All Forum Posts by: Adam Gollatz

To add to what @Matt Maurice said, you can’t develop an area if the current inventory is selling well below replacement cost. I’d also imagine there are not too many good lots that would meet the zoning requirements of multi family and to have it rezoned would probably cause a huge fuss in those mostly residential neighborhoods.

I think those neighborhoods will continue to do well as people seek areas with low crime, good school districts, and an easy commute. As long as productivity, employment rates, and income aren’t negatively affect home prices will continue to rise as inventory stays tight. Inventory will stay tight unless new construction picks up or population declines.

I think the number actually went up slightly from 25. Anyway, you’re not charging the fee, cozy is, so you’ll be fine. I know lots of landlords that use those services and I never heard anyone reimburse tenants.

Hi Derry,

Some of the Pros - they are very cheap, there is the 20k forgivable loan program, there are usually other grant programs and free money available.

Some of the Cons - they are usually in the roughest areas, they are generally in very poor condition.

I’ve personally never dealt with any, I haven’t seen any in an area I was looking for, but I have heard of people buying them and doing ok. I hear the trick is really researching the free money opportunities from grants and forgivable loans and maximizing those benefits. No sense in buying a house for 1 dollar, putting 50k into it and having a home that’s worth 45k with low prospects for appreciation.

There is a lot of information scattered through the city websites, call around and ask.

Hi Patrick, what are your goals and what is your price range? Are you looking to buy turnkey or do more of a BRRR method? For what its worth here is my quick opinion of the areas. I'm curious to see what others recommend.

110 E Clarence St - Bayview  definitely B to A. I think this is an auction property or something. Ive definitely seen that address before. Lots of competition in this area, a good high cashflowing deal will be very hard to find.

748 S 21st St - clarke square neighborhood. Definitely rougher and id probably classify this as closer to a D than B area, but some people are heavy on it because of west milwaukee and the 5th ward/walkers point to the east.

Rents for $900 - Which one?

1126 Layton Blvd Unit A - Same as above

1819 W Burnham St - True south side milwaukee. Ive been seeing a lot in this area from 6th to 20th between Lapham and lincoln. Again, Id rate it more as a D type area with 20k properties

2022 S 16th St see above

2059 W Vilter Ln see above

The cash flow might look good on these, just make sure you are running repairs, maintenance, and capex expenses by actual replacement cost and not an 8-12% of monthly rent. The people that do well on these buy extremely low (like 10k) and fix up themselves and self manage. Feel free to PM to talk more.

Not that I am aware of, but the city of milwaukee does have a free landlord training class that they give you certificate for. This is a requirement for buying city owned properties.

Hi Mike, Im not sure where you are at in your investing career so I hope this helps. 

The "numbers working" (high rents, low expenses) is a product of a variety of factors, but it all boils down to perceived risk. The free market tends to seek its own level, so as changes in the market come about, they drive values up or down based on perceived risk. Areas with high wages have high demand for homes, high demand lowers supply, risk is seen as less, so prices go up. Prices exceed development costs, so developers step in, and add supply. These areas are the areas where you'll get a 4-5% overall ROI, which doesnt work if you are borrowing 80% of the money at a 4-5% IR. And probably what you end up seeing in a lot of the California market. So what ends up happening is that money finds different places to flow. Cleveland, Cincinnati, Memphis, St Louis, Milwaukee, Indianapolis, etc. Usually it starts in areas with undervalued rents but it could be any catalyst really. They come in, drive up rents, people see the returns and more money comes. As more money comes in, the perceived risk goes down, so people are willing to accept lower returns driving prices up and taking rents along with them.

Keep in mind that talking about a city is referring to it at its macro level, and to be successful you have to drill down to the micro level, either neighborhoods or sometimes even blocks. In all of these cities they have a downtown area, and then it expands out from there based on nightlife, infrastructure, parks, schools, crime, etc. Take Milwaukee for instance, lots of outside investment and cap rates in some of the best areas of the city can be down to 5-6% or lower. If you work hard for deals and are patient you might be able to get in the 6-8% in these same areas. You can move a neighborhood away from downtown, into areas that are still good and get 8-10% and work for a 10-12% deal. Move further out and the numbers go up, you get the picture.

So when I look at these "emerging markets" so to speak, I like to look at what is truly there at the city level. There are the things that cant be changed and the things that can be changed. Whats the climate like? What are the natural resources (lakes, beaches, mountains, etc)? Whats the economy like, is there population growth, what are vacancy rates like and is there a healthy growing job market, and corporate/business investment. Once I find a city I like, I have my own set of ever changing subjective parameters to find the areas within that city. 

I say all of this because you said "you want to make sure you are focusing on the right market". Its important to remember that it is all subjective and nothing is guaranteed, but Im a firm believer that there is money to be made everywhere. You have to find what works within your risk tolerance and strategy or you will second guess yourself and will never be successful. If you have a network in those cities, Id say that is an ideal place to start. As for tools to accomplish this, its just good old fashion research. The statistics are easy to find on the BLS website or various other government/chamber of commerce websites. And you should definitely look into local REI groups to see what people are saying. Im local to Milwaukee and live there but spend probably about a week or so a month in the twin cities, so I have a good idea of both markets and how they compare. Feel free to reach out to chat more.

-Adam

Hi @Stuart Marshall and @Tiffany Reed

I have a decent knowledge of the Milwaukee market as Im local and self manage. Id be glad to chat more. Im curious to know more about your rentals, either neighborhood/zip, purchase/rent amount and level of updating. Feel free to message me if you dont want to talk publicly about it.

My 2 cents on low income housing is avoid it, and had we talked before you invested you probably would have. The cash flow can look nice, but deferred maintenance, vacancy, and cap ex costs can eat up a lot of that cash flow especially inside the city limits where a lot of the housing stock is 100+ years old. And as you are probably finding out, its hard to manage effectively. Im familiar with Nimius, In fact I met the owner of the company a few weeks ago at a local meetup and a lot of people I trust would recommend them, so I think this might be a case of "you cant get blood from a stone" 

Th best piece of advice I can give for both of you would be to check out some of the local REI groups. There's one on facebook called Brew City and you can meet some very knowledgeable and helpful people on there.

-Adam

Hi @Monique Stewart. Welcome to the world of REI. The midwest can be a great starting market. Once you narrow down a city, start networking specifically for that area through local forums. Even better, plan a trip out to see the city, its neighborhoods, and maybe go to a local REI meetup. Most cities have them. You'll want to find a good property management company and a good realtor or wholesaler to get started. Im in the Milwaukee and Chicago and Twin Cities markets, so feel free to connect if you want to talk about any of those.

Theres a lot of competition in Milwaukee because the lower price point so it not only draws a lot of locals but that outside investment as well. My biggest piece of advice would be to really dive into what type of approach you want to take with regard to asset classes. You can find 50k duplexes in ok areas that you can squeeze 1500/mo rent out and some people do well, but that comes with a unique set of challenges, especially for an out of state investor. Or you can take the single family or higher asset class approach which wont bring you as much cash flow, but has opportunity for building wealth.

Ive done out of state in a few markets and the two key pieces of info are going to be your deal sourcing (realtors/wholesalers) and your PM company. A good place to start would be local forums. Brew City is a good one on facebook for Milwaukee that Im a part of. The people that run it are very active and helpful.

It will really depend on what market you are in and your circumstances around selling. Your best bet would be to find a local realtor you are looking to list with and get their opinion. Even in my area, my advice would be different depending on what area of the city/suburb the property is located in.

Most renovations you wont get the full value out of what you put in. I know this sounds counter intuitive because we all hear about people flipping homes for profit. But that doesnt work in all markets and when they do, its usually because they bought the property for 60 cents on the dollar and on top of all of that they have cheap contractors and the best material pricing in place. You have to ask yourself if keeping the property for another 6-8 months and putting in 25-30k to get 40-50k out is really worth the time, effort, and risk?