All Forum Posts by: Peter Falk

Thanks Marcus.  I'm a member of the Apt Assoc of South Central WI in Madison and know they too were watching those cases closely as well and will look into the RPAWI.  

It sounds like you are the one wanting to get an option to buy during your lease term.  In most cases, the owner/possible seller would want an option fee paid up front to entice them to entering into the option to purchase agreement, so assuming that is the case, would enter into the agreement with a pretty firm plan to purchase and not lose that option fee.  It also can get challenging to set a price now to possibly buy in the future that the owner and you will feel is fair (with markets still appreciating at a healthy pace).

You can also keep your eyes open for a seller willing and able to do a land contract with you (but there usually would want much more money down and likely want a full pay off in a few years, but can see what you can negotiate on terms).

I agree nothing illegal about options/option fees in WI to my knowledge, but generally seem much less frequently used in single residential transactions than commercial transactions where due diligence and closing timelines may be very drawn out.

It sounds like you want to be a rental property owner/investor and not just looking to minimize your out of pocket housing expenses (getting a roommate to help cover your mortgage with a single family home).  If that is the case, and a 4-unit is in your price range, I would consider jumping in and owner occupying one unit in a 4 unit building and renting out the other 3.   If the unit you occupy is large enough, could get a roommate and see how it goes.  

I've always been self employed, but if you have a stable W2 job, lender underwriting should be pretty easy and painless to get approved for a loan and see what you qualify for on financing.

Good luck!

I'm in Madison, WI with pretty high property taxes (around 2% of the value/purchase price) and also think the quick ballpark 45-50% expense ratio is pretty close for operating expenses including reserves, assumed management, taxes, maintenance...

At this time with higher interest rates, and continued upward prices, cash flow is pretty slim.   I think most buyers are looking at long term appreciation and rental increases over time as we are in a growing city with lots of great amenities, stable employment, college town, etc) or some may think they can move rents higher if below market, but many 2-8 units sell for 12-14 x gross rental income making cash flow not too exciting after operating expenses and debt service with more challenging areas looking better on paper as always.

The WRA residential lease maintenance section I think does a good job of covering both that tenant shall maintain (change batteries) but not waiving owner responsibility for maintaining the smoke alarms and replacing when needed.  Also don't forget about CO alarms as applicable in many cases in WI (unless all electric heat and appliances....)

State of WI Carbon Monoxide Alarm Rules for Single-Family/Duplex Buildings | Fire | City of Madison, WI

Not an attorney, but is my understanding you can charge applicants your actual cost for running a credit check on them (up to $25), but do think an application fee must be refunded if not leased.  That is why most owners/companies don't seem to bother with application fees in the Madison, WI market as it's not worth the hassle of collecting it and refunding it (it's been very competitive with often multiple applications, so would be mailing checks back much of the time.

I think this section covers it and appears like LL could retain it if tenant approved and then decides not to sign the lease, but LL has a list of caveats to disclose up front about lease terms, etc.  They can withhold for the credit check up to $25 (again confirm current if you want).

ATCP 134.05.

Sounds like you have a plan to consult with some brokers and expose it to the open market. I feel that should definitely get you the most interested parties seeing it and therefore obtain the highest and best offer terms. As noted, commission are always negotiable as are brokerage options (full service to discount companies that pretty much just post it on the MLS and you work with all calls, offers, etc) and an agent can go over likely net out scenarios with you and give you an idea what you likely will be able to net after closing expenses and paying off the mortgage balance. I would at least start there and good timing to figure out a plan with spring slowly approaching and our busier sales season in WI.

If it's not habitable, conventional financing isn't too likely. There is an FHA 203K loan that lets you fund the purchase and rehab costs in your mortgage loan, but all the work must be done by contractors, so not a sweat equity over time project. If it's listed could see if the listing agent has rounded up any financing options for it other than cash (local credit union, etc.) but sounds like a project most buyers will purchase in cash. Hopefully it's marketed around the land value.

Early in the process you can also think about debt options and if you feel better starting off with small multi long term residential debt (fixed 15 or 30 year mortgage) or don't care if you take on shorter term commercial debt (most long term mortgages still aren't held to maturity, so would not be too driven just by that).  I agree with earlier advice to pick a property type to focus on so you can learn that market segment (market rents, typical price range, what a good deal looks like, what to avoid) and get your financing figured out (vacation second home loan, etc).  

I also thought renters insurance generally was there to replace tenants personal property as that is not covered by owner's property insurance.  The only rental claim I had a tenant submit for renters insurance was denied (condo flooded due to an exterior patio drain backing up) and they felt that damaged was not their liability.  The limited coverage I suppose makes sense when the policy are usually pretty inexpensive.