Dec 04

The question came up on the ApartmentAssoc@Groups.io:
Who are the elected reps we can write to about the MPS proposal?

I believe the only ones that actually decide on the policies is the MPS School Board and perhaps the Superintendent. However, they may be influenced by what other local officials think about an issue. Certainly Tom Barrett and the Council should be worried about things that may result in more austerity for Milwaukeans and less money for the city.

Superintendent Dr. Keith Posley He lists a Twitter account of @DrPosleyMPS The only phone number on his page is the main MPS Switchboard: (414) 475-8393

Sadly, only two of the Board members list a number other than the MPS Office of Board Governance and none a direct email.

MPS Office of Board Governance
Phone: 414-475-8284
Fax: 414-475-8071
Email: governance@milwaukee.k12.wi.us

https://mps.milwaukee.k12.wi.us/en/District/About-MPS/School-Board/School-Board-Members.htm

District #1 — Marva Herndon

District #2 — Erika Siemsen

District #3 — Sequanna Taylor

District #4 — Annie Woodward (414) 342-1813

District #5 — Larry Miller (President) (414)469-9319

District #6 — Luis A. (Tony) Báez, Ph.D. (Vice President)

District #7 — Paula Phillips

District #8 — Megan O’Halloran

Member at Large — Bob Peterson

Dec 04

Over on the ApartmentAssoc@groups.io email discussion list Mike writes:

Fortunately the facts are not as laid out in the post.  The article makes this clear.   “Property taxes” would not go up 64-128% under the proposals being considered.  The MPS portion of the property tax bill would go up by those percentages, not the whole bill.  The increases are still substantial – I estimate 25-50% of the whole bill.  If we landlords want to be involved in the political process we must arm ourselves with facts to avoid embarrasing ourselves and damaging our cause. 

Mike is correct, the percent of increase is the school portion. The original Journal article, which I based my comments on, stated:

“For a home assessed at $300,000, that would push property tax bills from $2,874 to $4,716 on the low end and $6,723 on the high end — increases of 64% and 134% respectively.”

Milwaukee Journal article as it appeared on 11/19/19

The Journal article has since been rewritten to “school property tax”

This represents an annual tax increase of $921 to $1925 on an average Milwaukee home.

I stand by my original comments of the dire consequences this will cause to our market.

Dec 03

From Rebecca Knox at Brew City REI Club

********Brew City: If you are concerned about the MPS referendum suggesting a SIGNIFICANT PROPERTY TAX INCREASE 64-128% and want to relay your thoughts on this, the LAST MEETING with the task force will be at 5:30 p.m. at Bradley Tech High School, 700 S. 4th St, Dec. 10.
********

All of the meetings will be open to the public. The panel is expected to make a recommendation to the school board in December 🤨😲 This is the last meeting they are having.

We spoke to District 4 elected MPS board member, Annie Woodward and she said there are a lot of agendas going on and encourages everyone to share their opinions.

The current conversation across our industry is Evictions.

What will happen to tenants who are already near failing, when tax bills force widespread rent increases?

What will happen when rental owners, who are already operating on slim margins, cannot find tenants that can pay the increased rents that mirror the increased taxes.

What will happen to homeowners who are barely keeping up with expenses today?

If property taxes double, which is the mean predicted increase, Milwaukee, and Milwaukee alone, could easily see a foreclosure/failure rate comparable to 2008.

Owners in the rest of the metro will be unaffected, making rentals and homes there more valuable and desirable, furthering the exodus from, and the decline of, the City of Milwaukee.

The Journal reported just two weeks ago of the harm caused by 28% of City workers leaving the city for the burbs.

Nov 30

In 2006

Everyone: “The market is high, aren’t you going to sell and make a killing?

Me: “Nope, don’t know where I would put the money if I did sell.

In 2009

Everyone: “Wow! you must have lost a lot of money due to the real estate crash!

Me: “Nope, I did not sell, I’m not selling, occupancy rates are the highest I’ve seen and rents are going up.

If you are in this for appreciation or flipping, the fluctuations in real estate values directly impact you. If you are a buy and hold owner, then the market does not impact you as much.

My buddies who sold out in 06, 07 and thought they made a killing, lost a lot when the stock market corrected, plus paid taxes on the sales. Those of us that stayed in the rental game did okay.

Property values and rental returns do not move in unison.

In forty years I’ve seen the worst housing markets being the best rental markets, as long as you bought right and financed right. In 05 and 06, when anyone who could fog a mirror was given a mortgage, we saw double digit vacancy rates.

So strong housing markets can actually be bad for the rental market.

Nov 29

From the Milwaukee Journal :

A new report from RENTCafe found that West Allis registered a 14.6% increase in average rent rates from just one year ago.

Per RentCafe, Milwaukee saw a 4% increase. Their report for WI is at:

https://www.rentcafe.com/blog/rental-market/local-rent-reports/wisconsin-rent-report-october-2019/

4% for Milwaukee sounds about right. 14.6% for West Allis is surprising.

But if the proposed MPS budget goes through with its expected 64-134% property tax increase, then I expect that Milwaukee rents will skyrocket, all the while profitability will decrease.

Nov 28

Read a great article at Forbes on Rent Control. Hat tip to WI Landlord Tenant Law Attorney Tristan Pettit for sharing the article with us.

“Because the downsides of rent control are all born by other people in the future, while the upsides of rent control, be they either real or imagined, are conferred on renters today. Politicians would gladly accept that someone else pays you Tuesday for a hamburger today.”

The article is good, but better is his full analysis. You can read it at:
http://www.seattleforgrowth.org/rent-control-politics-less-housing/
or download it at:
http://www.seattleforgrowth.org/wp-content/uploads/2019/11/Rent-Control-Analysis-Ver1-Complete.pdf

Additionally, the benefit of having rent lower than market rent may or may not help people that supporters intended to help. In a study of New York rent control in the 1960s, found that the “benefits were higher for older tenants, richer tenants, and white tenants than for their counterparts,” and “the cost to landlords exceeded the benefits to tenants by about 75 percent.

Even when apartments are price controlled, if they aren’t abundant, and one can’t pay more for them, then people must wait in line for them. Bread lines in the Soviet Union were symbolic of the fact that bread was cheap, but there wasn’t any bread to be had. Because of this, people with plenty of money to spend end up in rent-controlled apartments they won’t leave.”

Nov 28

In 2006 a well dressed thirty-something guy showed up at my office to talk real estate investing. I always enjoy hearing others’ opinions.

We start talking about debt. He would leverage the entire purchase or even more if the bank would give it to him. “In the long term, the market only goes up.” he boldly proclaimed. My opinion is that while debt is necessary, particularly at the beginning of your career, too much debt is deadly.

He pulls out his laptop and opens Excel and shows me how terrible my cash on cash yield was. His return was infinite, as he was 100% or more financed. I jokingly said, “Soon you’ll be richer than Bill Gates” to which he replied seriously, not that rich, but very wealthy. He also tried to sell me a copy of his Excel spreadsheet so I too could be leveraged rich.

By late 2008 the sharp-dressed kid was busted out. Yet, despite my “terrible” yield, I’m still here. Sometimes fancy Excel spreadsheets can get you into trouble.

Nov 27

Decades ago one of the people I considered a mentor told me: Pay $100 a month extra principal on the property with lowest mortgage balance.

When that property pays off, pay the mortgage amount plus the $100 towards the property with the next lowest balance and so on.

I argued that the money should be put towards the loan with the highest interest.

He said ‘Cash flow is king. Without cash flow, the rate of interest doesn’t matter, you’ll go broke.’

Ten years later I thanked him. He said ‘I wished I would have followed my own advice.’

Nov 13

There is talk of national rent control, with maximum rent increases of 3%, as well as only just cause evictions..

If your rents are below market, they could remain so forever. When it comes time to sell and you are getting $600 a month and the neighbor $800, the value of your property will be gravely diminished.

This punishes owners who allow long term tenants to remain below market. Eventually this will punish those tenants as well.

In some markets perhaps owners are evicting to gentrify, but in our market when an owner uses a 28 day no cause notice it generally means there is a behavioral problem. This will result in bad tenants staying and annoying their neighbors longer as well as more contentious relationships between owners and people that are problematic.

https://www.bisnow.com/national/news/multifamily/whats-in-aocs-national-rent-control-proposal-101041

“The economists are right, and the populists are wrong,” the Washington Post wrote in an editorial. “Rent-control laws can be good for some privileged beneficiaries, who are often not the people who really need help. But they are bad for many others.”

Specifically, the Place to Prosper Act calls for a cap of 3% or the annual U.S.. Consumer Price Index increase, whichever is greater, for rents in housing markets nationwide.

Oct 21


https://www.politico.com/news/2019/10/19/ben-carson-hesperia-california-discrimination-charge-051504

The ordinance also mandated unannounced annual inspections and criminal-background screenings by the sheriff’s department. The county sheriff’s department enforced the ordinance in a way that targeted minorities and evicted some residents who were the victims of crimes, including people who had called the police, HUD alleges.


HT: Tristan Pettit

This is similar to, Magner v. Gallagher a case that went to the SCOTUS. St Paul withdrew under political pressure from the Obama Administration.

Five years ago almost to the day, I shared the comments of Attorney John Shoemaker who represented the property owners in Magner. You can read that here:

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