I mentioned a couple weeks ago that we were considering some new business tactics to deal with the changing real estate market — one of which was to start looking at properties outside our current area.
Well, we’ve gone FAR outside our area, and now have our first property under contract in Milwaukee, Wisconsin…
I’m actually partnering with another rehabbing team out of Phoenix — they rehab 30-40 houses per year in Arizona, and are having the same difficulties finding houses these days as we are. So, we put our heads together, did a bunch of market research, talked to some industry analysts who hopefully know what they’re talking about, and have decided to spend some time investigating parts of the Milwaukee market. We spent some time up there a couple weeks ago, met some other investors, worked with a couple real estate agents and spent a lot of time driving through various cities looking at houses.
We found one that appeared to be a good deal, thanks to the fact that the listing agent apparently had never been in the house. It was listed as a 3/1.5, but was actually a 4/2.5; my guess is that there hadn’t been much activity on the property because of this mistake, so when we realized it, we through in a low-ball offer. It took about 3 weeks of negotiation with the bank, but we finally got the property under contract.
I’ll be going back this week with my Phoenix partners to do our due diligence — get contractor bids, view some comps to determine the actual ARV, etc. If the numbers still look good after our trip, we’ll be purchasing the property for $151,000, with about $60,000 in necessary renovation. It’s a decent sized project, but would be a good challenge.
We’ll also use this trip to do some more research to determine if Milwaukee is someplace we want to build a team and do a lot of projects. I’ll post an update when I’m back from my trip…
I’ve been following your growth over the last few years, I believe you are ready for the next level. Go get’em J!
Mark (GM Arlington)
I just stumbled across your blog today and found it to be very well written and informative!
This IS a major change in strategy. How did you find the Arizona partners or did they find you?
Are you considering moving to Wisconsin?
Hi Mark,
I spoke at a big investors conference a couple months ago in Denver, and the guy that ran the conference put one of the Arizona guys together with me to do a big rehabbing workshop/seminar. So, I worked with the Arizona guys over the phone/Internet for several months getting our presentation together, and then we finally met in Denver. We hit it off and decided to try to find an opportunity to work together.
We are certainly NOT looking to move to Wisconsin…I’m here right now and it’s 50 degrees at the end of May…not my kind of weather… 🙂
Jason,
How did you and your partner decide on Milwaukee out of all places? I am just starting to do research on my local market trying to narrow down to one county. Even that has been difficult as I see good and bad from every county and just can’t seem to focus.
Also one unrelated question, have you considered long term buy-n-hold for any of your properties so far? and do you see that in the near future?
Thanks,
Sophia
Hi Sophia,
We spent a good bit of time reading through housing market reports and speaking with national housing market analysts who have a good understanding of the various markets around the country. The top markets that came out of our research weren’t very realistic for us (tough locations like Seattle or high housing prices like San Francisco), but Milwaukee appeared to be a good market with decent opportunity and all the right housing metrics.
In terms of buy-and-hold, we’ve had a couple rentals so far, but we keep ending up selling them. Our plan is to buy a bunch of longer-term rentals over the next year or two.
Hi J,
Could you share how much if any you factored in competition when choosing this area? Also I sent you an email.
Best,
Jeff
Hi Jeff,
Competition factored in relatively little in our decision. It turns out there is practically no competition on the area we’re focusing on, though we still don’t know if that has more to do with the fact that there aren’t a lot of good deals or just that there aren’t a lot of people in the area who choose to be in this business. I guess we’ll find out… 🙂
I’m about a week behind on my emails, so don’t take offense if it takes me some time to get back to you…
No worries.
I hope you find lots of good deals!
Jason,
I am originally from Milwaukee (Wauwatosa to be exact), and recently relocated to the Austin, TX area in April, 2011 for my husband’s job. Would love to know the approximate location of the Milwaukee project, and if I can provide any helpful info or contacts for you. We are considering the same opportunities, since we do know the area well. All our family and friends are there.
Wish you the best!
Carolyn
Hi Carolyn! Thanks for the offer!
The property is in Brookfield, right next door to Wauwatosa. We finally have all our contractors for this project, but I may shoot you an email one day soon to ask some questions…again, thanks for the offer!
Wonderful! Then you DID get a great deal on price! Will be happy to help or answer any questions you have about the area. Hope all is going well – I know what it’s like to be in the middle of a rehab in Wisconsin in November . . . Last year at this time would have been better, but that was a fluke.
To your great success!
Carolyn
Carolyn –
Yeah, we were definitely trying to get this one on the market last month, but it turned into a crazy rehab with a lot of moving parts, and we just couldn’t make it happen. Our listing agent thinks we’ll either get an offer within the first couple weeks or we’ll have to wait until Spring…it will all depend on the weather.
On the bright side, we were in the area this past week, and the weather was gorgeous!
Thanks again!
Jason,
I understand how that goes! Hope you don’t have to wait until spring. That’s the problem with the cycle there. If I hear of any prospective buyers, I’ll send them your way.
Glad the weather was cooperating for you last week. We were there in mid-October, and it was beautiful. Everything’s still green here in Texas – how strange!
Take care,
Carolyn
Jason,
I live very close to brookfield, having lived in milwaukee for 20 years, I know the areas very well. I worked in computer fields for 20 years and would like to make a change now,wondering if you need a parter in milwaukee?
Karen
Hi Karen,
I actually already have a partner that I do all my Milwaukee deals with, but perhaps we can sit down at some point and chat, and maybe we can figure out something that works for everyone…
Hi J Scott I have been following your articles for some time, and posts on bigger pockets also. I have a quick question for you. With all of the flipping that you do why don’t you own your own General contractors business and subcontract out? I was thinking about obtaining a llc and gc license, is it a smart move? Why haven’t you done it? Thanks!
Hi Jessica,
I’ve considered it, but decided not to for a couple reasons (so far):
– It’s difficult to get a GC license here in Georgia if you don’t have experience working/apprenticing under a licensed GC. I don’t have any formal construction experience.
– I left my full-time job because I don’t like working for people. Subcontracting for others means I would have a boss, something I really like not having… 🙂
– The financial upside is good if the business gets big, but that would eat into my time doing other things (including my own flips). I’m not sure the financial upside is worth the time for me (again, as of right now).