arm’s length transactions
5 Property Flows
Property sales as a whole are up. More homes are going to out-of-state landlords and owner occupiers alike. Compared to a few years ago, many fewer properties are owned by local and suburban landlords. Who, then, is selling to whom?
To answer this question, I collected all the Real Estate Transfer Returns (RETR) filed with the Wisconsin Department of Revenue and matched them with the City Assessor’s records in the Master Property (MPROP) file.1
1 I successfully matched over 98% of RETR records with an MPROP record. RETR data is self-reported and inevitable contains some errors.
By combining RETR and MPROP records, I ascertained the ownership status of each residential property before and after the transaction.2 The Sankey (or “alluvial flow”) diagrams below reveal the size of those flows. Hover over a flow to reveal a tooltip containing the total size.
2 Archived MPROP records contain property records as of December in the given year. I arranged each property’s MPROP and RETR records by date. If an MPROP record preceded or succeeded a RETR record, its ownership status determined the prior or subsequent ownership value for the transaction. If a RETR record was preceded or followed by another RETR record, or if it was the first or last record for the property, the appropriate RETR values for grantor/grantee address or the self-reported grantee primary residence were used.
Net transaction flows to and from a given ownership category inevitably vary from the overall changes of ownership in each category for several reasons. (1) The flow file contains slightly more recent data than the MRPOP dataset. (2) Some properties are sold multiple times. (3) Most importantly, properties can change ownership status without being sold or otherwise conveyed. For instance, the net transaction flow from landlords to owner occupiers is larger than the total citywide increase in owner-occupied properties. This is mainly due to the prevalence of non-sale conversions of owner-occupied properties into something else. It is far more common for an owner-occupier to move out of their property (and presumably turn it into a rental) than it is for a landlord to move into one of their rental properties (thereby converting its status to owner occupation).
5.1 arm’s length
The graph below shows the outcome of 34,551 arm’s length sales of single family homes, condos, duplexes, and triplexes in Milwaukee from January 2019 through December 2022. A small number of sales involving owners of unknown location or properties owned by the City of Milwaukee have been removed.
The flows of arm’s length transactions reveal how owner-occupiers increased their share of houses. The lion’s share, 83%, of homes sold by owner occupiers also went to owner occupiers, but these transactions only made up 60% of owner occupier acquisitions. Owner-occupiers also purchased 43% of properties sold by Milwaukee-based landlords, 51% from suburban landlords, 51% from landlords elsewhere in Wisconsin, and 39% of properties sold by landlords based outside the state.
When owner-occupiers did sell to a landlord, it was usually one from the Milwaukee metro. City-based landlords bought 7% of owner-occupier sales, suburban landlords bought 6%, and out-of-state landlords just 4%.
When out-of-state landlords bought properties in arm’s length sales, they usually did so from other landlords. Sales from other out-of-state landlords account for 25%, Milwaukee-based landlords 31%, suburban landlords 24%, and owner-occupiers 14%.
5.2 all
The following graph shows all 56,283 property conveyances including non-arms length transactions. Sales involving owners of unknown location have been removed.
Landlords are more active in non-arm’s length conveyances. But even when including these, the net positive flows from landlords to owner-occupiers are still apparent.
all transactions
5.3 ultimate
Some properties went through a sequence of transactions during this period of time. For example, a property could’ve been foreclosed on by a bank, then sold to a flipper, and finally sold to a long-term owner. The table below shows, for all properties which experienced a change in ownership, the first and final ownership status of the property during the study period–January 2018 through December 2022. As such, it might be the most useful for understanding recent property flows in the city.
Of all the properties first sold by an owner-occupier since January 2018, 82% were (at least eventually) sold to an owner-occupier by December 2022. 7% were sold to a Milwaukee landlord, 5% to a suburbs landlord, and 4% to a landlord outside Wisconsin.
Of all the homes ultimately purchased by an owner occupier, 70% were originally sold by an owner occupier, 12% by a Milwaukee landlord, 11% by a suburban landlord, and 5% by an out-of-state landlord.
Of all the homes ultimately purchased by an out-of-state landlord, 31% were originally sold by a Milwaukee landlord, 21% by another outside Wisconsin landlord, 24% by a suburban landlord, and 19% by an owner occupier.
ultimate transaction flow
5.4 Package sales
Sales of more than one property in a single transaction have grown more common in each year since our records begin in 2017.3 This kind of property data is messy, but by our count, there were 103 multi-property sales which included at least 1 residential property in 2017. This grew by 77% to 182 in 2021. The number of such sales has already reached 213 through just December 2022.
3 Identifying meaningful bulk sales from the list of all property conveyance records poses challenges. Large landlords often transfer properties between their myriad LLCs, but simply limiting the analysis to self-reported “arm’s length” transactions misses some genuine sales. I restrict this analysis to conveyances meeting the following criteria: (1) there is no stated relationship between the grantor and grantee, (2) the grantor’s address is different than the grantee’s, and (3) the conveyance is either arm’s length or not arm’s length but still subject to a transfer fee.
The number of residential properties sold in these transactions has likewise increased, from 343 in 2017 to 631 in 2021, and 799 through December 2022.
| Residential properties sold in multi-property sales | ||
| in the City of Milwaukee | ||
| sales | parcels | |
|---|---|---|
| 2017 | 103 | 343 |
| 2018 | 121 | 495 |
| 2019 | 125 | 481 |
| 2020 | 148 | 440 |
| 2021 | 182 | 631 |
| 1 2022 | 213 | 799 |
| 2023 | 61 | 140 |
| 1 Includes conveyances reported through December 2022. | ||
Houses sold in package deals tend to be quite affordable on an individual basis. The properties sold this way since 2021 have a median 2022 assessed value of $78,100. But would-be homebuyers, particular in this price range, can’t compete with the kinds of buyers who can close swiftly and pay cash for multiple properties at once. In all likelihood, many of these properties aren’t even listed on MLS.
Bulk purchases have been particularly popular with Milwaukee’s three private equity backed companies. Through December 2022, we identified 7 package purchases by SFR3, in which they acquired 66 parcels. Highgrove Holdings used 11 bulk sales to buy over 180 properties, and VineBrook bought 232 properties in 35 transactions.
| Multi-property purchases | ||||
| package sales | properties | total paid | per property | |
|---|---|---|---|---|
| Highgrove Holdings | 11 | 188 | $10,307,651 | $54,828 |
| SFR3 | 7 | 66 | $5,707,150 | $86,472 |
| VineBrook Homes | 35 | 232 | $25,063,900 | $108,034 |
Highgrove Holdings was the buyer in 4 of the 5 largest deals. Each of those deals involved buying out the portfolio of another out-of-state landlord who was leaving the market, and all four were conducted between June 30, 2021 and January 21, 2022. Three of the transactions were with companies owned by Sergio Pejoves, in which it spent $6,609,336 buying about 100 properties. The other transaction was $1,326,815 for 31 properties owned by Alan and Liqun Schapiro. Both Pejoves and the Schapiros were featured in an April 2021 MJS article about out-of-state landlords.
Many bulk purchases aren’t large. VineBrook Homes has recorded 27 multiple property deals in 2022 through December, with an average size of 6.5 parcels. In total, the company spent $19,656,900 on 176 properties. Per property values ranged from $80,000 to $157,000 with a median of $109,000.
| Multi-property purchase by VineBrook Homes during 2022 | ||||
| grantor | parcels | total paid | per property | |
|---|---|---|---|---|
| 2022-01-20 | Homepointe Rentals LLC | 3 | $240,000 | $80,000 |
| 2022-01-06 | Joseph Passalacqua | 6 | $630,000 | $105,000 |
| 2022-01-06 | Joseph Passalacqua; Hope Albers | 2 | $205,000 | $102,500 |
| 2022-01-24 | Sac3 LLC | 9 | $985,970 | $109,552 |
| 2022-01-24 | Sac4 LLC | 5 | $550,625 | $110,125 |
| 2022-01-24 | Sac5 LLC | 7 | $757,770 | $108,253 |
| 2022-01-24 | Sac6 LLC | 2 | $211,024 | $105,512 |
| 2022-01-24 | Sac7 LLC | 21 | $2,431,770 | $115,799 |
| 2022-01-24 | Sac20 LLC | 2 | $193,809 | $96,904 |
| 2022-01-25 | Single R Holdings Company LLC | 5 | $467,356 | $93,471 |
| 2022-01-25 | Homes For Living Mke, LLC | 4 | $382,644 | $95,661 |
| 2022-02-15 | Mary E Zierke | 3 | $360,000 | $120,000 |
| 2022-02-15 | Steven M Cimbalnik | 2 | $240,000 | $120,000 |
| 2022-02-24 | Mark A Cimbalink | 14 | $1,701,241 | $121,517 |
| 2022-02-24 | Simba Homes, LLC | 11 | $1,236,259 | $112,387 |
| 2022-03-07 | Robert E Gariepy Jr | 5 | $610,000 | $122,000 |
| 2022-03-08 | Metro City Apartments, LLC | 5 | $740,000 | $148,000 |
| 2022-03-14 | Andrew J Nagel Aka Andrew Nagel | 4 | $375,000 | $93,750 |
| 2022-03-16 | Cornerstone Properties LLC | 13 | $1,730,000 | $133,077 |
| 2022-04-07 | Brittain Brothers LLC | 6 | $499,500 | $83,250 |
| 2022-05-25 | Urban Redux Milwaukee Iii LLC | 2 | $313,318 | $156,659 |
| 2022-05-25 | Jsm I LLC | 2 | $217,614 | $108,807 |
| 2022-05-25 | Brewtown Capital LLC | 19 | $2,185,000 | $115,000 |
| 2022-05-26 | Shk Properties, LLC | 17 | $1,650,000 | $97,059 |
| 2022-07-21 | Schmitt & Rezash Properties LLC | 3 | $265,000 | $88,333 |
| 2022-07-25 | Pct 1, LLC | 2 | $268,000 | $134,000 |
| 2022-08-22 | Sugar Pine Investments LLC | 2 | $210,000 | $105,000 |