The Wisconsin Investor
Each week, we bring you interviews with some of Wisconsin's top real estate investors who share their tips, tricks, and strategies that you can implement right away. This show is dedicated to helping Wisconsin real estate investors elevate their game. Along with interviews, I'll also dive into hot topics in solo episodes and feature experts from various real estate sectors across Wisconsin.
The Wisconsin Investor
Property Management Do's and Don't's with Fran Bourassa
Fran Bourassa, a key player in Northeast Wisconsin's real estate scene, joins us to impart his wisdom on property management and investment. Discover how Fran transitioned from buying his first duplex at 21 to amassing a substantial portfolio through strategic partnerships and calculated moves. In this episode, Fran opens up about his decision to create Vantage Point Property Management Group, a firm born out of frustration with traditional management companies, aiming to meet investor needs with precision and care.
Wisconsin's real estate market remains a hidden gem, offering stability and attractive cash-on-cash returns. We explore the compelling reasons behind the growing interest in Northeast Wisconsin from investors nationwide, alongside the unique challenges faced by property owners in different parts of the state. Fran shares insights into the region's promising opportunities, underscoring the area's safety, landlord-friendly policies, and the potential for fruitful investments in single-family homes and duplexes.
Unpacking the art of self-management, we weigh its benefits against the convenience of professional property management. Fran provides a glimpse into his own experiences and the role of technology in streamlining property management tasks. Our discussion extends into the world of property management software, with tips on leveraging these tools to simplify operations. Whether you're a budding investor or a seasoned property owner, tune in for practical advice and valuable insights designed to enhance your real estate journey in Wisconsin.
To connect with Fran and discuss working with him, email him at fran@vantagepointpropertygroup.com.
Welcome back, guys. We are on the Wisconsin Investor Podcast and I'm super excited for today. This is a hot topic on a lot of conversations I have with real estate investors who are looking to get in the game or are currently in the game. Today we're going to be talking all things property management with my personal property manager, Mr Fran Barasa. Fran, how are you, sir, good? How are you Good? I think I always mispronounce your last name, by the way, but it's more fun.
Speaker 2:That was spot on.
Speaker 1:That was spot on. Okay, good, because that's fun to say it really is. Fran, what I want to do is just start out, tell our audience a little bit about you. You're also an investor as well, so talk a little bit about how did you get into this game of real estate. And then how did you end up owning, probably, I would say, the biggest property management company in Northeast Wisconsin as far as from, I don't have any data to support that, but just from my conversations with people and other investors I know that are working with you. But give us a little history on you and how you got here.
Speaker 2:Yeah, so, um, I was new, I wanted to be a landlord because it was kind of appealing to have someone else pay off a huge debt for me, um, and be able to keep that. So, um, I started investing when I was like early twenties. I think it was my first duplex when I was 21.
Speaker 1:Wow, um yeah, it worked out. Did you house hack it or did you uh? Did you just buy it? Okay?
Speaker 2:I was taxed for quite a few years and that, frankly, allowing me to save essentially my mortgage payment every month. Let me do my first flip, which is how I got cash. I had no money to start, so the long and short of it is, you know, I scaled really slowly in the beginning. It's really conservative. I did most of the things in cash and so I worked a ton of overtime and save up a lot of money and invest it, and it was harrowing. Every single time I did anything it was like my life savings was at risk. But it turned out.
Speaker 2:And then fast forward a lot of years and you know, I decided to scale up more quickly with my business partner, especially who now owns Vanish, went with me, james Albright, and we bought I don't know, probably like 70 or 80 units in the year. And at that point we're like, ooh, we don't really love this property management thing. Um, we're going to find someone else to do it. And really, what kind of drove our process there is. We interviewed basically all of the property management companies that were available back then this is probably like 10 or 11 years ago, maybe 12. And we found that there was a lot of misalignment between what they were incented to do versus what was good for us as investors. Okay.
Speaker 2:And I think at first we're like well, let's just start our own, because we're idiots and I don't really know what we're doing. Just start our own, because we're idiots and I don't really know what we're doing. And then we actually looked into it and it's really hard Like you have to be a licensed brokerage and trust accounting and insurance and it's a mess. But, frankly, when we ran out of options, that is exactly what we did and from an inception standpoint, we never looked at it as a what is good for us as a property management company. It was always what's good for us as an investor and that's how Vintage Point kind of built its fee structure, our internal departments. You know how we staff what we do and that has led to a fair amount of growth over the years, and so that is where we're at today. I like that. You think that we're the biggest. I'm not sure that that's the case. I like to call us mid-signs, but you know.
Speaker 1:Okay, All right. Well, whatever You're the one that comes up in the conversations, I have the most right. You mentioned a couple of things I want to talk about real quick. You interviewed 10 different companies or something to that effect. Right, when you're interviewing a property management company and I think this is important for people who are self-managing right now and thinking about switching it over to third party or are trying to get in the game and want to get that first property or first couple of properties what are the things you're looking for when you're interviewing a product? What should somebody now, being an investor and have gone through that process of seeking but also knowing now as a property manager, what are some things people should be asking property management companies when they're interviewing and what should they really be looking for?
Speaker 2:That's a great question.
Speaker 2:So I would say probably, first and foremost, the number one issue that I hear others indicate that they have with their property management company is communication. So I would say probably number one is, if you're reaching out to property management company, understand who you're going to be communicating with, how responsive they are, kind of what those expectations can be, and see if it works for you in your life. You know some people are totally comfortable calling into. You know a subset of people, other people want a single contact, et cetera. So I think that's really important. But right behind that is you want to make sure that they're aligned with you as an investor. So you're going to want to ask questions like how do you get paid, like what incents you to do the right things for me as the investor versus you as the property management company? What are your policies? What are all the fees and buyer beware, with everything in terms of like you can go through a lot of different companies and this isn't just applicable to property management companies, but there's a lot of companies out there.
Speaker 2:I think of my cell phone bill or whatever else, where I think I'm going to get one price and end up paying way more. So it's important to do kind of a review at the end of the year to see what you're actually paying, cause I think it's really a good understanding of how your business is performing.
Speaker 2:And then to that end, I think you know you get varying degrees of you know people that have built their businesses, their own investment portfolios, that are just kind of looking to step out and not be so involved in day to day you have others that are looking, just getting into it and looking for a lot of guidance, and so, if that's the case, does that property management company help you in either of those cases? Are they capable of running pretty autonomously, or are they going to have someone on staff or to work with me in order to grow and hopefully increase the portfolio?
Speaker 1:Okay, another thing that I like to ask a lot of property management companies. I'm a big BRRRR guy, as you know, and if you're not familiar with the BRRRR strategy buy, rehab, rent, refinance, and it's a great way to grow a portfolio quickly and recycle cash. So, as Fran mentioned earlier, you had to flip to get some cash, to keep doing the slow burn as you build up a little bit of cash. Or if you find some private investors or a HELOC or however you're going to use that cash, it's a great way to just put it in, pull it back out, but what you have to do with that is you have to improve the property. So buy, rehab is the first. Rehab is the first R? Um. One of the things I like to ask is will this property management come to your? Can they help me if I get a fixer upper? You know, do you get that question often? Or is that something you think people should be asking more? Or what do you see when people are looking?
Speaker 2:you know, yeah, um, so certainly it's a. It's a freaking question is slightly less common than it used to be when back, you know, in Burr is all the rage, but it's still very important because, even if you're not burring it specifically like, you still want to understand your property. Managing company's capabilities in terms of, you know, can they fix up? If I were to buy a fixer upper or something that's, you know, in disrepair, needs a lot of help, like, can I rely on them to find situations? So, um, I would say there's some intricacy related to that, like, one is are they incented to do it? In the sense that, like um, do they have folks on staff that are actively getting paid for that work? Um, and if that's the case, you know, maybe talk to some other clients and see what their experience is, um, are they getting bids out? Do they have established contractors? What's the size of them?
Speaker 2:Property management is one of those businesses where scale matters. It's not to say that smaller property management companies can't be great, because they can be, but specifically when you get to scale, I know that if you look at where we're at today versus we're at day two, we have a lot more buying power, so we're getting much more significant discounts on work that's being done or supplies that we're purchasing or things like that, and for us that translates to direct savings to our clients. So some of the smaller outfits may not have that yet but they might have alternative connections that they could look at, potentially scaling that away.
Speaker 2:The one caveat I would say is probably one of the biggest hangups as it relates to work being done is, as an owner, you have to understand and recognize the fact that you're going to be paying someone to do the work. So I was the same guy when I first started. I learned how to tile and lay flooring and all these things I'm certainly not qualified to do, largely because I couldn't afford to pay it and it was heartbreaking in the beginning because I'd get the bill and be like, oh, man I could have done that for free, but ultimately it probably wouldn't have gotten done because I don't have time to do it or be certainly I'm not a professional, and so it may not have been done as well.
Speaker 2:And the biggest piece that I wasn't valuing was my time itself. You know what I mean, like even if I'm not earning money doing it and I know that's kind of the genesis of like a lot of these conversations is like I can do income producing activities or you can just hang out with your family. You know you could do something you enjoy.
Speaker 1:Right. Well, I tell a lot of investors that, like I'm a big believer in what's your time worth. Do that exercise, break down how much am I worth per hour? If you're working at W2 right now and you don't do anything else, you probably have that figure pretty well dialed in. Every every two weeks You're probably getting your paycheck. You know exactly how much your time is worth. And then if you look and you say, oh gosh, this guy could do it for less than what my time is worth, to me that's always a no brainer, right, cause you're buying. You basically you're buying back your time. You said you directly. Pass that on. Are there like and maybe, if it's okay with you, can we speak specifically about vantage point at this point? Yeah, absolutely, when you are doing a project, are you directly? Are you upcharging those things? Do other property management companies do that? Are they upcharging costs? Are you doing like a contractor fee, if you're kind of coordinating a fixer upper? How is that structure for you guys? And then, what do you see other companies doing?
Speaker 2:Yeah. So those are excellent questions and questions that you should ask any property manager, without getting too far into the details. Generally speaking, we're charging what we get charged including any discounts.
Speaker 2:So flooring is an example. The flooring that we're purchasing right now sits on the shelf for, I think, $3 and.69 a square foot. We buy by the truckload, so we're paying like a buck 42 or 43. I think it's getting increased slightly, but we just pass that savings along. That's largely due to our internal kind of vision, though, which is essentially bring clients on board and then manage your property until they die, so we're totally fine playing the long game. We want to provide value to our clients. We get similar discounts for like HVAC or plumbing, or you know especially just like handyman work, and that's a big one.
Speaker 2:So you know, handyman nowadays like market rates probably 65, $85 an hour somewhere in the neighborhood. Usually there's minimums like our minimums or to our minimums or truck fees and all this other stuff. The handyman we work with we it's spilled out at 40 bucks an hour currently and we don't allow minimums. So if someone goes there to fix a wiggly doorknob for 10 or 15 minutes you get a $10 bill and that's pretty rare.
Speaker 1:Yeah, that's cool, you can tell I really I really bill and that's pretty right now yeah that's cool.
Speaker 2:You can tell I really, I really pay attention to all my books with you. Exactly, you can pick that example.
Speaker 1:Yeah, I mean I appreciate you doing that. Uh, well, I think what's important is you and I have been working together now on my properties since 20 what, 18, 19, something 2018, yeah yeah, so five, six years now we've been doing this and when we first started I thought something that was really helpful.
Speaker 1:And I wonder if I'm curious now, as you guys have scaled, cause we have kind of gotten out of this rhythm, but we used to have like a monthly kind of review of the properties and the books and that kind of thing. Is that still something you guys do with certain clients who request that, or what does that look like and what's?
Speaker 2:that. So I mean have like um kind of a huge variety of clients in terms of what they're looking for. Um, some especially newer clients of ours, uh, do you want to meet, you know monthly or quarterly or whatever, to chat about stuff? Um, usually we try to avoid weekly just because it's not overly exciting, but, um, you know, we're happy to do that internally. Um other clients, like we have some clients that I literally haven't spoken to in years. They're either living out of state or internationally. I'll get an occasional email saying like, hey, can you look at this property? I'll look at it, I'll give them some thoughts, they'll buy it. I get another email saying, like, pick up the keys at this title company. We send them a list of what we recommend to do for renovations renovated without them ever stepping foot in the state, get it rented out and then just collect a paycheck for the rest of their lives.
Speaker 1:Yeah, I think that's so powerful because one of the audiences that we want to target here at the Wisconsin Investor is we want out-of-state people that are looking for a place to get a return on their capital. We want them to look at Wisconsin. I feel like when I started this podcast, wisconsin was pretty overlooked. It was for whatever reason it's it's you get down into like St Louis and some of these other you know middle of the of the country kind of areas, and Wisconsin is just kind of like left out there. I'm like why is it great freaking market, you know pretty steady. You're not going to get the ups and the downs and those kinds of things. Uh, like you get in some of the coastal markets and that sort of thing and you get good, hardworking people here, generally speaking, that you can trust. But what do you see from the market here in Wisconsin? If you're, you know, from your out-of-state investors. What are the things that they're saying to you or that keeps them coming back?
Speaker 2:Well, so just to kind of give you a little of my own experience, so a few years ago I was concerned, um, because of all the bags being in one basket right, like I own primarily, actually exclusively, in Northeast Wisconsin. And so you know, obviously the nice thing is we're not prone to earthquakes or monsoons or you know all those kinds of things, shark attacks, whatever.
Speaker 1:Yeah.
Speaker 2:Um, exactly, so we're pretty good on that front. Um, so unlikely that you're going to have a ton of widespread damage. But I always thought, like what if you know something? You know there's certainly cities in the US where something bad has happened and suddenly it just essentially falls off an economic cliff.
Speaker 2:And so I thought long and hard about diversifying and I actually explored all over the country, so I looked at individual areas and suburbs I think there was like 180 of them on my list and I found there were a couple of regions where I could get similar returns, like, specifically, I think, right outside of Raleigh, North Carolina, outside of St Louis, outside of Kansas city, but they were close but not quite as high as I can get in Northeast Wisconsin and they're highly competitive markets and they're at least in some of them. There was a lot more volatility over the years, Cause I look at like three to five years of past data as well and it was hard for me to believe, because it's like I grew up here in Northeast Wisconsin. Was I really that lucky to be? I found to be like the best return, and obviously what you're looking for in returns is going to be largely influenced where you want to buy Like, if you buy a house in Northeast Wisconsin odds are.
Speaker 2:It's not going to appreciate $3 million in the next five years, but it has almost unbeatable cash on cash returns that I can find across the country. Wow, that's awesome, yep. And so we do see a lot of you know outsized like investors that are used to investing in larger you know metro areas that are moving to this area because it's a great place to stick some money, like you'd mentioned. Like the volatility on the coast is not as impactful here, even when the market goes, you know, up or down, but especially great when it goes down, like if whatever San Francisco or New York city drops 20%. Um, you know we, we feel for whatever it actually is. Like, if there's, it's responses are very muted. Yeah.
Speaker 1:Somebody, somebody looking to preserve their capital, this is a very good place to place it and if they want modest growth, like you said, you're going to get a great cash and cash return and you're going to get a pretty consistent growth year over year on your cash. Yeah, absolutely, we have some property down in Florida and it's man, when we bought it it was like hot. We bought it during COVID, we got in at the right time, property values skyrocketed and now we've had two hurricanes within a week of each other back in October and it's like the. Just the, the conversations we were down there, you know, just for a little vacation we had planned before the, but also to check out the damage and stuff, and man, just the conversations you have with people now is so different than it was prior to that of people's just kind of mood about Florida now that live there.
Speaker 2:You know now they're they're looking like where can we go to get out of here, because this is getting crazy. So we've actually had um. Ironically, two tenants move from florida to green bay sight unseen, um, because we were recently. Green bay, specifically, was on that list of best places to live in the united states okay, um, so they literally just looked at the list and they moved into this area, having never been here before.
Speaker 2:Wow, that's kind of interesting, but yeah, yeah, so it's cool, they're really cool, I'm sure they'll. So they literally just looked at the list and they moved into this area, having never been here before. Wow, that's kind of interesting, but yeah, so it's cool, they're going to go to this. I'm sure they'll buy soon.
Speaker 2:But there's a lot to be said about Green Bay, wisconsin and like Northeast in general, like the nice thing too is Wisconsin as a state is generally pretty landlord friendly. Certain municipalities are a little tougher, primarily like Madison, milwaukee, you know the southern parts of the state, but northeast especially Very landlord friendly Generally speaking it's. You know, you don't have these horror stories of evictions taking two years or five years or squatters or all this other stuff, and beyond that it's just a nice place to live. And so I feel like when people are looking to relocate for jobs and come into this area to move around, you know I would feel pretty comfortable walking down basically any street that is in Northeast Wisconsin at two o'clock in the morning. I can't say that for a lot of other murder like larger Metro markets For sure.
Speaker 1:When you said the challenge a little more challenging down in the south of wisconsin, what do you hear as far as like what makes it a little bit more challenging down there as?
Speaker 2:far as um specifically yeah, so specifically as it relates to eviction proceedings and or the length of, you know, notice periods and whatever. So, um, there are state statutes that govern all of wisconsin, but different municipalities can have tighter restrictions and, like dade county and milwaukee, like both of them, have pretty specific restrictions as it relates to non-payment of rent or reasons you can terminate leases and things like that. Okay, um, like using brown county as an example, um, generally speaking, if I file for if, in fact, if a tenant is late on rent and then I have to provide all the notices and do all the filing, whatever, I'm probably looking at, if I go as quick as I can, between three and a half and probably five and a half weeks before they're out. In some of the other counties, like down south, you're probably looking at like 60 to 120 days, but in New York and California, it can be six months to a year.
Speaker 1:Yeah, okay, all right, so we're still good, even if you're down South, you're still good, absolutely, absolutely. Yeah, very cool. Well, that's interesting. I had no idea the different. I thought it was a state. You know, you got to go by the state, whatever the state says, and that's your eviction law. But wow, there's my nugget for the day.
Speaker 1:We could probably end the podcast now, fran, Thanks, with somebody, somebody who's thinking about self-managing. Let's switch that now, cause I, when we started, somebody told me one of my mentors said you need to self-manage when you start so you can kind of learn the rules and all this stuff and then you'll know how to manage your manager better. Right, it turns out for me, I'm sure for other people it was great advice. For me that was terrible advice, cause I almost murdered a tenant because he wanted me to fix a hole in a screen, that he put the hole into the screen and I couldn't fathom the fact that he was calling angry at me to go fix the screen. I'm like, bro, you fit, you broke the screen, fix your own damn screen, right?
Speaker 1:Anyway, so I am not cut of the cloth to self-manage, but some people are. Some people really enjoy it. Obviously you did it out of necessity, it sounds like, and it is what it is and you're very good at it. But what would you say are some of the main things? Somebody who's looking to self-manage, what are the things that they need to know before they take that jump of either acquiring a property and starting to try to self-manage, or maybe they're thinking of switching away from a manager to take it back themselves?
Speaker 1:What are some of the things.
Speaker 2:So I mean to be honest, I self-managed for a long time. I self-managed way longer than I should have because I didn't know better. I think had I leapt on board with the property manager initially, I probably would have scaled a lot faster. Um, because you equate so much of your time to work, like, how many unit turns can I deal with? Like, equates to how many, how much size I can be right, like I can't 100 units if I can only renovate one place every two months? Um, cause I'm doing it after work or whatever, so, whatever.
Speaker 2:So there are some pros in the sense that, like, you learn a lot. So, even like, during my first flip or two, I didn't know what I was doing. So I hired professionals and I said listen, I'm going to get you coffee and I'm going to be here all the time and you need to teach me while you're here, and so, very similarly, you can take an approach with property management. You know doing the things you really learn and, if nothing else, you'll appreciate a professional property manager later, because it's so easy to like, look at your reports and be like 10% or 8% or whatever it is. What are those jerks doing except collecting rents? But you know when you get into it and, like you start feeling a ton of phone calls and like you, mentioned.
Speaker 2:there's a lot of reasonable and unreasonable tenants out there and working through the paperwork and the accounting and all of the things that professional property management typically entails, you'll understand how much time and effort it actually takes.
Speaker 2:From a pro perspective, obviously it can be cheaper depending on the specific class of property.
Speaker 2:I'd say, more than anything, If you're working with a scale property management company that's offering good services that are related to renovation, I think you're gonna be hard pressed to find cheaper alternatives to get that work done, unless you do it yourself, but that's an option. I would say that you know you learn a lot in terms of like tenant interaction and how to deal with folks, common issues that come up. You know I've seen some people that have a firm belief in garbage disposals and then they self-manage for, you know, four years and then they'll remove them from properties, you know. So you know you learn kind of the tricks of the trade, which is great. From a con perspective, housing is extremely litigious and there are a lot of really specific laws, and so you know for us, because we're at scale, what what is typically a very uncommon experience for people um, we handle all the time, like fires or floods or court or whatever it is like. We do that so frequently because we're at scale. If you have one or 10 properties, you know it can be pretty intimidating to do an eviction or to you know, figure out what to do if you know the tenant dies in
Speaker 2:your property or you know something tragic like that happens. But it's such a one-off that without a lot of experience you're going to be working through it and there's professionals out there that you can rely on. You know, if you're self-managing and you need to do an eviction, you can always go to an attorney and they'll do it for you. But if you're trying to do it pro se, like there's no room for error in the sense that if you don't get your documents right and your ducks in a row, then you start over and it costs you time and money.
Speaker 1:So yeah, I mean I know some folks who've taken property management back and they retired from their full-time job and this is what they do now and they manage their properties and all that stuff and they seem to enjoy it. They have more control. I think that would be another thing. They can control what the rents they're going to ask are, and I mean you could do that with a property manager. I think you just have to have communication open all the time, like you, and I would just like hey, whatever I trust you said it Unless there's a specific property, I'm like hey, I want to try to get this.
Speaker 2:I have yet to hear you say you'd like me to lower the rents.
Speaker 1:So you know that just haven't gotten there yet.
Speaker 1:You know, maybe at some point in my career we'll get there I have not asked you for that request yet, but I think I think that's one thing I see maybe for a pro is you have more control over your own stuff and nowadays with technology and stuff like that too, I think that's eliminated some of the rent collection burden, maybe with some of the just the direct deposit stuff or the different things. So that could help eliminate things. But I'm obviously I'm very pro property management. If you want, in my opinion, all the listeners out there to what Fran you said earlier, I think this can't be passed up all the listeners out there to what Fran you said earlier, I think this can't be passed up.
Speaker 1:If you are looking to scale and grow, in my opinion your two most productive activities are finding deals and finding money. And if you can just focus on those two things and you can pass the property off to a property manager who can rehab these things for you and you can trust that property manager and they're not going to take you to the cleaners and all that sort of stuff, I mean really then your only thing holding you back is those two things finding deals and finding money. And if you got two hours a day to dedicate to your real estate business. Doing those two things is going to get you to scale much quicker than trying to hunt down your tenant or going and fixing the hole in the screen Right.
Speaker 2:So I would say one other pro that I misunderstood or didn't understand. All probably is more accurate. Prior to being involved in property management, having actual tools was tax stuff.
Speaker 2:So I would literally go to my accountant every year with boxes of receipts and Excel spreadsheets and hope I didn't go to prison and now I run a report and I have it done in like literally 10 seconds, and so that is hugely beneficial. So I would say, even if you're self-managing out there, just get good software out there, because it exists and it will help you tremendously.
Speaker 1:Buildium's the main one, I hear all the time. Is that still accurate? Is that still the yeah? There's a couple of other competitors.
Speaker 2:We use Buildium, as you well know. Appfolio is another big one. Appfolio, I don't think, is great for a lot of self-managed, because I think it was a 50-unit minimum.
Speaker 1:Yeah, you got to have some scale, I think, to get into Appfolio.
Speaker 2:I've heard some good things about Rentvine. There's a few others. We like Buildium specifically because of some of the add-ons. It has some neat features for tenants. They can pay cash at any Walmart, cvs or Walgreens and it gets applied to the room right away, which is kind of unique. The reporting is good. It doesn't matter, but there's a lot of great options out there.
Speaker 1:No, and I think, going to that point, though, I think you're right If you are self-managing having some kind of good bookkeeping software or something, because when you're trying to get a loan for that next property, what's your banker going to ask you for? He's going to ask you for a P&L and a balance sheet. If you don't have those two things and you haven't been keeping good books, good luck growing your portfolio and getting along. So again, just another benefit If you're an entrepreneur like me like ADD style kind of guy I hate doing books. It is like nails on a chalkboard to me. So to have you guys, then I can just go in and I can just pull a report and you know rent rolls and all that stuff. You can just click it off and send it off to whoever needs it for your lending purposes. I mean, it saves me so much time and so much stress, like I don't have to deal with it. So I'm a. I'm a big, big fan of that feature.
Speaker 2:Once you treat it like a business too, you know what I mean. Like that's a struggle and I ran across that many, many times when I was self-managing too is like right, wrong or otherwise, and you don't have to be impolite to people or mean to them, but you're running a business and they're not your friends, they're your tenants, and so it's. It's very easy to get sucked into that. You know story of why they can't pay rent this month or why they're going to be. You know, by something happens and something happens and as a human, you want to be very empathetic Property manager will hopefully help remove you from them.
Speaker 1:You can make a little more that is such a good point, fran.
Speaker 1:I can't state that enough Us in the wholesaling business. We have our rentals and then we have the wholesaling business and I would say the majority of tenant occupied properties. One of the biggest trends is it's a self-managed property. They're going to sell it to us at a discount because they didn't fix it up. They say sucked a little bit of the cash flow. But also their rents are like half of what market rent is at the time and they get sucked into the tenant story and they have a relationship and they feel bad for the tenant or they get whatever.
Speaker 1:And again to your point, we're all humans, we all want to do good, we all want to do good, we all want to do that. But we also, to your point, we have to treat it like a business. Right, if you want to run a business, you have to treat it like a business. Again, if you want to do charity work in real estate, I'm sure your tenants will love you and you'll be the most popular landlord on the planet. But if you want to have a successful business, you got to treat it like a business. And to have a successful business, you got to treat it like a business and for me, too, same thing. Removing myself from that is really, really helpful. In fact, I just was texting you, fran, because I don't manage many of my own properties, but I have some rent to owns. I found those are, I think you mentioned earlier like class of property. Right, if I have a nice house, I get a good family with a good option fee. They pay me up front, generally speaking, and they treat it like their own house.
Speaker 1:Rent comes in pretty automatic. I'm pretty hands-off with it. In this case, we had a couple that split and now they're fighting over who owes what for the rent that they were still on the hook for for the lease that they broke. And I'm like how do you collect late rent? I've been in this game since 2016. I don't know how you go after somebody to collect late rates.
Speaker 1:Yeah, like I felt like a newbie. I was like brand um, how do I do this? And you're like well, you can talk to your attorney, and so I appreciate a lot of that too, where you're always knowledgeable. You're more of a partner in my business. I feel like of I need you. You're an extension of my business and you're a resource to help me. But also on all of the other units we have. I don't ever have to worry about how to collect that late rent. You know you're doing whatever you guys have to do to try to get that rent, so I appreciate that factor as well. Um, what are some other things, fran, like people should know, I guess. Going back to the out-of-state people we talked, I want to just circle back to that. You mentioned earlier some of the pros of our market and some of those things. What are your out-of-state people saying that are maybe some challenges that people should maybe know about and be able to prepare for, if there are any that you hear when you have conversations with some of these out-of-state folks.
Speaker 2:So I would say the challenges are specifically as it relates to either their goals or their level of capital, and it's not what you think. So, as it relates to things in Northeast Wisconsin specifically, I do think that you can get a great cash on cash return here, but if they're used to investing in a in a coast, a coastal environment, if you will like you know, we've had essentially groups of attorneys or doctors or whomever get together and you know they're high income individuals and they'll get together and you know they'll.
Speaker 2:they'll give us a call and be like hey, if we have $20 million to deploy, like what can we get?
Speaker 1:And it's like that's a whole lot of houses you know we don't have a lot of like $20 million apartment buildings for sale. You can buy Bellevue.
Speaker 2:Exactly so. You know, from like a high level perspective, it's difficult to spend like tens of millions of dollars. But the nice thing is is, if you're looking to do that and deploy it over the course of years or whatever the case may be, it's a great place to aggregate. But you know, like we don't have at least to my knowledge, and obviously I'm not a fortune teller but like we don't have specific areas where I'm concerned that we're going to significantly decline in value.
Speaker 2:You know what I mean Like populations are growing, things are getting better. When I look back to five years ago versus 10, versus 20, like the same places that were relative, you know good deals back then are still relatively good deals today. But there is a significant increase in value, rent prices that are up, and so you know it's hard from some of the just the sticker shock. I'd say it's like reverse sticker shock even, where if you're investing in Southern California and you're buying a whatever $2.5 million house and you're getting you know whatever $400, $500 in rent, it's like if you're going to spend $230,000 on a duplex, then you're going to be.
Speaker 2:You know what I mean. So it's quite a surprise what you can get in terms of especially gross revenue for a lot of these places, depending on the type of properties you're buying relative to what you can find elsewhere. And to that end, you know if the rules are similar across the board in the sense that if they're looking for capital appreciation or liquidity, their best bet is probably going to be buying single family homes, maybe side-by-side duplexes, which are all the rage right now. They're great deals. We've seen a tremendous appreciation. If you're looking for cashflow, it's hard to beat upper or lower duplexes.
Speaker 2:There's a lot to be said for the amount of cashflow especially if you know how to strategically incorporate assistance programs or whatever the case may be, into your portfolio, like I was going to ask you about that, yeah yeah, you can, you talk a?
Speaker 1:little bit about that with the assistance programs, because I know there's a stigma for a lot of people about working with some of the programs. Section eight is, you know, a term a lot of folks know about, or in our local market we have some called ics here in green bay uh, I forgot what appleton's got something. There's several programs, but could you just talk in general, without getting too into the weeds, about pros and cons of working with some of these organizations in your rentals?
Speaker 2:For sure. So I'll focus on Green Bay. Brown County probably is a little more accurate. So you mentioned ICS. They're the ones that facilitate integrated community solutions, I think they're called. They facilitate the Section 8 housing assistance in Brown County.
Speaker 2:And over the years you hear things as an investor, like all the tenants are going to ruin the places, everything's going to be trashed, they don't have any money, et cetera, et cetera, and that is true. But also it is not true because it's individual per tenant, right. So the nice thing is in this area you can decide whether or not you want to take housing assistance. In a lot of areas of the country it's not up to you, like you have to take it um, so around here you can decide whether or not you want to take it.
Speaker 2:Um, in years past, probably like four plus years ago, um, I always thought for some specific properties it was a really good, um, strategic advantage, uh, to accept it. And then, because we saw this sharp acceleration of rents, that's the advantage pretty much eroded completely. And then maybe it went a little bit negative to disadvantage, because how they have to calculate the rents is based somehow on median rental income for the prior year and so essentially you take relatively high risk tenants for lower than market rent Didn't make a ton of sense unless you were in a property that was in good shape but looked like it fell out of 1980 or along those lines. But in this particular case, like right now, because rents have been relatively flat compared to like last five years, year over year. Now ICS for 2024 will pay up to $1,675 for a three-bedroom unit including utilities and there's no restrictions, so it doesn't matter on the property type.
Speaker 2:That can be an apartment, that can be a duplex, that can be any you know, or a single family house. But if you see, like some of these upper, lower duplexes that are going for, you know, low 200s or mid 200s and it's three bedrooms each unit, that's $1,675 for each unit. Yeah, they just pump out cash like nothing else I've seen.
Speaker 1:Yeah, I'm kicking myself for selling that one. I had an upper-lower duplex that was a three-up, three-down and I was like, oh, I'll sell it whatever. And then all of a sudden I realized the ICS program. After that I was like idiot, idiot, I should have refinanced it.
Speaker 2:I should have just refinanced it Kept the dang thing. Some of the lessons you learn. So there is a big stigma about the tenants. You know we still vet them and I can only speak to us. I suspect other property managing companies or self-managed people are still doing the same thing. We still vet them. You know we check their credit history and criminal history and evictions and all these different aspects of their lives to make sure they qualify.
Speaker 2:But the challenge with them specifically is if with ICS or maybe Section 8 in general, if they get booted out of the program which is pretty rare, but if they do with almost near certainty they can't afford the place and so they're not allowed to reapply for two years. Now it's not like a common thing for them to be booted out. Most often they're told a long time in advance like these are the things you need to do, often simply filling out paperwork, complying with inspections, those kinds of things. But that is a risk. A lot of people are concerned about the inspections that we have to go through. We work with ICS all the time. We're super familiar with their staff. We have a great relationship with them. We know the inspectors, we know what they're looking for. I mean, it's not hard, it's literally on their website, and we found more cost-effective ways to meet the needs of the inspection. So, as an example, um, you know, having grounded outlets is on that, and so your options would be to rewire an entire house, which is obviously super expensive, not good.
Speaker 2:But we meet the same requirement by installing a gfci, so that is a 14 solution versus, you know, rewun your house um, yeah, yeah, exactly, so you know you want to work with someone who knows how to work through those inspections, but, um, they're not overly um aggressive about stuff, like usually, if a place is livable and in good shape. Um, they have some caveats, they could have screens on everything, uh, but they'll, they'll work with you. They're not super abrasive, they're not strict to the point where Like a city inspector sometimes is yeah, those guys are.
Speaker 1:those are the inspectors. Sometimes you want to avoid, depending on the municipality.
Speaker 2:Yeah, depending on the municipality, I'd say.
Speaker 1:Yeah for sure, brad. Let's get close to wrapping here on this. I do want to go back, because you said something about what's so interesting is perspective. Right, just that word perspective. I talked to so many investors, like myself included. Now I feel like an old curmudgeon. That is like, well, back in my day, walk uphill both ways in snow, two feet of snow, and I'm like, well, upper lower duplex for 230. Feet of snow and I'm like, wow, upper lower duplex for 230. No way, man, I used to buy that thing for 50 g's.
Speaker 1:It's, it's perspective, though, because it's just hard. It's hard for me to pull the trigger on things now, knowing what the prices were. Oh, it's so difficult to do that everything to me is a garbage deal, how like. But then you're also talking about how these California people it's the exact opposite they're looking at it like, oh dude, I can't place capital fast enough. There's not enough properties for me to buy, I can't. Possibly, it would be so many transactions. So it's just, I just wanted to make that point and drive that home, because to me that was kind of convicting. Like crap, I just got to keep buying stuff because in 10 years I'm going to be super glad I did when I'm just budging. Then I was like 10 years ago I bought those upper lower duplex for 230. Now I got to pay 500 you know well.
Speaker 2:Uh, I probably shouldn't admit this aloud, but like I can't tell you the number of single family homes, I walked like 2008, 2009. I'm like this is listed for 30 000 bucks. This isn't worth a dime over 20. It's like what was it doing?
Speaker 2:and it wasn't 1945 but those, those are unbelievably real numbers. Yes, I've um, I so it's uh, you're right, and, frankly, depending on where they're at and kind of their investment journey, like um, it's, the most difficult thing is to look in the future and understand how different it is from the past. Like, that perspective piece is super valuable and the nice thing is is, with the sharp accelerations as of late, you get a lot of it in a relatively short period of time. But you know, when I, when I first started investing, especially like at Hemingaw, about this $2,000 expense or whether I overpaid for this place by five grand or whatever the case may be, and then fast forward 20 years and it's worth three times what I paid for it, I don't really care so much about the $2,000. It was really working initially. Preston Pyshko, md MPH. I forget about that.
Speaker 1:Yeah, my buy box has changed quite a bit in the last six. In fact this year I've kind of had that awakening of like I took a as another measurable and it's it's I just one of my favorite tools, actually. We'll, we'll end here. I have one more question for you before we wrap, but then we'll wrap this up. But one of my favorite tools is chat GPT right now and what I can do is I go in there and I plug in different scenarios.
Speaker 1:I'm like, if I bought this property at $240,000, my loan was 220 at this percentage rate, on this type of amortization schedule, what's my equity if appreciation in the market averages 3% a year? Blah, blah, blah in 20 years. And then you look at those numbers and you're like, why wouldn't I just buy everything? It's really. I mean, you get the tenant paying your debt down in that time, you get the market just doing this and it's just really a difficult. This is why real estate kicks butt, because it's so difficult to beat that anywhere else. You can go rip 20% in the market right now within the stock market and that's great. But if the market tanks you lose all of that. And, yes, real estate could tank, but at the same point every day. That goes by. Every month that goes by, your debt is going down and even if you don't get the appreciation, you still have the tenant creating wealth for you in that property.
Speaker 2:Well, I 100 agree with you. Like the challenge with stocks and as an investor in things such as emron I am a clone or um Mutual I'm very familiar with like my money being worth zero now or like tenths of a penny versus you know if this, if real estate takes a dip or whatever you're down five percent or 10 percent, it's not like 100 percent.
Speaker 2:And from like a conservative standpoint I'm a conservative guy To me it makes a lot more sense and makes me feel a lot more comfortable for me to be able to go rap on the door of the place that I own and I can paint it and improve the value or I can put new shingles on it or whatever and I have an influence over the value there versus some CEO does something inappropriate, the secretary whatever, and suddenly now I have less money. That makes no sense to me.
Speaker 1:I am with you, I totally agree. So now we have alienated. Alienated everybody who loves the stock market, which is great because we love real estate. All right, anyway, let's wrap here. We have a fun question. Wrap this up Brand. Every episode we ask a little fun question what is your favorite Wisconsin tradition or favorite place to visit in Wisconsin?
Speaker 2:Okay, I'm going to go out on a heater here. This is going to be controversial right here. I love it. Uh, wisconsin tradition I like is chili. I love chili. However, the wisconsin tradition closely associated with that that I dislike is putting noodles in chili. Oh, that is a hot topic, that's still good but I would argue it's chili goulash or chili mac, something, not chili.
Speaker 1:We need to get a debate episode going with somebody who's pro noodle and just let you guys riff and I'll just moderate because I'm pro either way. Man, I'm good either way. If you know how to cook it, I don't care what you call it.
Speaker 2:Yeah, I would agree.
Speaker 1:But if you get any investors to Wisconsin, highly recommend, I wonder if that's a thing, because that is a thing around here Chili cook-offs, that is a thing, and I love that about it. Yeah, you're right, especially this time of year, man It's-. Yeah, this time of year is perfect. I'm starting to salivate, so we better wrap this up. All right, guys, this has been another episode of the Wisconsin Investor to get started in real estate or you are already started and you want to start investing in Wisconsin I would love to have a conversation with you or somebody from our team. So just go to wisconsindiscountpropertiescom, feel free to contact us and somebody from our team will reach out and we'd love to be a part of your journey. So, fran, appreciate this episode, man. Lastly, if anybody wants to connect with you about property management services or just has property management questions, I know you're a resource all the time, but what's the best way for them to get ahold of you?
Speaker 2:Yeah, they can give our office a call at 920-412-7773 or email me directly at fran at vantagepointpropertygroupcom.
Speaker 1:Vantagepointpropertygroupcom. Okay, Awesome, Fran. Thanks so much for being on man. It's been a great episode and we'll see you guys on the next show.
