Moving family to Milwaukee area and looking for REI

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Moving family to Milwaukee area and looking for REI

Jeff Thompson
Member since 2021 · 4 posts · 2 votes

Hello!

I just started looking through posts on this board and it's really encouraging to see how many people are willing to offer advice to new investors. My wife and I would like to join the REI club and we are moving to the area in June. It's been a challenge because we are doing everything virtually (from Phoenix,AZ), but we have an amazing realtor that has been really helpful. I would sincerely appreciate any insight this board can offer!

We are looking to purchase a home that we'll live in for a short period (2-3 years) and then either sell or keep as a rental. Ideally we would find something that needs cosmetic work and maybe some remodeling that can be done over the period we are living there. We were very excited about the idea of an owner-occupied duplex, but we need 4 bedrooms (or 3, plus an office) and there aren't many of those that exist. We've explored the idea of a 2/2 duplex and converting it to a SFH while we're there, but that sort of defeats the purpose.

The issue we're running into, like everyone else, I'm sure, is the market being so strong that even houses needing substantial work are selling at the upper limit of what they'd be worth after renovating. And if we look at SFH in desriable family neighborhoods, the asking price is putting the PITI at or above what it seems the market rent would be.

So I think my specific questions are:

1. Should I be looking outside of the MLS and Realtor.com for these goals? Is there a better resource for finding properties that need a little TLC, but are livable and can turn a profit.

2. How can I research the rental market prices? The only way I know at this stage is looking on Zillow for available rentals, but when I set a filter for $1,700+ I get a total of 17 with the map spread to Mequon, Waukesha, and Mount Pleasant. 

I'm obviously very newbie here, but I'm very willing to listen and learn. I appreciate any and all advice!

- Jeff

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Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
5y

@Jeff Thompson you are arriving at the same conclusion as everyone else who is moving here and is thinking about combining investing and primary residence: it is a tough compromise to make, if you try to force it you end up with a not so great place to live that is also a not so great investment.

While you can find an off market deal, that's a long shot. Most off market I see is at price points that are below what agents can cover profitably. There are still some at higher price points, but I don't see many (as an investor I still buy most of my deals on MLS, even now...)

If you are thinking about house hacking with a duplex you can look up some YouTube videos on the topic, link is on my BP profile page, in particular the third one gives an overview of Milwaukee's duplex inventory and the different types we have, both the old style 1920 and the newer style 1960s. But neither comes with more than 3 bedrooms.

Rents are higher than you think, there is only so much you can tell from Zillow. Our properties rent on average over $1,600 and signifcantly over what zillow or rentometer would indicate, simply because of the condition. If you go into the suburbs or downtown there are a lot of (new) rental properties between 2k and 3k, there is even a market over 3k, however much smaller in volume.

I work with a lot of relocation clients and have been through your scenario many times before, my recommendation is buy a middle class single family home with good size (large!) and update it while you live there. 

Milwaukee RE prices have been going up over 10% last year, you can see the data in my monthly market updates, and it seems like we are on track for at least +1% per month this year. I am writing a lot of offers these days 20k or 30k over asking, waiving both inspection and appraisal contingency in hot neighborhoods, and often times that is not enough to get an offer accepted. A few years ago we would write 2k over asking and people would say this is like CA (they don't know how crazy CA is..). We simply have more people than homes, no vacancies and very little new construction. Unless something dramatic chnages we will keep going this direction. 

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  • Clayton Plummer
    Investor · Manhattan, KS · Member since 2020 · 81 posts · 52 votes
    5y

    @Jeff Thompson - 
    I don't live in the Milwaukee area, but I think there is more than one REI club there. I belong to the Brew City REI Club on Facebook.

    From what I've learned (again, total beginner here, so take it for what it's worth) the Milwaukee area is good for cash flow, but not so much on the appreciation front.  In the city limits specifically.  If you're looking out in the 'burbs, that's a different story and I cannot speak to it.

    I would use Bigger Pockets to find a good Real Estate Agent (I would recommend @Kevin Gregg) in the Milwaukee area that understands the investment side of real estate.

    To give you at least one answer to your questions:

    1. Yes, you should be looking for off-market deals, especially if you want to do the BRRRR strategy or Flip. Or if you want to do the BRRRR/Hack strategy and your family is OK with living in a construction zone. For off-market stuff, there is another Facebook group literally called Milwaukee Off Market Deals.

    2. Since you're already on Bigger Pockets, they have an "Analyze a Property" tool on the far right hand side of the drop down menu under Tools.  Also, there's Rentometer.com.  You get five uses free before you have to sign up for an account and pay to analyze rentals.

    Good Luck!

    1Reply
  • Jeff Stein
    Rental Property Investor · Milwaukee, WI · Member since 2018 · 138 posts · 52 votes
    5y

    @Jeff Thompson

    Welcome to Milwaukee! I think this area is a great place to live and invest. I think it will be hard to find such a large duplex around Milwaukee. 

    1) if you are looking to move quickly, the MLS and a good realtor is, in my opinion, the way to go. Finding off market deals that fit your specific requirements in a short time frame will be challenging to say the least. The majority of duplexes will be smaller so the likelihood of finding a large duplex, needing some rehab, but livable and at a value eliminates a lot of inventory.

    2) Mequon is not a very renter heavy neighborhood so I am not surprised that not much is on the market. Also, overall $1,700/mo is on the higher end for renting in the suburbs around Milwaukee so again not much will be available. There are multiple renting sites that you can use to get a sense of the market prices like apartments.com, zillopw, trulia and craigslist.

    I invest in commercial and mostly small office space so my information may not be the most updated, but I have lived here my whole life so i am mostly drawing off that.

    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    5y

    @Jeff Thompson you are arriving at the same conclusion as everyone else who is moving here and is thinking about combining investing and primary residence: it is a tough compromise to make, if you try to force it you end up with a not so great place to live that is also a not so great investment.

    While you can find an off market deal, that's a long shot. Most off market I see is at price points that are below what agents can cover profitably. There are still some at higher price points, but I don't see many (as an investor I still buy most of my deals on MLS, even now...)

    If you are thinking about house hacking with a duplex you can look up some YouTube videos on the topic, link is on my BP profile page, in particular the third one gives an overview of Milwaukee's duplex inventory and the different types we have, both the old style 1920 and the newer style 1960s. But neither comes with more than 3 bedrooms.

    Rents are higher than you think, there is only so much you can tell from Zillow. Our properties rent on average over $1,600 and signifcantly over what zillow or rentometer would indicate, simply because of the condition. If you go into the suburbs or downtown there are a lot of (new) rental properties between 2k and 3k, there is even a market over 3k, however much smaller in volume.

    I work with a lot of relocation clients and have been through your scenario many times before, my recommendation is buy a middle class single family home with good size (large!) and update it while you live there. 

    Milwaukee RE prices have been going up over 10% last year, you can see the data in my monthly market updates, and it seems like we are on track for at least +1% per month this year. I am writing a lot of offers these days 20k or 30k over asking, waiving both inspection and appraisal contingency in hot neighborhoods, and often times that is not enough to get an offer accepted. A few years ago we would write 2k over asking and people would say this is like CA (they don't know how crazy CA is..). We simply have more people than homes, no vacancies and very little new construction. Unless something dramatic chnages we will keep going this direction. 

    3Reply
  • Jeff Thompson
    OP
    Member since 2021 · 4 posts · 2 votes
    5y

    @Clayton Plummer

    We're looking out in the suburbs primarily! I guess what you're telling me is that I am eventually going to have to get over my Facebook phobia and create an account? :-) Thanks for the tool references!

    @Jeff Stein

    Yeah, I think we've all but abandoned the duplex idea. It would have been a great idea before there was a baby involved. $1,700 does seem to be an upper limit according to the resources you listed. Those are the things I checked, but I just wanted to make sure that I wasn't neglecting a different data point.

    @Marcus Auerbach

    Originally my strategy was as you said - buy a SFH and update it will we live there. However, after a dozen or so houses and a few offers, I realized that even houses that needed updating/renovating are selling at the price that they'd be worth in perfect condition. In other words, regardless of the condition, I think I'm going to overpay for a house right now.

    My new strategy is to pick a house that doesn't need any work at all, in an area that is as close to depreciation proof as possible, and just be prepared to overpay. That way we don't have to dump any more money into it, and we can live in it comfortably for a few years until we get our footing in the area. Then we'll either keep it and rent it out or just hope that it appreciates enough to break even.

    I'll be able to be more discerning on investment properties once we're settled and I understand the area better.

    0Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    5y

    @Jeff Thompson - you are paying fair market value per definition; a property is worth what a willing and able buyer and a seller agree upon. So you might be overpaying by a couple grand, because you have to offer more than the other 12 offers...

    Based on the data that I have I think it is entirely possible that prices in Milwaukee will continue to go up over the next years. We have no vacancies, new construction is not even a factor and demand from millennials is not going to disappear either.

    Ultimatly the market has to reach an equillibirum between supply and demand, which can only happen with additional units, so new construction of affordable homes (not luxury) needs to ramp up and that will take years to do.

    I agree with your conclusion on SF that need cosmetic work, the market disregards the condition and pays more than it should, better to leverage the low interest rates and buy something that does not need remodel cash after purchase!

    1Reply
  • Jeffrey Parulski
    Member since 2020 · 1 post · 0 votes
    5y

    Worth noting, if you are moving from Phoenix to WI (I just made the move in the other direction), WI homes will often have a basement, which could provide a 4th space for an office in a 3/3 duplex. If it's a newer building (60's era or later), it may be a very livable basement so long as it stays dry.  It's not an ideal office, but could fit the bill as a temporary solution, plus you could have the basement finished and convert it into a proper 4th bedroom or even a 3rd unit if the layout and zoning accommodates.

    0Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    5y

    Great deals can be found in that size range if you implement some off market lead gen systems like direct mail and cold calling.  That being said, you still want to establish relationships with local agents.

    Using Google to research market rental rates has always been my go to. 

    0Reply
  • Ryan Talmadge
    Tampa, FL · Member since 2021 · 108 posts · 68 votes
    5y

    I would recommend the book Finding and Funding great deals by Anson Young as well as making some connections with agents in the area working within your price point.

    I am in the same boat, living in Florida and doing small investments here while planning to build my portfolio in Milwaukee. 

    Let me know via DM when you settle down would love to chat with you when I come to the area to set up some meetings. Speaking of which @Marcus Auerbach is the guy you want to follow and listen too. I have read every post in this forum and he has consistently provided the best intel and along with his market reports on youtube I feel very comfortable with my choice. 

    Good luck brotha!

    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    5y

    @Ryan Talmadge - appreciate the shout out, happy to have my brain picked LOL
    That's the reason why I started a YouTube channel about Milwaukee real estate!

    0Reply
  • David Mo
    Lender · Milwaukee, WI · Member since 2020 · 109 posts · 115 votes
    5y

    Second shoutout to @Marcus Auerbach who helped me purchase my first duplex house hack, and was very fashionable throughout the whole process :) 

    1Reply
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