WI: Starting Investment $?

Question

Hello BP!

I recently made a cross country move to Wisconsin following my college graduation. This means I'm not overly familiar with the local market (I would like to stay local for my first investment[s]). I have been reading and studying rental property investment and have saved up $20k to get started in my real estate journey. I am interested in achieving steady, passive income so that I don't have to work full time anymore and can be a stay at home mom. I currently work for a property management company who oversees condos, and am onsite in the office to help residents. I would love to be able to manage my own property but definitely need to learn more about what goes into that. I have set a goal to have purchased a property (I am looking at either single family homes or a possible duplex/triplex, depending on what I discover as I continue to study to the area) or at least be actively looking at deals before the year is up.

My question is: what ducks should I have in a row before making the plunge and purchasing my first property? I would like to have some savings left over for personal emergencies and other misc. costs - so I will continue to save. What costs should I expect, other than a down payment and closing costs? Are there any ballpark numbers to know I've saved a comfortable enough amount? Do I need to have established an insurance policy, found a management company beforehand, etc? I'm basically just looking for clarification on the sequence of events I should be following.

Thank you in advance for taking time to read/reply!

Rebecca Knox · Answer

Hi Abigail, what part of Wisconsin are you going to be investing in? I think that's a nice amount--I actually started in real estate at negatve $20k :)

When I evaluate investments to buy, I always like to know if seller has an idea of age of big ticket items. Matt Maurice, part owner of the property management company, Welcome Home Milwaukee, have a nice deferred maintenance cost sheet as a reference tool. You might want to reach out to them.

Pete Woelfel · Answer

Hey @Abigail Ford - congratulations on getting started!  I think @John Lyszczyk gave you what you needed to know  about costs up front.  I'd also pay close attention to @Rebecca Knox - she knows a ton about the Milwaukee market and is well connected.

When I started investing, my first two purchases were turnkey - meaning I didn't really have to do anything outside of finding a tenant.  I knew I was paying a little more for the properties, but I wanted to learn one step at a time.  This got me familiar with working with an agent (who taught us a ton about what to look for in a property), navigating the financing through a bank, going through the inspection, finding a tenant and everything else that goes along with landlording.  It wasn't  a requirement for us that the house be "newly renovated" but we did want to know we weren't going to have  to replace any big  ticket items like a furnace, roof, appliances, water heater, etc in the first couple years.  Once we were comfortable with these things, we moved on to properties that might need a little rehab.  Everyone  is different, but for us this was a good way to wade into the water slowly and made balancing REI with a job and family easier.

The question about what neighborhoods to look at comes up a lot.  Unfortunately, the only real answer is "it depends".  It depends on your goals, the amount of money you have, the amount of work you're willing to do and what kind of work that is (landlording vs networking with private lenders vs marketing, etc), the amount of time you have, the list goes on.  On top of that, there are often differences in areas/streets within the same neighborhood.  There are others here way more qualified to advise on locations than I am, but I can tell you we've had good experiences in Kops Park and Nash Park and so far in Washington Heights.  I also have a rental in Wauwatosa but that's getting into higher price points.  I don't  own anything in West Allis currently, but that's an area I also have my eye on.

Hope that helps a little and good luck!

Rebecca Knox · Answer

In my opinion, it's very subjective as it's really up to an individual's immediate and future goals, their risk tolerance, their experience and their resources....neighborhoods are also subjective---I personally like areas where I can get SFRs for less than 60k and duplexes for <80k and that's going to generally be northside/northwest Milwaukee and south side Milwaukee like 53204, 53215 or Clarke's Square, Lincoln Village.....but pricier areas such as Bay View, Cudahy, South Milwaukee are extremely popular as well....also, where you start isn't always where you finish--many people start on the northside because you can get 4 properties for 100k vs 1 property for 100k and then they move in to better, more passive areas. That's personally what I love about real estate is there are so many strategies, so much creativity and passion---definitely try to go to local meetups and network with others who share the same passion and you will learn so much more, so much quicker--everyone is a unique human encyclopedia :)

John Lyszczyk · Answer

I tell my clients to work with a local Mortgage Loan officer as their company will likely use local appraisers who know home values well in your area. In my experience, having a local MLO also comes with having a better customer experience. I have had clients use companies like Quicken Loans and on all occasions its been a bad experience. They often have either very little or too many communicators involved in transactions and they use out-of-area appraisers who aren't familiar with the market. Electronic documentation management is great, but most local MLOs can match that and offer the same great rates. I'd rather work with someone who I've met in person before. Just my personal preference.

Brock Mogensen · Answer

Welcome to Wisco!  I suggest going for a duplex or triplex instead of single family.  Less risk with more doors under one roof.  You will want to define your buying criteria (size, location, cost, etc.).  Once you have your criteria defined start networking with other local investors and realtors.

Abigail Ford · Answer

@John Lyszczyk - Thank you!! As I am fresh out of college (and I stayed local for it) I am new to even the simple aspects of home/property buying hence why I wound up here. I was originally planning on doing my mortgage through my primary bank (a national branch), but they don't have any locations in Wisconsin! Any advice on if I should find someone here or if doing the mortgage process remotely works out okay?

Abigail Ford · Answer

@Phillip Davis - I am familiar with the house hacking strategy, but at the moment I am fortunate to be living rent free (I moved into a paid for in-law suite) and will be for the foreseeable future. I think I will end up using that strategy when I move again, which won't be for two or three years. Hopefully it will mark my second purchase! I'm not committed to any area, I would love advice on which market(s) you think are best!

@Rebecca Knox - I would love to invest somewhere relatively local to my area; so up to an hour vicinity from Milwaukee? Would love any advice you have on what neighborhoods are doing well! And thank you, I will check it out. I've seen a few houses that advertise new roofs, new cooling systems, new water heaters, etc... Would you say buying something newly renovated/updated would be best, as a general rule? I had assumed so but of course it means higher listing prices.

John Lyszczyk · Answer

Hey Abigail,

Other than closing costs and down payment I would anticipate two additional costs when buying a single family homes or 2-4 unit homes: inspection and appraisal. These can range from $250-$500. This will be paid before you close on your house. As far as insurance goes, you just need to get a quote for coverage on your home before closing. Your Mortgage Loan officer should be able to give you an relatively accurate estimation of total closing costs and monthly payment well before you arrive at closing.

Phillip Davis · Answer

Hello Abigail and welcome to Wisconsin! There are many questions in your post that leads to more questions lol. You don't need an established insurance policy, Property management should be fairly easy for you if you work with one and also there are many options around the area. Most people would suggest 6-12 reserves, or rent payments to have a healthy starting point. Do you own your home now? House hacking is an amazing strategy for starting if not and allows only a 3.5% downpayment, (20% min if not). Also what market are you in? There are different price points in different areas.

WI: Starting Investment $?

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