can find good deals, but you have to look hard. Many current owners have unrealistic expectations of what their properties are worth. I share my hard numbers with them and explain that the costs of bringing their properties up to snuff will substantially reduce what I can pay. Most of them reject my overtures, but I'm keeping them in my drip file because their properties will likely sit for a long, long time if they try to sell for what they perceive to be the price that the property is worth. After they spend $5000 or more per year just to hold on to the property, they are likely to get fatigued and sell at the lower price.
Inspectors and taxes are a way of life in southeastern Wisconsin, but for the most part you can put objective values on them and work those values into your calculations. That said, I moved up here from the greater Chicago area, and the tax and inspection burdens here are actually a breath of fresh air from the big city to the south.
That's my 2 pennies worth.
- Co-Owner · New Berlin, WI · Member since 2017 · 224 posts · 71 votes9y
@William S. try connecting with @Michael Henry. He can help you sort out the numbers.
- 9yDawn AnastasiPro MemberRental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
In any city, you have to get very familiar with the area, neighborhoods and processes to be good at it. I've been investing in Milwaukee for 6 years now. (7 counting buying my primary residence.)
Personally, I love "junky" houses. I can re-build them the way *I* want to, using materials I'm comfortable with, and make the properties look the way I know tenants in the area will like.
I haven't had problems with rent amounts. Rents have gone up since I started investing here. Not dramatically, but enough to keep up with cost of living. My taxes have, for the most part, gone down slightly since I started investing.
Rent examples (I'm usually slightly on the lower side):
+ $750 - $820 for a 2-bedrom single family
+ $875 - $950 for a 3-bedroom single family
I don't have any 4 bedrooms but the rents will be higher than 3 bedrooms obviously.
I haven't had any issues with inspections and so forth. Sometimes they are a little picky, yes.
On properties without mortgages I'm usually cash flowing $450 - $550/mo and on properties with mortgages I'm cash flowing $150 - $220/mo.
But again, to each their own. Every investor has to evaluate an area themselves to determine what they are comfortable with.
- Rental Property Investor · Overland Park, KS · Member since 2015 · 492 posts · 234 votes9y
I think my problem is the expectation level. I can't be satisfied with a so-so renovation. I also don't invest in bad areas/low rents. $1,400 and up is my requirement. However, the property taxes/assessment is what gets me all the time. On the tax website I'll see properties assessed for $100k and then the list/recent sold prices are $30k and above. The city then comes back next year and slaps you with an outrageous tax increase, now all of your analysis on the investment is thrown out the window. You now can't raise rents to compensate the tax increase because renters won't pay it. The tax system here is squeezing everybody and nobody seems to know it up here...
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes9yWilliam S. this is one reason I'm avoiding Milwaukee despite living near it.
- This post comes up as I'm on the verge of signing a purchase agreement for a turnkey property in Milwaukee. Dawn Anastasi can you provide me your honest opinion of Capitol Heights? The property I'm looking at is a 3.5bd/1ba for a $90 all-in investment. I will have a PM of course, as I'm investing from New York.
@William S. It sounds like it is not the market, but more your requirements. If you need a higher end renovation in a nicer area you will not be getting the larger rent-to-value ratios. Taxes are a bear, but you know they will adjust after purchase, so use the adjusted value to run your numbers. Maybe they're just taxing heavy because they know they still look better than Chicago!
I'm initially from Milwaukee but now living in Denver and was actually surprised at how well Milwaukee could cash flow (even with the ungodly taxes). I used to feel the same way about the city as you, but since I moved away from Milwaukee, rents have increased and property values have increased but not sharply.
You're going to have an issue in this town if you're going for a higher end market. Milwaukee is not a high end town, and taxes are high. I'm not saying go with junk properties but I see plenty of properties even on MLS that would cash flow nicely in the $100 - $150k range. Don't look for the next "hot area," instead look for neighborhoods with working class people who don't wish to own a home and pay their rent on time. I'm becoming a fan of parts of West Allis and St. Francis for these reasons.
- Contractor · Milwaukee, WI · Member since 2016 · 142 posts · 52 votes9y
@William S. You should reach out to @Marcus Auerbach he is doing pretty full rehabs, so they are done the way that he wants, and usually gets about 1400.
@William S. Seeing your second post for $1,400 rents and up... if that is a "per door" target you are going to be off. Salaries are also artificially low in Milwaukee so you're cutting out a lot of good rent payers by trying to get rents that high. $50k is a pretty good/average salary in Milwaukee, people within that income range are looking for $800 - $1,000
Milwaukee is an run down factory town. It was always that way. The taxes are quite expensive and I would probably look in warmer states. Tying up money where you may not receive rent during recession is worst thing happens to anyone. Today economy is good.
- Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes9y
Originally posted by @William S.:
Please excuse me for a moment, but Milwaukee is driving me absolutely nuts. I don't understand how you investors make it work here. The properties are in junk condition, your property taxes are absolutely out of control, and the rents you're charging are way too low given the taxes. How are any of you making money here? There is so much government overreach with taxes, city inspectors, etc. Why are you investing in this city? Nobody is moving here, and the roads are garbage as well. I've been trying to do it so I can self manage, but I don't see the numbers lining up no matter how many times I run them... Please help me understand.
Side Note: I relocated from Kansas City. So this way of "life" is different and hard to understand.
Of course it is. It's like miniature Chicago, only worse lol Get the hell out!
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9yWilliam S. I'm going to be overly general but there are many markets (far more than Milwaukee) where a $1,400 rent price point is tricky. If you can afford that rent you can likely easily afford the monthly mortgage for a home. So you have to find the small group of people that "choose not to own". And people who can afford $1,400 in rent will want to be in neighborhoods that have owner-occupants. That pushes comps up because those owner-occupants aren't looking for a return, they're looking for a home. Not every market is high(er) end rental friendly. Now paying for property taxes, snow removal, etc. is a whole other ball of wax...
- 9yDawn AnastasiPro MemberRental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
Originally posted by @John G.:
This post comes up as I'm on the verge of signing a purchase agreement for a turnkey property in Milwaukee. Dawn Anastasi can you provide me your honest opinion of Capitol Heights? The property I'm looking at is a 3.5bd/1ba for a $90 all-in investment. I will have a PM of course, as I'm investing from New York.
I do not currently own any properties in that neighborhood, but I do own properties to the west and to the east of it. I would rate it a C area.
As others have said, I think you are running into issues based on your criteria of $1,400 and not wanting to own in "bad" areas. At that price point, you are going to exclude most of the City of Milwaukee with exception of east side, downtown and riverwest which are tough areas to cash flow right now. There are plenty of B/C+ areas where you can find a property that cash flows well in a stable neighborhood.
- Flipper · Buffalo, NY · Member since 2017 · 33 posts · 7 votes9y
@Dawn Anastasi
Are your mortgage payments $300?
Just curious as I noticed the delta w/mortgage - w/o mortgage - 9yDawn AnastasiPro MemberRental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
Here is one specific example (amounts per month):
Rent = $930.00
PITI = $492.23
Water = $50.00
Vacancy/CapEx/Repairs = $175.00
Net cash flow = $212.77
This is a 3/1 single family. The same tenant has been there since January 2014 when I bought the house for $39,900.
There is a fine balance between rent prices and cash flow. Blue collar neighborhoods seem to be where the money is at in Milwaukee.
I own a single family 3br rental near West Allis, between Miller Park and State Fair Park. With the exception of permit checks, I have never seen an inspector. I keep the house in a condition that I would live in. It was my old residence and is in good shape. Proper background checks have kept my problems with tenants to a minimum. Taxes aren't too bad and are much worse in some of the nearby suburbs.
I do worry about Milwaukee's future, but many of the problems that Milwaukee have are block by block and not the city as a whole. There are nuggets to be found in Milwaukee, but you have to really know the market. Having said that, I no longer invest in the city and have concentrated in the Waukesha and Kenosha areas. I would suggest looking at the 53214 area code in Milwaukee, as there are still deals there in good neighborhoods.
Originally posted by @John G.:
This post comes up as I'm on the verge of signing a purchase agreement for a turnkey property in Milwaukee. Dawn Anastasi can you provide me your honest opinion of Capitol Heights? The property I'm looking at is a 3.5bd/1ba for a $90 all-in investment. I will have a PM of course, as I'm investing from New York.
John, just my two cents, but I own a duplex in Capitol Heights (I think the neighborhood is more commonly known as Midtown). I think it is a solid neighborhood (I wouldn't venture east of the "Fond du Lac" border). Especially on the more common, thru streets (Capitol, Congress, 60th, 68th, etc), there are many homeowners and people who take care of their homes/neighborhood. The area also benefits from being centrally located. For me to buy here, I would definitely need to be getting a solid 2% rule property. For example, my duplex is on 68th and a block north of capitol. I purchased for $70k and put $7k into the property. Each unit will rent for $850.
- Rental Property Investor · Overland Park, KS · Member since 2015 · 492 posts · 234 votes9y
I think you make an excellent point here. Basically two groups of renters.
1. Those who have to rent.
2. Those who don't want to own.
In our market there have been several new apartment complexes being built in A-class neighborhoods. The rents are extremely high. For example, a 1 bed, 1 bath 750 sq ft apartment is $1,415/m. That's really high for the midwest. I believe this caters to young professionals, or those who have relocated to Milwaukee.
For me, option 1 doesn't work for me because I want to self manage. This would lead me to C-class neighborhoods and I simply don't want to deal with this. If I chose option 1 and hired a PM, then I would simply buy in a lower tax state, however you're still signing yourself up for potential problems. I'm only looking for B+/A-class neighborhoods that are quality homes. I prefer quality over quantity/less is more approach.
- Rental Property Investor · Overland Park, KS · Member since 2015 · 492 posts · 234 votes9y
For the locals who have posted, I am only interested in Tosa and the surrounding Tosa area. I do have one in Brown Deer, but am unsure about that area.
- Rental Property Investor · Honolulu, HI · Member since 2016 · 22 posts · 7 votes9y
If you want to know about Brown Deer than Marcus is definitely the guy to reach out to. He renovates like you're talking about and cash flows just fine. I see lots of talk about Milwaukee from people located in Texas or California. Run down factory town with salaries unable to support $1400 rent? I guess that's why they've built and are building apartments and condos all over at or above that range... Do a search for available SF rentals in decent areas and no matter where you look you'll see an utter lack of inventory and there are always people looking for someplace decent in a good school district to rent because they're not in a position to buy but can afford to rent and want their kids in good schools. The deals are there in all reasonable price ranges, you just have to look for them and figure out what exactly you're looking for and just keep looking.
- Real Estate Agent · Milwaukee, WI · Member since 2017 · 8 posts · 8 votes9yPeople don't realize that these junky houses in "bad" areas of the city can be the most profitable. I'm looking at purchasing a 4 bedroom SFH for $15k, which only needs a good cleaning. However I'm also going to do bit of rehab because these junky homes need investors to build up the area. The city has great programs to match rehab jobs for these junky houses dollar for dollar in forgivable loans. After rehab, all monthly and annual expenses, and even my personal income taxes, this junky house will produce about a 25% cash flow return on my investment per year.
- Marietta, GA · Member since 2013 · 202 posts · 118 votes9y
Isn't the turnover rate going to eat heavily into that 25% in a junkier area. Have you actually done this on a few properties or is this the first and you are projecting 25%?
I assume you are paying all cash?
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