Residential single-family real estate is reeling. The sub-prime crisis has hit and it has hit hard. While experts tell us the recession is technically over, many homeowners still struggle to keep the largest single source of wealth they possess, their home, from dropping into the abyss. There is still a popular notion that all real estate is a bad investment when nothing could be farther from the truth. True, single family home values are still dropping slightly (but no longer at the annual rates we witnessed in 2008 to 2010), but investment properties are stable and among this investment class many apartment properties are holding their value and some are even continuing to appreciate.
For investment real estate there has not been the spectacular fallout that has impacted other investment types, but for retail & office properties it has been challenging. By and large, retail properties are still retaining tenants while working harder to attract new ones. Rents are flat or discounted and will stay that way for the foreseeable future. Absorption is slow. The slowing economy puts pressure on American’s pocket books, they buy less, and retailers struggle, but most will tough it out. According to the Small Business Times, for March, 2011, retail vacancies for the Milwaukee metro area were 11.2% in the 4th quarter of 2010. This places these markets a bit on the high side for unrented space, but not too bad compared to more volatile national markets.
Office vacancies are high in most markets as well. The Milwaukee, Ozaukee & Waukesha office market has a 21.4% vacancy down slightly from the 4th quarter of 2010 at 22.3%. These are big numbers for a market that should stabilize at 6-7%. The absorption is strong in the western suburbs, but flat or negative in the downtown markets.
The real stellar performer in the midst of this mess is apartments. As more people lose their homes they become renters. Others who can no longer qualify for a mortgage will stay in the rental market. Demand for quality, professionally managed apartments has gotten stronger & stronger. Throughout the Milwaukee metropolitan market, vacancy rates for apartment properties range from 2.6% to a high of 6.4%, great numbers even in a flourishing economy. Owners of apartments may not be able to increase their rents much for a year or two, and they may experience a slight increase in rent defaults, but they will pay their taxes, their mortgage and continue to build wealth even in the worst of times. Historically real estate outperforms the Dow over time in real returns.
Since most of us experience apartment life at some point in our lives, it’s easy to understand what it takes to make an apartment appealing to renters. Maybe more importantly, managing apartments is straightforward; not requiring special skills or education. They provide people with decent places to live, and over time, they can make their owners rich.
Call Kevin Gleason @ 414-870-5363 to answer any questions you may have about investing in real estate or to discuss our apartment listings.
Apartments – An Investment Strategy For Today’s Troubled Times
Reverse Rehabbing !?!?
We previewed a wholesale property a while ago that we found very interesting. Its a 1950′s two story colonial. Overall in pretty fair condition, but another example of a rehab gone bad. The rehaber was trying to bring in today’s more popular open concept design to the first floor living area. First impression – unique and very interesting! But there were a few things that raised our eyebrows.
Opening up a load bearing wall was the key to creating a new open space. But, guess what? – not an ounce of understanding that if the 2nd floor would no longer be supported by the wall, it would have to be supported by something!
Here’s what’s cool! We found out that, at least in this case, if you take out the load bearing wall of a house, it does not necessarily mean eminent collapse! 
We always wondered about that! In fact, this place was looking pretty good – just a few small crack in the drywall!
We always thought that if you cut out a load bearing wall you’d better run for your life! So we did learn something here – sometimes the house comes down immediately – sometimes it needs a year or two!
Then we looked in the basement and realized that to create the open concept, the rehaber decided that the 1st floor half bath was in the way too! So that ended up in the dumpster along with the wall! We know that in this neighborhood a 1-1/2 bath home sell for $13K – $14K more than a one bath home. Oops!
This rehaber was pretty fortunate, all things considered. The second floor is still up there and the problem can be fixed. We’re pretty sure the 1/2 bath needs to go back in too, but – well, at least it will be new!
We love to work with rehabers.
We’d like to see you add value – not subtract it!
We can be your resource, your partner or both. We’re pretty sure the point of rehabing is to add value and profit from it. Call us if you agree!
Have a question about a wall – not sure if it’s load bearing or not? We can help; just give us a call.
- written by Glenn Gohlke
Help You Become a Successful Rehabber
Copyright © 2008 Gohlke & Associates, LLC – All rights reserved
A Story About a Very Sick House
We visited a very sick house a while back. It was a house that at the time was dying because its reluctant owner, a bank, wasn’t paying any attention to its immediate medical needs! We think “medical needs” is the right phrase. This house WAS SICK – having become a health hazard in just 5 or 6 weeks of complete neglect. The “disease” (mold), if left unchecked much, longer would have left only one fiable fix for this once loved home – a bulldozer!
This was a solid house when the bank took it back. But with that year’s heavy rains and commensurate basement moisture issues, residual dampness in this basement was creating a mega problem. A $150 dehumidifier and some much needed ventilation was all that it would have taken to keep this cancer from getting a foothold.
We list foreclosures and help buyers find them. We get inside an awful lot of these properties and sometimes “awful” is exactly the right word – our tour of this home was testament to that. We’ll spare you more about the sites and smells when we got to the bottom of the basement stairs – let’s just say the idea of inhaling while we where in the basement was not very appealing and we didn’t feel much like eating for awhile!
We know that many banks are overloaded with foreclosures and are struggling to keep up. But mold doesn’t wait for protocol or paperwork. Bad financial situations can become financial disasters in only a few short months without at least some minimal property management. We’ve seen too many vacant foreclosures that sell only after a long time and only after large price cuts. Its a shame.
Copyright © 2011 Gohlke & Associates, LLC – All rights reserved
We can prevent problems like this & keep values from melting away like ice cream on a hot summer day. If you are a bank, mortgage company or distressed property owner, give us a call. We can help!
Creating Wealth Through Real Estate Investing
My name is Kevin Gleason. I have been a commercial real estate broker since 1986. Over that time I have sold numerous commercial properties, encompassing apartments, shopping centers, office buildings and single-tenant net-leased properties. The clients and customers I have served have two things in common:
They have all built wealth through investing in real estate
and not one of them did it over night.
Typically they started out with a small property, say a four family apartment. After a few years, as the property appreciated, they refinanced and pulled cash out and used it to buy another. Thus began a pattern of investing that over ten to twenty years built a portfolio of properties worth millions.
Some were hands-on and on a part-time basis or with a spouse or partner managed the properties themselves. This for the most part consisted of renting apartments to qualified tenants, providing those tenants with a quality residence and collecting rent checks every month. Simple bookkeeping, consisting of bill paying and record keeping took a couple hours a month. On occasion they might paint an apartment or cut the grass or plant flowers. They could enhance the attractiveness of their property in whatever way they chose, and the benefit was attracting better tenants, increasing the rent more often, and controlling to a large extent their wealth creation.
Other investors hire a management company to perform those tasks for a fee based on the total collected rent. The more rental income the manager generates, the greater their fee. This arrangement provides an incentive for them to keep the property full. Either approach takes the investor to the same place – financial security, and over time, a valuable portfolio of real estate.
This approach to becoming rich hasn’t changed since I started in this business. It goes on everyday, everywhere, and creates the same result:
Slow and steady wins this race, and careful and responsible investing in real property will never let you down.
Call me if you are thinking about embarking on the slow boat to wealth creation known as real estate investment. All you need is access to credit, a work ethic and the patience to see it through.
Kevin Gleason
Realty Dynamics
(414) 870-5363
kevin@realty-dynamics.com
