Just a Landlord

Our properties are in Milwaukee and I am scared.

The proposal to eliminate residency requirements for municipal employees will pass and will further weaken the demand for housing in Milwaukee.  The result will be more abandonment of homes in older, lower value neighborhoods as owners in the outer band of Milwaukee make concession to sell or rent homes vacated by the exodus of city employees.  You read the city can’t afford to bulldoze the stuff that needs to be torn down today.  Where will this leave us? Will we be the one city in the nation New Orleans and Detroit can look down at as a failure?

Another aspect is much of your income do you spend within a few miles of your home.  I buy most of my groceries a mile from home.  I shop at the Walmart that is a mile and half from home and the Target that is a mile in the other direction.  As people move out there will be less sales in those stores and they will require less employees resulting in more of my tenants going from barely making it to failing.  City workers in general make an above mean wages so this will be a dramatic impact.

You live in the suburbs or your properties are there so you think this will be a good thing.  But in reality you should be as concerned as me.  Suburban school districts will have to expand their schools to accommodate the influx of former Milwaukee residents.  That will adversely impact your taxes.  The only alternative will be to  diminish the quality of the suburban  schools as they become more crowded and understaffed.  All the while they will be shuttering MPS schools

School teachers that wish to remain teaching in Milwaukee should be the largest group opposing this as the first group to leave will be city employees with children who are not satisfied with MPS. This will reduce job opportunities at MPS.  Carmen and I lived in Milwaukee for a while, but ruled Milwaukee out when we bought a new house due to problems her daughter and son had at MPS.  We moved to Greenfield.  Schools are good and safe. But I am so close I can walk to Milwaukee in ten minutes.  We have a very responsive police department.  Our water and sewer rates are much lower than the city  that provides the service ironically.

City workers in general will see layoffs, reduced opportunities  and lower employment as people leave.  They will now have to fight for jobs with those who already live outside of the city, but would not take employment in the city as they did not want to or cannot for economic reasons move to Milwaukee. So although they are the ones pushing for this they too will be paying a price.

You are saying:  “Sure Tim, I agree and would love to contact my Senator and Representative but I’m too busy unplugging toilets and fixing broken windows to keep up with politics”  Well. fear not.  You can find who your state legislators are at:  http://legis.wisconsin.gov/Pages/waml.aspx

What can be done collectively to improve our businesses, save costs or generate additional revenue?

I will post my in-depth thoughts on these topics over the next week or so as time permits me to clean my notes into coherent sentences. If any of the topics interest you comment here or email me at: Tim@ApartmentsMilwaukee.com

• Reduce Maintenance Costs
• Become better at sharing our collective knowledge
• Group purchase of a distressed block or two
• IT meets real estate

Reduce Maintenance Costs

Improve supply sourcing: ‘How can we use our collective shopping experiences and buying power to improve our bottom-line on a daily basis in 2013?’  More thoughts on better material sourcing.

More effective Maintenance Labor/Contractors/Services The ability to have skilled, cost effective maintenance available on demand is typically a missing element for most small to medium sized owners. Read more on  effective maintenance labor solutions that could change our industry.

Become better at sharing our collective knowledge

The ApartmentAssoc@YahooGroups.com is good beginning. But the idea could be greatly expanded upon. Perhaps a Wikipedia style “Best Practices” Guide* for Milwaukee rental owners. It would include everything that a property manager may run into.

Similarly a Mastermind Group could reap benefits if the right people were involved. Here is an overview of the Mastermind concept.

Also look at what groups like StartUpMKE are doing in the tech field.  Read my thoughts on increasing the sharing of knowledge.

Group purchase of a distressed block or two

Choose a very small geo area of Milwaukee. Think something on the terms of both sides of a block or two maybe three at the max. It should be depressed, as in make Detroit look like a nice place to live, depressed.

Apologizes to Detroit, but many people know of Detroit’s challenges and fewer of the challenges of Milwaukee.

Yes, unfortunately, there are many areas like this in Milwaukee and the numbers are increasing as foreclosures work their way through the system.

The plan would be to assemble a group of investors and turn the area for fun and profit. My  expanded thoughts on group purchasing of a distressed block.

Tech meets real estate

There certainly huge opportunities for software/web solutions to things that cause frustrations for owners and perhaps tenants.

Some ideas:

• Setting rents to market. How much are you losing because your rents are too low or how much have you lost due to your rents being too high and your vacancies languish? Me, too. ;-(
• Property acquisition tools Look at what sites like http://www.spotproperty.com/ are doing elsewhere, but not here.
• Vacancy filling Craig’s List used to work, but now there is too much spam and fraud. What about a system where the tenants need to prequalify before actually applying. While pre qualifying by an individual owner may be problematic from a fair housing standpoint, a proper third party system could work.
• Custom Management tools My company’s secret sauce is our highly customized management software. Nearly every task is one or two clicks and the computer makes many mundane management decisions on its own.
• Put your solution here

You can read my thoughts on tech and real estate here

Conclusion

What? This is not enough ideas for one year? Then post yours on the comments!

Shy, then email directly at: Tim@ApartmentsMilwaukee.com either for my review only or to repost anonymously as you direct.

You Are Naturally Short Housing

Some days it seems like all the smart people think real estate is dead.  One of the larger real estate clubs in Milwaukee has changed their focus from real estate to a mix of  other investment ideas.

Back in 2004-2008 it seemed like everyone was “investing” in real estate even though the numbers did not work.

I had a twenty something kid in my office in .. 2007?.. showing me his Excel spreadsheet and explaining how my model was wrong.  I said ‘Wow! looks like you will be richer than Bill Gates in ten years.’  He said ‘Well,  not richer than Bill Gates, but a Multi! Multi! Millionaire.’  He even offered to sell me a copy of his spreadsheet.  Unfortunately I would not part with $500, even though it it did a nice job at predicting future property values at 25% per annum appreciation.

Last year a lender contacted me,  suggesting I should buy all of his former rental properties.  They were pretty rough, so I passed.

Today relatively  few people are buying in our market, however the numbers can make sense now, while few deals made sense in 2006.

Remember there is a big difference between the wisdom of crowd and a crowd mentality. Go against the stream when, and only when, it makes sense.

Being a contrarian for no good reason is just a fools bet.

The who’s who of Milwaukee rental housing were in attendance at Joe Peter’s funeral.  So many that one person commented that if a bomb hit the church nobody in Milwaukee would have to pay rent again.  A lot of folks I had not seen in years.  It’s sad that the only time we see these people anymore are funerals for friends.

One such person was Mike, a former board member of the Apartment Association.  He asked if I remembered having lunch with him a number of years ago.  I admitted I didn’t and kiddingly asked if I had skipped out on my portion of the bill. He assured me I hadn’t and that he just wanted to thank me for the sage advice I had given him that helped him succeed when others failed.  I had him remind me of what I shared with him that he felt was so valuable.  Once he told me, I felt it still rings so true that I would share it again.

At that lunch back in probably 2005 or 2006, the height of the silliness we were seeing in real estate pricing, Mike wanted to know how to acquire more units.  I cautioned him that his focus was wrong.

It’s not about how many units you own.  It’s about being sustainably profitable.

Unit fever is a disease that has wiped many owners in both good and bad economies. So don’t aim to have 50,100, 200, a thousand units.  Rather do the math and aim to only own profitable units and create scalable infrastructure before getting big.

Wells Fargo v. Sandra A. Ford is a NJ case that started as a pro se defense to a foreclosure. It ends with Wells Fargo getting spanked by the NJ court of Appeals in what will be a published decision..  At appeal the defendant was represented by Legal Services of NJ, which is similar to Legal Action of WI.

My great interest in foreclose defense cases is twofold.

First I see some of these cases holding the potential of unraveling the entire real estate market by creating hundreds of thousands of “free” homes across the nation. I fear this will cause a second and more dramatic drop in housing prices as once the mortgages are wiped people can sell for practically nothing and make a profit.

I wish to throw this question out for discussion:

What is the most important thing you know?

We all come from different backgrounds and have had different experiences.  Individually we know what we know, but no more.

Collectively we could be pretty smart and achieve more.  That is part of the power of a discussion list like the list I moderate ApartmentAssoc or the ones I participate on such as MadisonApartmentOwners, LandlordAssociationOrg or the hundreds of other groups on Yahoo Groups or Google Groups.  You ask a question and get an answer.

But what about the question that you do not even know you should ask?  So go ahead add what you think is the most important thing you have learned about landlording to the comment section.

[Note I am importing replies from the above Yahoo Groups into this comment section for all to read]

A couple property owners approached me stating they have received notice from the Milwaukee Department of Neighborhood Services (DNS) that they must obtain new occupancy certificates on properties they purchased a couple of years ago.  In both cases the properties had been in foreclosure.

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