Milwaukee duplex rentals

[Michael Gibbons]

I’m posting to see if anyone has had success recently buying and renting out duplexes in Milwaukee and what neighborhoods are best and what rents are for a 2 or 3 bed, 1 bath per unit. I’m seeing around $3,100-3,800/month in costs and am trying to figure out if there’s any way to make money with these current rates. I have experience with STRs in Florida but am looking for a less exciting, less stressful idea and am located an hour from Milwaukee.  Any feedback from Milwaukee investors is appreciated!

[Marcus Auerbach]

Buying has gotten tough, also in Milwaukee, or maybe I should say especially in Milwaukee, which is one of the most competitve markets in the US at the moment (who would have thought..) - I talk about this on my YouTube channel a lot.

You basically have two choices, buying rougher properties in rougher areas, ich which case chash flow looks great (on paper). Or buying nicer properties in nicer areas, in that case cash flow is break even at best.

Personally we follow the second approach and we don't even rehab anymore. The reason is that we have such a tight market, that even very dated properties sell close to full price and do not get enought discount to pay for the updates. My last few BRRRs ended up with negative equity, meaning my total cost of acquisition plus rehab exceeded the appraisal. I am still okay with it, because everything is new and the houses won't need much capex in the next 30 years. However, at this point it seems easier to avoid a $60k rehab and several months of work and just let the  appreciation do it's thing.

I don't know how you came up with $3,100 to $3,800. Outside of PITI you have to pay for water and sewer, utilities are typically split and most owners make the tenants mow the lawn. Rents range anywhere from $1200 to $1700 per unit, in some cases higher - but that means great location and fully updated interior/exterior. Most of our investor clients opt for the middle price segement, about 250-300k, but you can make a good case for the upper segement as well 350k-400k if you have the capital, as this means more revenue for the same amount of work.

[Carlos Ptriawan]

Quote from @Marcus Auerbach:

Buying has gotten tough, also in Milwaukee, or maybe I should say especially in Milwaukee, which is one of the most competitve markets in the US at the moment (who would have thought..) - I talk about this on my YouTube channel a lot.

You basically have two choices, buying rougher properties in rougher areas, ich which case chash flow looks great (on paper). Or buying nicer properties in nicer areas, in that case cash flow is break even at best.

Personally we follow the second approach and we don't even rehab anymore. The reason is that we have such a tight market, that even very dated properties sell close to full price and do not get enought discount to pay for the updates. My last few BRRRs ended up with negative equity, meaning my total cost of acquisition plus rehab exceeded the appraisal. I am still okay with it, because everything is new and the houses won't need much capex in the next 30 years. However, at this point it seems easier to avoid a $60k rehab and several months of work and just let the  appreciation do it's thing.

I don't know how you came up with $3,100 to $3,800. Outside of PITI you have to pay for water and sewer, utilities are typically split and most owners make the tenants mow the lawn. Rents range anywhere from $1200 to $1700 per unit, in some cases higher - but that means great location and fully updated interior/exterior. Most of our investor clients opt for the middle price segement, about 250-300k, but you can make a good case for the upper segement as well 350k-400k if you have the capital, as this means more revenue for the same amount of work.

Yes Milwaukee is challenging due to recent appreciation. But also due to DNS strict rules even for cash flow property, insurance is also rising recently.
FLorida has problem with insurance recently. Chicago is uninteresting to me because of property tax.

[Marcus Auerbach]

@Carlos Ptriawan - DNS enforcing trash removal? I know this is tough on out of state investors, a pain to deal with, but generally cleaning up the city is a good thing. You can't just throw your old matress on the street and then pile your garbage on top of it. 

I have volunteered a day picking up trash in the hood thsi summer: 6 hours of manual labor makes you see things a bit differently

Also, the fines for littering went from $25 to $500! There is just no reason why it should be okay to drop your McDonalds bag wherever you stand...

[Carlos Ptriawan]

no, if it's trash only it's not a big deal, they want lot of things, from cutting the tree to repair driveway, 20k projects.

[Carlos Ptriawan]

Also Milwaukee housing is at all time high now, August number would be fantastic to see if the trend would follow last year trajectory
https://www.redfin.com/city/35759/WI/Milwaukee/housing-marke...

[Marcus Auerbach]

Trees and driveways are expensive and are two of the issues that get often ignored during purchase, I think because the timeframe they need attention seems almost generational. But when you are looking to build generational wealth, you have to deal with long term issues. Fully grown trees are between 2k and 4k to remove, driveways about 8k to replace, but at least will make your curb appeal much better! 

We try to tackle a few every year. Coincidentaly we had 3 trees removed this months, probably 20 large shrubs on different properties and we have a lot of planting to do this September. We also replace a few driveways every year, most are 60+ years old and even concrete does not last forever. You can always delay one more year, but eventually you have to. Eventually the DNS will remind you to take care of your property.  

We will have August numbers in a few days and they won't be much different than July. Fewer new listings, still over 100% list to sale price ratio, number of transactions down 25% over last year August and prices up about 6% over last year.