Investment Update: Closed on Milwaukee 5-Unit!
We did it! I finally ended a long, drawn-out saga by closing on a 5-unit property in Milwaukee, WI. Now, it’s time to fill you in on the story and the many lessons learned along the way!
I started looking at this property in February, 2025. First, I saw it on Facebook Marketplace listed by a wholesaler. I reached out and gathered some info on the property and started running my numbers. She had an interesting deal structure. The seller wanted $240k for the property, and she was marketing it for $265k (seems strange, right?). But then I saw why. She worked out a deal where the seller would finance it for a few years with zero interest. It’s a little deceiving as she could have gotten it under contract for $240k with a small interest rate and have had it be the same monthly payments. For me, I didn’t like this, because it would take about 3 years to pay down the loan to a point where I wouldn’t be “under water” on the property (meaning, my loan is more than the property amount). I tried getting her to come down about $12k, but she wouldn’t budge, and that was that.
KEY POINT: Never be afraid to walk away from a deal. You don’t need it that bad, and there are plenty more to come!
A few weeks later, I saw the same property on Facebook Marketplace, but this time it was listed by a realtor. I reached out and asked if the deal fell through with the wholesaler. He told me she was in breach of contract as she never paid her earnest money deposit (EMD) and they were accepting secondary offers. After some back-and-forth, we agreed on a price of $240k with half of the purchase to be financed by the seller at 3.5% interest, interest-only, over 8 years. After the 8 years, I would pay the loan amount in full. The rest of the purchase would be financed by a commercial lender.
In my mind, this was a much better deal than what the wholesaler brought! I knew a lender that would lend on this type of deal structure, even with zero skin in the game (no money down). However, this particular lender was out of the area. Nonetheless, I figured it would be easy enough to find another lender to entertain the deal. Well, that proved to be incorrect thinking!
LESSON LEARNED: Get your financing dialed in before going under contract.
Now, I did end up finding a lender to fund the other half of the deal, but it required me to extend the closing date by a few weeks as the appraiser was backed up. It took a lot of digging, many calls, and a ton of networking to figure out the funding. Although it worked in the end, I wouldn’t wish that amount of stress on anyone! The seller also didn’t have to approve the extension. They could have decided to walk and relist the property. I call that a win!
I also conducted an inspection of the property. My home inspector is amazing. If you’re looking for a great home inspector in Wisconsin, look up Troy Beasley of Ace Home Inspectors and let him know I referred you. Troy found a LOT of material defects with the property, as he usually does with a property of this age. However, I don’t mind this, as it presents a great way to reduce your offer price or receive credits for deferred maintenance.
KEY POINT: if you are having to put down a down payment, go for credits in lieu of a price reduction, as they will reduce your down payment, dollar for dollar.
In this case, since I wasn’t having to put anything down, I negotiated a price reduction. The agent emailed me and said they would reduce the price by $25k to $215k. This was great! I was ecstatic! I immediately messaged the agent back and said I agreed. And then… he responded that the seller had changed his mind. The seller “forgot” (yeah, right…) that he was paying the buyer’s agent commissions, and that we would need to adjust the price up accordingly. After a lot of back and forth, we agreed on $223,600 for the purchase price, which was still a solid deal in my opinion.
LESSON LEARNED (X2):
First, don’t agree to anything unless it’s presented to you in writing for your signature. Emails are not good enough. In my case, I should have told the agent to send me the counteroffer in writing for my review without sounding too optimistic.
Second, have your own agent represent you. In my case, I had the seller’s agent represent me as well, which turned out to not be such a fair arrangement. Turns out, the seller and his agent were buddy-buddy. The agent was charging a 4% fee for the buyer side PLUS a fixed fee commission ON TOP OF a 6% fee for the seller side. That’s more than 10% commission - nearly double what realtors typically charge. This is borderline criminal in my opinion, and frankly, it was the seller’s choice to use a realtor anyways. I would have much preferred to work directly with the seller, as I could have purchased the property for a lower price, and the seller would have walked away with more money in his pocket.
I digress…
So… after going through the wholesaler, then going through the agent, having my secondary offer become first, doing an inspection, negotiating the price down, extending the contract, and securiting financing, next comes the appraisal. The appraisal took 3 weeks (CRAZY!), but it came in at the original purchase price of $240k, which is great news. However, they pointed out that there was a water leak in the process of being repaired. This was the week we were supposed to close, and my lender required the seller to fix the leak before closing, as there was a hole in the wall due to the “repair”. Luckily, they were able to confirm that the repair would be fixed by closing.
Come closing day, this was the first time I ever saw the settlement statement - at the closing table with the notary. There was no mention of the seller financing on my side of the statement (WHAT??) AND the security deposit credit was only $950, when the lease agreements showed security deposits of $3,600 (HOW??). I was beyond perplexed. Just one thing after another with this deal!!
It took, no joke, 2 more weeks to clear up the security deposit issue. It turns out that, although the lease agreements required security deposits, the seller never collected them for two of the units, and only collected half for one of the units (WHY??). To clear this up, I had them execute an amendment to each lease agreement so that the tenants had agreed in writing that no security deposit was paid. Aye…
KEY POINT: When dealing with smaller numbers of units, you’ll see a LOT of sellers that don’t know what the heck they are doing. This is why it’s so important to get educated!
When all was said and done, I now own 5 more units that will be cash flowing from day one. I have plans to increase rents on three of the units starting in month three, increasing cash flow by about $270/m. I’ll still have some room to improve on rents, especially after making a few necessary repairs on the property and by requiring tenants to pay for their water bill. All of this will lead to long-term increases in cash flow and a very solid return on investment.
CONCLUSION
So, after all of this madness, was it worth the headache? For now, I’ll say yes, because I not only ended up with a cash-flowing property with hardly any money down (about $7k for closing costs, including the appraisal and inspection), plenty of room to increase cash flow over time, and several lessons learned. Please learn from my mistakes so you can work smarter instead of just harder on your deals!
And if you want the advantage of learning from over 40 practitioner instructors and leveraging a national network of thousands of investors, you know who to call :).
That’s it for today. As always, it’s your life, your canyon, your legacy. You are in control. Let’s flow!
Disclaimer: The Flow Authority makes no promise or guarantee of any results, money, success, or lifestyle from learning real estate investing strategies. The information provided in this blog is for educational and informational purposes only and should not be considered financial, legal, or professional advice. The views expressed in this blog are those of the author and do not necessarily reflect the official policies or positions of any organization, government agency, or financial institution. Any personal experiences shared are for illustrative purposes only and may not apply to every person’s situation. This information is general, not personal. Seek specific advice from a licensed professional for legal, financial, and business decisions. There are no typical results in real estate investing; every person, property, and transaction is unique. The information shared in this blog is believed to be truthful, accurate, legal, moral, and ethical, and is subject to change.