Why Milwaukee?

You know, over the last few months many people have asked me the question that this blog post is based on, Why Milwaukee? Well I almost want to reply to them all, Why LA?

I have only been here in Milwaukee a week, and to be honest, I have not seen a percentage of what this city can offer, and I'm not necessarily defending the choice to move here, specifically, so much as defending the "get the HELL outta California!" moniker.

I ask people, is a three bedroom, two bath home in Pacoima off of Laurel Canyon BLVD really worth $310,000? How about one off of Telfair for $379,000? How about a 1,300 square foot home in Arleta for $317,000? I gotta tell looking at numbers (and this is CHEAP btw), I'm not really impressed; average home price in Pacoima is a quarter of a million dollars...average salary per person, based on IRS income tax statistics, $11,500...yearly. Ok, home price, $250,000, 20% down, give or take 5k in closing costs, now you got a family, with an 11k per capita annual salary having to come up with 56 thousand dollars just in down and closing costs, plus, having an 1,100 a month mortgage payment (but what about HUD loans and other first-time home buyers loans with lower downs? sure, just up the monthly mortgage payment ~$80 bucks per percentage point less in down). Factor in the fact that most families are dual income families, you have 23,000 a year, or 1,900 per month, and you have a family that basically HAS to rely on food stamps, WIC, welfare, etc, because after paying mortgage, they are BROKE!!! $800 dollars to live on per month, yeah, try feeding yourself with that and still have money for gas to get to work. Sure, this isn't everyone's situation, but let's face it, how many of us really made more than 30-40k last year? Even on that salary, 1.4k-2.2k isn't a ton to live on considering we haven't even talked about utilities (yay for summertime A/C bills!). So, home ownership isn't for everyone, why bother talking about that? Well, fine, how about this, average rental rate for Pacoima in a 1 bedroom apartment is 1,100 a month. Wait, a one bedroom for as much as it costs to buy a three bedroom house? Yes, it really is that bad. How about schools, you care about your kids getting an education, how about California, especially LAUSD, being one of the worst places in the nation for educating our nation's young.

Ok, now I'm just ranting and talking shit, ok, let's look at the "nice places." Try Burbank (ok, for those of you that are whining about Burbank not being "nice" just shush for a second), decent place, decent schools, average home price? Any guesses? Try HALF A MILLION DOLLARS!!! Whoa, that much? The houses share similarities with the houses in Pacoima, they aren't 3,500 square foot mansions in either area, so I guess you're paying a premium for proximity to the studios, which is apparently what most people in Burbank do for work. Now we're talking, median household income (sorry, no per capita info here): $64,000 overall annually, with the Asian population SMOKING the competition at nearly $80,000 and the African-American and Hispanic populations coming in between $50,000-$62,000. Well, much more money and education there, obviously, but let's talk numbers again. House, $500,000, 20% down, about 10k in closing costs, well that house costs $110,000 in down+closing, and around $2,200 a month. Sure at 50-80k a year, you're talking $4,166-$6,666 monthly to pay that, and more. But still, being left with only 2-4k per month, considering the cost of utilities, gas, food, BMW and the other typical expenses one might have if they lived in Burbank, you're talking a sizable chunk of your money gone just cause of home-ownership (which by the way, is one of the most useful ways of building your retirement portfolio and increasing your net worth, if that is at all important to you).

All I'm saying is, if you got a job paying 60-80k, sure, you might make it, scrape by, and exist for a while, and you'll be loving that weather, but I'm sure it'll get annoying after the 190th day of 90+ degrees. Oh, and since you're working so hard for that $80k good luck visiting the beaches and downtown nightlife that you're paying that premium for.

All I'm saying is, are the "benefits" worth the "costs?" I am one to say "no," but that is just me. I am more inclined to seek out a place where you can still make the same amount of money, or close to it anyway, have all the luxuries of living life larger than you thought possible, and not give in on too much. Let's talk about other areas...

Florida, for all those that can't get away from the sun and sand, well, here you go. You can buy a house in Boca Raton, FL (where you can take a walk at 8pm and not get mugged, just saying) for around $180,000. Ok, so not über cheap, but consider this, at an average salary between $34-$80k per capita (yeah, big spread, I know), and roughly two-thirds of the price of a home in Pacoima, you can have that same house, and three to eight times the salary. Might as well buy three houses for the price of one Burbank house, capitalize on the increasing rental rates on two of the houses, and have all three mortgages paid for by the rental income of only two of the properties and pocket your entire $30-80k salary for all your other bills (BMW, gas, food, boat, etc). Or how about a place like Milwaukee, which brings me to why I came here. Sure, snow sucks, etc., etc., etc., but with the average salary for my industry, Information Technology, actually matching that of the greater Los Angeles area and most other areas except for San Jose and San Francisco, or around $50-70k, home prices averaging $80k, and the entire cost of living index falling to about 20% less than nationwide average (which, BTW, LA is about 70% higher than the national average) you're talking about a whole lot of quality of life for sacrificing three months of cold and snow. I don't know about you, but to be able to have 2-3 homes for the price of one in Pacoima, and get paid 5 times more, and be able to keep all that money because the extra house or two basically pays the entire mortgage for all of them, it just seems to make more sense.

And, additionally, if this place ever loses it's luster, the homes can remain rented (with the extra house generating income above and beyond the total mortgages so you basically have a part time job paying you, and, you're not working for it), or sold for at the very least a minimal profit (think 2-3 years, around 4k in principal paid down per year, per house to be about 24-37k, plus a slow per year appreciation of 1-3% and the fact that they are rental property investments, increasing the intrinsic value to your buyer, adding somewhere around 2-3k more per house for a total of 30-46k that I can take away in CASH) means that for moving away for a number of years and making smart investment decisions, I will be able to accumulate around 100k in the course of three years by having rental income cover my mortgage and saving that 1,100 per month, and cashing out on the homes after three years. I don't know about you, but having 100k to throw around (or save for retirement, which at S&P rates of an average 10% per year for 34 years or so till I retire will be worth about 2.5M dollars or about 1.5M accounting for inflation) at 31 years old would be a nice starting point. All for giving up the luxuries of California for just three years.

Now, let's say 5 years, even 10, the numbers compound enormously (if I continue to reinvest and purchase more property like apartment complexes). Is it possible? Sure. Is it risky? Probably. Is it worth it? Definitely!

Now, ask me again, Why Milwaukee? I'll say, "I don't know, why not...?"

But I'll ask you again, Why LA?