All Forum Posts by: Joshua Martin

@Dave Wilson Hey! I know all the ones you're talking about, and I know some things about the nonprofits occupying them too. I guess I know the listing agent too. While I'd like to help her out and help her find a buyer, I'd have the same reservations. As @Todd Dexheimer pointed out, they are D areas, and pretty firmly D areas, maybe with the exception of one. Additionally, non profits are hardly guaranteed rent. While I know one of the non profits on the rent roll is managed well and probably not going anywhere, it's still a non profit that relies on grants and state assistance for their work. Neither of those things are ever guaranteed or certain, and with our crazy governor in Wisconsin the latter might actually disappear. If I was going to buy over there I'd ignore the actuals and put together a pro forma with market rents. The seller might think I was silly but that's how I'd approach it. Lastly, banks, assuming you'll partner with them, see what you see and I know one of those properties is under contract having troubles in underwriting. Thanks for your interest in Milwaukee! Its a cool place. @Todd Dexheimer If you vetted all the non profits and liked them what would be your opinion be on purchasing a property like this? Best, JTM

If I was sitting on some capital, I'd go big.

Hey @Drew Markert! Way to get in the game! Sounds like it will work out well for you. Few questions, where is this thing? And depending where you might be better off putting the other unit on Airbnb altogether. we discussed Airbnb at the last brew City Meetup and sounds like it's viable most places around Milwaukee. And if you're single find a roommate. we're doing the same thing on my end. Nice having zero living expenses. Best, JTM

Shhh... ;)

It may not be as ideal as you want, and I certainly understand when you're talking about MLS prices. I see these four families come up in Cudahy at 240+, and spit off maybe 2500 month in rents. Yeah, these don't work. But consider whether you're just ruling out opportunités because your assumptions are too high. 12k a year under one roof sounds like a lot. At that rate in four years you could replace the roof, 4 HVAC units, 4 water heaters, and you still have a substantial cap ex budget. I don't think that number is realistic or at least way overly conservative, and if you go that route of course your numbers will look like ****. Insurance you should pay about 100 for, so there's another 50 per month. Also, when you're buying in these price points I think you need a slightly better more nuanced analysis beyond simple cash flow. Debt pay down means something when you have a substantial mortgage, so while you're not cash flowing where you'd like to be, you're also still making 3-350 paying down debt per month. Maybe check total return as opposed to just cash flow. I don't typically factor appreciation into my analysis because it seems too uncertain, but debt paydown certainly. And if you buy right or leverage creatively you should have substantial equity in the property. These deals are out there. If you're just complaining about the MLS being tough and no good deals on there, well then you're right and maybe time to take your efforts elsewhere.

My only thought would be about your capex and maintenance budget. If this is four units under one roof, and assuming the property is stabilized and you've done any up front repairs, what are you spending 12k a year on?

I would start with the BP guide to real estate investing and find out exactly what you want to do. If it's multi family, then learn how to run numbers on these properties to see if they make sense. Then, or simultaneously with the last, start searching for and running numbers on properties. If they make sense with the higher leverage of an FHA, go for it.

There will be snags. In the competitive marketplace we're in, FHA looks like more of a pain to a seller than a conventional option (because FHA appraisal standards are higher). Given that, in addition, if a property needs work it is not a great candidate for an FHA loan. There is another loan product offered by FHA, a 203k loan, where you can put the rehab and purchase price together on a note and still only put 3.5% down. This type of loan product looks even less appealing in our marketplace, and is pretty much perceived by lenders, sellers, and agents alike as a total pain in the rear. All that said, I just found an off market 4 family and did just that with one of these (it was a pain in the ***, but well worth it).

I would say your next thing is to identify some multi family properties in the residential sphere (four or less units), run numbers on them and see what's out there. Additionally, if you find some that you like even a little, run them past your lender and see what impact the rental income has on your pre-approval number. I bought a four family that is now valued at almost a four fold multiple of what I would've been able to afford solely on my debt to income ratio.

Anyways, cheers and good luck!

Best,

   JTM

@Jason V. What is your online rent payment system? 

Thanks in advance.

Side note, I think 1st St. between North and Center is maybe the coolest strip of houses in the whole city. Harambee? I could see it.

@Darren Liedtke, Hey neighbor!

Great question, at least it's the one I'm always thinking about as I drive through the city!

Broad question, so I'm just going to answer it in kind.

I was in Boston recently, and while taking some mental notes about how radically different the real estate market is (the value is all in the land, and speculation about the value of that land), I did unintentionally realize how backwards and uncomfortable Milwaukee is in ways, namely, it is so profoundly segregated. It's not only a cultural and civic problem, but it also poses radical uncertainty for the investor if they're trying to make an appreciation play (which, all cards on the table, I don't think you really go for in Milwaukee - by chance, maybe, or they cash flow and you get lucky, but they have to cash flow). You don't just have to rehab real estate, you have to change perceptions of an area, and not just socio-economic perceptions, but the racial ones too, because, sad and as unfortunate as it may be, in Milwaukee race is identified with crime and 'sketchiness,' and property values reflect this in a very strong way.

I was also just reading a real estate book by Brian Murray (he was on two of the podcasts, don't remember which), where he talks about 'buying on the line.' The line is arbitrary. Case in point, as your hack appraiser made clear, the line is arbitrary but definitely real. A duplex on Holton at 35-40k is maybe worth buying, but a duplex literally one block over on Booth is a steal at 100k. Why? It's the same god damn house. 

For what it's worth, I still think River West is legit. I bought a four family on Fratney and Chambers that I'm happy with the cash flow and equity play on, and will close on another 3 family on Weil and... (Nessun Dorma) in about 30 days. Same goes for that one. I'm not sure our neighborhood's all done improving yet. You can buy B/B- property and get B/B- tenants at numbers that will still cash flow well and you have as good a shot as any at appreciation. 

I talked to a lady that owns a commercial building on Holton and Center over there (you'd know the one), and it's just sitting there, lame and vacant, not doing anything. How many of those would it take to change a corner and the way people see it? To get people coming around or even a happening little restaurant. Not sure. We're fighting the problems outlined above.

With respect to more general lines, hard to say. Sometimes I think the revitalization will follow the housing stock. Brewer's Hill being rehabbed, for example, makes sense because of what they had to work with. Good bones, nice victorian houses. St. Francis or Cudahy, for example, are a lot of little match box, pre-fab things that I can't see people really wanting to revitalize. (I think this is actually the problem with respect to Buffum and Richards and the other couples dumps: no one cares about the houses, because they suck. Maybe Gorman & Co. could just buy the whole strip Keefe to North and rehab all of them on tax credits or something...).

Anyways, I'm trailing... Let's get coffee next week, neighbor.

Best,

  JTM