All Forum Posts by: Robert Taylor

As far as I remember, the answer at least here in WI is a solid NO! They even have very tight rules as to what our assistants can and can't do, such as if I were to hire a non-licensed secretary or whatever. I'm sure if you sent an email to the WRA (WI Realtors Association) they'd give you the run down!

@Natalie M.-sure, I'd also agree that if you have someone that TRULY does know the ropes and is willing to really show you, I'd say go for it, what do you have to lose?

One thing to keep in mind though is that even if you do learn all the ins and outs, it takes a nice stack of cash you can afford to lose if worse comes to worse, to really play in the auction game.

@Andrew J. 

I'm going to send you an IM too, (Andy and I actually knew each other a ways back outside of BP and it was cool to randomly reconnect via BP!) I'd love to swing by there and check it out sometime soon.

Great to hear that you've got it rented out AND getting good ROI, in a very good area as well!

As far as underestimating the time factor, I'm still doing it myself! Although, I've been beating myself up a bit with my latest round of projects and then about a week ago I took a different viewpoint and considering that I had three big projects, basically all total rehabs including the one that needed the rebuilt basement, plus a few factors that were truly out of the ordinary-not unexpected, that ALWAYS happens, but a few real oddball items here, I guess for each one it didn't take me that long and of course in ANY business, NO ONE is ever 100%, there's always room to improve for anyone. My point is just to learn from it, which it sounds like you're doing too.

Yes, hiring out for stuff usually always makes sense from what I've seen, but it is worth taking a little time and analyzing each step or task. One thing that I'm doing now is I have a sub who's basically an all-around handyman type guy who's helping finish up three of my four current ones. One thing I've found and I'd think everyone would, is it is much easier to sub out the first maybe 80% of a rehab-I'm talking about a major rehab project, covering most or all of a house. You start out with a list of "big jobs" (i.e. roof needs replacing, plumbing work for licensed plumber (assuming you pull permits-something I think you could get away with 10x easier 5 or 10 years ago not pulling them) electrical work for electrician, demo, drywall, . . . ) Yet, it seems like you'll also get to the point, nearing the end where you will have a long list of "little jobs" detail stuff, little fixes, details you didn't notice due to all of the major fixes needed before, etc, where having a single all around handyman type guy (or girl!) to just handle that punch list makes the most sense. Anyway, I've been battling with my "handyguy" to fill out these simple as heck forms I made, just so I know how much time (approx) he spends each day on each task, is it complete Y or N?, do we need supplies to finish and any important notes, like something that would save lots of time and grief for the next project? For whatever reason, he HATES the sheets! Its goofy, they only take literally 10 min to fill out throughout the day (and I want him to update as the day progresses, NOT to do it all at the end of the day when he'll forget half the stuff!) He finally quit battling me and is diligently doing them each day now, but I really want that info to see where that money all goes, because it does add up! Plus, the notes for next time, etc all valuable info.

It is easy to get buried in doing big parts of the job yourself though and lose track of other very important managerial jobs. I've been very hands off the last two years, but I'm actually going to probably do the tiling for the two baths at my latest one, for a few reasons besides just saving a few $$$. I'm fairly experienced with tiling and also do my research fully, because a great tile job MUST have great prep work too, or its going nowhere good! (John Bridge Tile Forum-As good a source of info on tiling as BP is on RE investing!) I still have all of my tools incl great laser level, etc and I want to see how long it will take me to knock it out for future reference too, but we're talking about a week of work at most and I'll have a helper too.

Just make damn sure that whoever you hire is not only not a clown or a goof (unfortunately common sometimes) but that they've got liability ins coverage (and don't hesitate to call that ins co to verify it either! I knew someone not in RE investing but who hired a roofer for re-roofing a biz building who ended up causing MAJOR disaster! Turns out the proof of ins form this clown roofer showed WAS for real-UNTIL he stopped making payments on payment plan! So, proof of ins form showed 6 mos or whatever term of coverage-say until Nov 2014 if it were now-but this clown made 1st payment and quit paying! So, by the time the clown caused MAJOR damage to the building through total negligence, he had ZERO coverage! It ended up being covered by biz owners ins co in the end, but only after MONTHS of hassle and then his rates went way up due to making MAJOR claim!) workmens comp ins, in WI contractors are supposed to be state licensed and its not too hard to get, but MANY are not, like many on craigslist, many of the municipalities here have their own licenses as well. (city of MKE does, Shorewood off the top of my head)

Besides that stuff, everyone here thinking of flipping also better know darn well the rules on employees vs independent contractors too. Basically, if they're not REALLY their own biz, like working for other multiple customers etc IF the IRS or state comes in and audits, you can end up getting WHACKED and WHACKED HARD for that one! Its crazy when it seems like 80 or 90% of people on craigslist aren't insured, licensed, don't have llc, etc that these rules mean spit, but I know more than a few people that have been targeted by the IRS or state of WI and it not good! Not good at all, like where that great profit on that last flip (or 2 or 3!) is GONE once those penalties and interest are added up! A simple web search will show you 100 websites all about the independent contractor vs employee info rules.

I don't mean to scare everyone here, but its all the 100% truth and even though the term "flipping" (which I despise by the way-makes me think of slippery, fly by night characters looking for the quick buck!) is probably 10 years old or less, people have been rehabbing and reselling distressed properties for decades. It is just that now it has really boomed, first in the 2000's until the crash and now seems to be back again and the IRS and state revenue people are well aware, city inspectors are well aware, everyone knows what's up now and where 10, 5 or even two years ago it was easier to get away with a lot of stuff, it is getting much tougher now! At least anecdotally, I've honestly heard of more flippers getting audited in the last year than I heard of getting audited in all the years prior to this year! Having an accounting degree myself, I can tell you that once the IRS and state revenue people start getting good results in any one field of biz, they pounce on it! Same thing with not pulling permits on projects, I've always been pretty good about that, unless it was something truly minor, but I've known so many people over the years who used to rehab entire homes without pulling any permits and as long as the city inspectors didn't catch you in the act, you were likely just fine. (well, except of course if maybe some faulty no permit wiring job burnt the place down a few years later! Then its time to move, like to another continent!) Now though, many buyers are much more savvy, any decent buyer's broker will check, usually it is in city's website, most lenders and/or their appraisers often will check, etc. 

Maybe I got a bit off topic here, but that's my assessment-call it "Flipping in 2014!"

Check your inbox though and hopefully I can get a tour soon!

@Kyle Mack -I've heard all sorts of things as to what MKE wants to do, or even what they could do with their now massive portfolio of city owned properties, most or all through tax foreclosure. Last # I heard was they owned 1300+ properties and there was a very un-official proposal that a contractor friend heard about before it became very semi-public, where someone wanted to make an offer to buy a HUGE number of them and was apparently putting feelers out to rehab them, but from what I heard they figured out exactly what I and a lot of other people figured out already, which is that unfortunately the ONLY outcome that makes $$$ sense for most of those homes is to bulldoze them, which is not a good outcome at all. Besides ruining a lot of once wonderful and often still basically solid old or older homes, it is a terrible thing to do to neighborhoods, especially neighborhoods that are already fighting many battles as it is. 

The plain truth though is that most of the city owned props are in the lower priced areas of the city. I think Andy already mentioned before that his place is in Bay View, so it was one of the rare ones in a higher priced area. They won't have any problem getting rid of them in nearly in shape in Bay View, East Side, far south side, SW side, Washington Heights, or the many other higher priced areas. Even as the "max fixed up house price" moves down the scale, homes not trashed will still sell eventually. Problem is though that many of them are in areas where even an original home in awesome shape will be lucky to fetch more than $50k. When you add in to that the fact that for EVERY city owned home, they've got a full manifest of EVERY repair that needs to be done, based on a full inspection by a city inspector, that means that to get an occupancy permit, that stuff all has to be fixed, fixed 100% correctly AND by a properly licensed contractor, which means a master plumber/electrician for those fixes and that adds up REAL quickly! 

So, that makes it tough for any investor to want to jump in, why bother if AT BEST you might make $10k for a LOT of work, a full rehab? The city has been trying to get adventurous owner-occ's to buy in, but 98% of buyers want a move in ready home. No matter what they might claim otherwise, when it comes down to really doing it, most get cold feet when they realize how much work and incredible hassle is really involved. Besides that, there's also the $$$ question for owner-occ's. IF they qualify for financing, then why not just buy the one down the street that's move in ready for just a few $$$ more-if that?? Finally, yes the city does have their programs like Ed mentioned with the forgivable loans, I looked into those briefly myself a while back, until I heard from several investors and contractors that it is a mountain of red tape and headaches, maybe they can lure a few owner-occ's in that way, but I've heard nothing positive about the MKE NSP and related programs from anyone yet. 

I hate to sound so negative about that particular situation, unlike a lot of people in the MKE metro area, I've lived in the city for most of the last 22 years and although I could afford to live in Waukesha Cty (where I grew up AND where I wouldn't pay a king's ransom in property taxes, just half a king's ransom!) I CHOOSE to live here, because I love it! So, I'm not at all someone from the burbs just bashing the city, which we hear a lot of, but unless they come up with some radically improved incentives, I think most of those city owned homes will end up being bulldozed, which is a real shame for the house itself, as well as the neighborhood and the neighbors!

Now, right away, let me say to John D, please don't take any of my following comments the wrong way, because your story could very well be true and I'm honestly taking it as true, a 75 point gain in a short time frame is certainly POSSIBLE, so I'm not at all trying to challenge your truthfulness here, just wanted to make that clear.

As far as these "credit repair services" go in real life, everything I've ever heard from a VALID AND RELIABLE SOURCE is that they're at best nearly useless and are only doing easy work anyone can do themselves for a large fee or much worse, that many are just total SCAMS!

Vanessa, check out credit boards forums, not sure of exact web address, just google that. I had to get some good info on repairing someone's credit, etc and credit boards was the ONLY place I found on net that was truly an honest forum and not just another cheap cover story to sell something. The hard truth is that apparently, these credit repair miracle stories are TOTAL BS!! I know that sometimes med bills can get wiped clean and here and there, other minor miracles do happen, but what I've heard is that bad credit takes a long time to fix for real!!!

Hi Roger,

Yes, here in Milwaukee, things seem to be going well for the various people I know currently in the landlording biz, including myself (in a small scale as of now) As Nathan mentioned, here on BP Milwaukee has been getting a fair amount of attention lately, or even for a while now but I'd agree that there are probably a number of various mid sized metro areas that can be good places, or certainly in our current market conditions, which seem to be a very good time frame now for owning residential rental units. 

Yesterday, I commented one of my favorite comments I've made several times now on BP, which is that I've often seen where I think some of the people commenting or asking questions here on BP end up far too wrapped up in all of the many ratios, %'s etc and not paying enough attention to factors that can't be judged with ratios, etc. I have a thought that's sort of along the same lines as far as looking for "hot" markets to buy whatever in, sure there may be certain ones that get "hotter" than others at times for a wide variety of possible reasons, but I'd also say that there will be a long list of markets that you will do just fine in, provided you handle your end of the rental business as well as you possibly can. Depending on just how much available time you have for this business, I'd put at least some time into researching the various metro markets of course, but at some point I'd then take that list of acceptable areas and move on to whatever you need to do to make sure that you're running your business as smart and efficiently as you possibly can.

PS-Ironically, with this extra attention that my area has been getting here on BP recently, I just thought I'd throw in that if by hard work and/or some luck, I'm able to hit a real "home run" or multiple home runs if necessary and I was then able to move anywhere and be able to afford a nice home in any metro area, I'd be moving somewhere near to where you are now! I've spent a fair amount of time in SoCal, from LA County down to the border and I really LOVE that whole area! Its not cheap though, so I'll have to hit that home run, or a few of them before I start packing!

Wait a second there Dawn, a girl is either pretty or she's not and that will ALWAYS simply come down to MY personal opinion and that's it! Anyone who might even consider disagreeing with me is WRONG!!!

Well, I actually kind of excited about making this comment, that doesn't usually really happen here, but I'm excited to use one of my favorite sayings for probably at least the 5th time in the last couple years or so of posting on BP. Now, I do have a few small exceptions to my little idea here, so be sure to read them before calling me dumb, crazy, etc Thanks! OK, here it is:

I think that an awful lot of people discussing both buy and hold rentals as well as rehab/flips here on BP get WAAAYYYYY too wrapped up in the various %'s, ratos, etc.!! Now, IF one of us lands a new job where we're the guy/girl 100% in charge of a massive operation, maybe for a giant hedge fund buying up rentals all over the USA, or at least in multiple markets, then I'd say go for it with the ratios and %'s as much as you can. Also, my other important caveat here is anyone that's relying on financing or even who has just discuss your RE investing biz with anyone from the financial services business (bankers, private money, even gov't officials that might want some info on how you invest for some reason, etc) then I also very much recommend at least being very familiar with the common ones, because my experience has always been that those people LOVE that stufff and you don't want to look clueless or like you're flying with no solid plans to them. They also have #'s, %'s and ratios for most every other field of business too such as restaurant biz that I was in before, you ought to know your target %'s for labor and food cost or you'll look clueless to them too!

Instead, what I strongly prefer (at least my case personally) is taking everything as its own animal and analyzing all sorts of possible factors that may or may not be relevant on any one property.

On the 2% rule-As I see many have touched on, here in the Milwaukee area where I live and invest, if that's your big deal over everything else, then I can direct you straight to the toughest and roughest part of the city even though Milwaukee's not huge, its still about 1.7 mil in the metro and our toughest areas are often downright dangerous at night and even during the day at times. We've had at least 3 or 4 incidents where some totally innocent person has been shot with at least 1 deaths simply driving through those areas, although a bunch of landlords make money there too. Yet, I think simply dismissing it as where you pay more for fancier areas, get lower ROI but likely better appreciation, better tenant pool, etc. as if its just this basically even sliding scale with less and less ROI but more future appreciation, etc is also selling things WAY too short! I can think of several solid "B" suburbs here for instance that I'd give widely varying grades for wanting to invest in for the long term, yet they're all very much "B" areas!

I've lived here in the Milwaukee area for nearly all of my 40 years and I've seen several big time turnarounds in parts of our metro area, including one area that I was so hot on back when I was still in college and in no position for making some "moves" but had I been, I'd be rolling in it right now, a bunch of other people are! I could let that burn me up, instead I use it for motivation for next turnaround area. I've never heard of ANY rule, ratio, %, etc that could possibly cover that type of investing, the turnaround factor. There's two areas here I'd say are both probably"C" areas that I think are ripe for a big time turnaround, IF things keep moving in the right direction. So, I'd skip over 100 cheaper properties in other "C" areas I see basically zero turnaround chance for, to buy in either of these spots, how would you ever account for that, its very subjective topic.

Of course, you can't spend 100 hours or even 20 hours just analyzing these subjective factors, but I spend a fair amount of my free time and even some regular work time on such research. I think going all objective with all the rules, ratios, etc and not subjective isn't smart, especially if you'd love to hit a few "home runs" here and there! I'd love to hit some home runs, even if it means owning a few less units overall!

Khang,

I'd have to say that I think you have picked some very decent zip codes, which isn't always the easiest thing. Of course, picking the various super expensive ones usually are good choices, but when you factor in the reality of having to buy and make money on rentals then you're certainly not looking in the big $$ zips, so out of the more moderately or eve slightly below moderately priced zips, I think you're choices are very good. 53207 and 53222 have a few smaller areas in certain spots that get a little bit rougher at times, but not a "war zone" type area for sure. 

As a bit of a follow up on my earlier advice on landlording in the city of MKE and also seeing an awful lot of people here on BP, both local and all over the USA such as yourself getting pretty excited about owning rentals here, I'll again HIGHLY recommend that you check out the "Just a Landlord" blog of Tim Ballering, a major landlord as far as non-big corporation landlords go, who has MANY years under his belt being a successful landlord here in MKE, as well as one more I forgot to mention, also just an EXCELLENT blog as far as for the very valuable info inside, is one created by a local MKE attorney who's pretty well known as one of the best landlord/tenant law lawyers in MKE or even all of WI. His name is Tristan Pettit, if you just google "Tristan Pettit Milwaukee" his blog should be #1 or #2 on the list. He's got just TONS of great info too and of course his info is based on being a top landlord lawyer here! (and check out his little part about if you should buy rentals in Madison, which is our state capitol and 2nd largest metro area in WI, about 500k in the metro area) Madison has a very long history of a lot of aggressive and very liberal or even radical activism and politics, which has led to all sorts of local regs being passed over the years, ALL favoring tenants and as he explains, in Madison if you get some bad tenants who know even a little bit about how to game the system, you're SCREWED!!!

Now, MKE is a much different story and in general our WI laws aren't too bad at all from landlord's point of view. Yet, as Tim Ballering explains in much depth in his blog, if you manage to get on the wrong side of the city here, or even just one inspector, it can really hurt and for some it has basically ended up ruining them financially! Now, DO NOT get alarmed yet, that's an extremely rare type thing, but getting on the wrong side of city of MKE can get pretty rough for a property owner. From all I've seen over 15+ years now, if you (or your properties) stay off of their radar, nearly nothing ever happens! The flip that I just accepted an offer on last week is in the 53211 zip, which is easily the most expensive zip code in the entire city for single family homes. On this block, its about 2/3 single fams and 1/3 duplexes and because its a block from UW-Milwaukee, there are a lot of students in the duplexes and some are very well preserved, while others such as the one immediately north of my flip house are basically kept in barely acceptable condition. This one next door has the original wood siding with the paint just peeling badly, all over the house! Yet, no one from the city says a word and I've heard its been that way for many years and this is right in the most expensive single fam zip in MKE! Yet, I've also personally seen MANY examples where the city will ride hard on owners in some of the really rough or even war zone zips, where having any peeling paint means it has to be fixed ASAP or they'll get whacked hard by the city with fines!

My quick advice is if you buy ANYTHING with ANY open repair orders and especially if you buy multiple places that need even a moderate amount of work, really mainly exterior work, which is very common on REO's, make damn sure that you or someone like maybe your local contractor gets in touch with the city ASAP and does a great sales job about how even though you may live 2000 miles away, you're going to fix it up ASAP and you'll be the best thing that could've happened to these places! BUT, if there are NOT any open orders, don't say a damn thing, BUT get things moving ASAP and be totally ready to do that sales job at a moments notice! Also, the city now has a vacant property registry going, supposedly to keep up on these places, but I'm also thinking about the big $$$ they're seeing from reinspection fees, etc so make sure that any vacant places are registered ASAP on that one. All the info on this program as well as looking up any open orders can be done via the city website.

Keep us updated on your arrival and if I can, I'd enjoy meeting up with you and any of the other MKE locals here that might too!

Hi Khang,

I'm also a WI licensed broker since 2004, have been investing since 1999 and have lived in MKE area for approximately 38 of my 40 years so far. I'm not really looking to take on any clients as a broker right now, I'm busy enough with my investing work and just a few serious investor clients that I'm currently working with now, but I'm always happy to chat a bit about the local market, etc so feel free to shoot me an IM if anything comes up. Not to "toot my own horn", I'm a pretty modest guy but I'm very confident about being pretty spot on as far as valuations go here, at least for anything above "war zone" level properties. I also do a good number of rehab/flips here, specializing in $150k++ up to near $1M. 

Yes, numbers-wise, Milwaukee can be an EXCELLENT place to invest, you can buy in reasonably for a medium sized metro area, especially compared to the Bay Area and SoCal, our prices are a fraction of what they are there! Rents are quite decent, we have had a pretty stable economy for decades and we really don't go through boom/bust cycles here, other than end of 08 of course, which hit EVERYWHERE! 

One note of a bit of caution for you though. I've been a landlord in the area since 99, both in the city of Milwaukee as well as several suburbs and I'm not saying that the city of Milwaukee is "anti-landlord", but I think most landlords, especially bigger ones will certainly agree that the city of MKE is at best just so-so or ambivalent about working with landlords. Its a strange attitude at times, where they'll bend over backwards to try to promote owner-occupant homes (which is fine and understandable) but it often goes to the point where they'd much rather try to put an owner-occ into a distressed property that they know darn well isn't even close to really being qualified to be an owner-occ for many reasons, long before they'd ever think about partnering with any landlord, even one with a good rep. I think it might even trace back to our local history of socialist mayors, etc back in the 30's, 40's, 50's where anyone looking to make a buck (like that's some evil thing!) is sort of suspect! Its not that bad, but you really should learn as much as possible about the various rules AND the various unwritten rules as well!

There's an EXCELLENT blog that's written by a local landlord who's been very politically active for many years and has really done a lot to level the playing field for local landlords, without his years of hard work, it would be a hell of a lot tougher to be a landlord here. I'm not sure if I should post the link, last time I did something like that, the BP police came and slapped me down, but just google "just a landlord milwaukee" and it should be top result, his name is Tim Ballering, he owns many hundreds or even thousands of units here and has been through it all! Its packed with tons of excellent info about literally every facet of MKE landlording and includes the many "unwritten rules" you'll NEVER find on the city of Milwaukee website!

Hi Vanessa,

Yes, people do L/O in our market, I'm honestly not sure how many of them are happening these days, but they do happen. I was just talking to another local, MKE area RE investor who was telling me about just completing what I believe was his first ever L/O, rent to own, whatever you'd like to call it rehab project and "sale" (well, L/O sale) and he thinks it looks very good from his point of view so far.

As far as what that man told you, I'm not a mortgage expert (although you could certainly find others around town for a second opinion) but from what I know, I think what he's telling you is essentially correct, as far as I know. I do know a fair amount about credit scores and theoretically, IF someone with otherwise great or good credit somehow had their financial world collapse on them and they filed for bankruptcy or were foreclosed on, I suppose that would fit your idea of someone with one big screw up on their credit that disqualifies them, at least temporarily from buying a home. I think that's an EXTREMELY unlikely situation though! Every story I've ever heard of someone being foreclosed on or filing for bankruptcy is at the end of a usually long road of credit problems. Even the story of people who get whacked with some massive and uncovered medical expense who file is usually led up to with other bad marks on their reports. Plus, as far as I know, if you are foreclosed on/file bankruptcy, assuming you get your financial house in order, you should be able to get another mortgage after a period of time. I'm not sure on the time frame, but 3 years sticks out in my mind. 

The problem is what he told you though, usually people like that face continuing credit issues, unless they really turn over a new leaf and nail things down. The other concerns are also as he mentioned, getting a home mortgage depends on much more than just a great credit score, you also need good ratios on your front end (ALL housing expenses incl taxes, ins, etc) and back end ratios (ALL debt expenses, housing, credit cards, car, etc) so a good income is required, as well as a down payment of some sort (some programs go as low as 3.5%, others still want 20%) Assets can also figure in to this as well, but that's getting away from the bit I know about current lending standards and I don't want to start going off the wrong path here!

Yes, theoretically, someone well over 700 could easily not qualify if they don't have the income, assets, etc and have other debts as well.

That all having been said, I wouldn't let that at all discourage you from exploring and maybe getting into L/O investing though! I think you'd need to change those standards though, but there are people doing well in L/O, at least last time I checked!