All Forum Posts by: Jack Medford

I moved from California to Wisconsin about 2 years ago, and have since focused most of my time on Milwaukee and the surrounding area. There are tons of properties in your price range which cash flow anywhere from 1.5%-2% even on the MLS. Happy to share my experience if you're interested in this market.

I've also recently begun looking at Rock County (southern Wisconsin) as there are a lot of cash flow opportunities. However, 2-4 unit properties are not nearly as prevalent as they are in Milwaukee. 

As @Alina Trigub mentioned, it depends on your goals. Are you looking to maximize return on your cash? Or would you rather focus on minimizing the effort it takes to receive a return on your cash?

Being a private lender can be much more passive, thus giving you more time to do other things, but it typically comes with a lower return than rentals (not always the case). However, it is not without risk and requires you do a lot of due diligence to make sure you are comfortable with the loan you are providing. For instance, if the person you lend to stops paying all of a sudden it becomes a headache. 

More than anything your decision probably comes down to how you view risk, and which situation you prefer for mitigating said risk. 

$281 for duplex is pretty nice for a first deal. That is $140/door. A lot of investors shoot for $100/door minimum, so you've got a bit of cushion there. You may find the numbers aren't that comfy, especially early on, but at the very least it sounds like a good learning experience with fairly low risk. (As long as the radon and mold issues aren't major.)

Good luck! Hopefully you get a good response from the seller.

Reliability and affordability. The pricing structure needs to make sense for the properties I am purchasing. However, I am not interested in just partnering with the lowest priced property management service. I also want my PM to be responsive and reliable when it comes to information about the local market as well as taking care of the day to day concerns of my property. 

In short, I look for PM's who provide an affordable service, while also appearing to be very reliable. I then compare any additional features offered between the ones that make the cut. 

This really depends on what you want for yourself. Would you prefer the cash to purchase something else, or just have on hand? Or would you prefer to hold this property long term, gaining no money in cash flow, but waiting for the appreciation? 

If you are fine with playing the long game and waiting for payoff to be 5-10 years down the road, then you can sit back and hold out for appreciation gain. If this is not enough of a payoff for you, selling might be best. 

Assuming 6% in closing costs, you will end up with a gain of around $40,000. ($550k * 94% = $517k) (Original loan balance of $353k) ($517k - 353k = $164k) ($164k - $127k = $37k) (Don't know how much principal you've paid down since buying, hence the assumption of about $40k). 

Hopefully this quick math makes sense. Assuming you bought in the beginning of 2017 that would be a $40k gain over 2 years. (also assuming net income was 0 for those two years due to high expenses) That would be a cash on cash return of 31.5% or 15.75% annually (40/127). If these returns are fine, might as well sell and move onto something else. If you'd like to try for better returns then you can hold and wait for a future date. **Keep in mind the cash on cash returns in this post are based on income and expenses cancelling each other out.**

I would probably go the route that @Jonathan Taylor Smith suggested and require the seller to provide possession of the property in a vacant state. I would also likely ask for a reduction in the price. Have you tried asking the seller why they have allowed the tenant to live for free for 7 months? 

On a separate note, have you had a chance to view the inside of the property? The tenant's disregard for paying rent might also lead to a disregard for the property itself. This could lead to a lot more rehab than a typical turn on a normal property. 

I wouldn't have an issue with this, especially since you know the source of the cash. As a previous waiter myself, I can attest to the fact that cash just piles up and it can be a pain to have to get into the bank to deposit it all or worse, have to hide it in your house somewhere and worry about a break in. 

As you've mentioned, they've been doing this for two years. I think a different rule applies to your situation: If it ain't broke, don't fix it. 

I haven't made the transition yet to truly long distance investing. I invest in state, but my closest property is 1.5 hours away, so I treat it as long distance because I do not make frequent trips to these properties. 

I second @Matthew McNeil's suggestion with the book. The other advice I would give is to start analyzing deals in your target market, and then present them to other investors for feedback. Keep working toward refining your process of analyzing deals until you feel comfortable enough to take the plunge. 

If your goal is cash flow, then stick with where the cash is flowing. Appreciation is always a nice addition to any real estate purchase, but it is typically the hardest factor to predict (unless you're in CA, NY or similar market). 

What is it that had you almost completely set on choosing Iowa over Illinois? Is the chance at appreciation so great that changing your mind is worth the risk?