Selling a Rental Property in Milwaukee: Tenants, Wisconsin Law and Taxes
A lot of Milwaukee rentals are owned by regular people, not big companies. Someone bought an upper/lower duplex in Bay View to live downstairs and rent the top, held onto a Polish flat in Lincoln Village after moving to the suburbs, or picked up a couple of single-family houses on the North Side years ago. At some point the furnace calls, the late rent and the turnovers stop being worth it. This page walks through what Wisconsin law says about tenants when a rental changes hands, how a sale affects your taxes, and how we buy occupied rentals without making you empty them first.
What happens to your tenants when the building sells
Most of the rules come from two places: Wisconsin Statutes chapter 704 and the state consumer protection code for rentals, Wis. Admin. Code ATCP 134. The rule most landlords worry about is simple. Under Wis. Stat. 704.09(3), the terms of a lease bind whoever owns the building next. A sale does not cancel a lease, and the buyer cannot rewrite it. When we buy, we step into your shoes as landlord on the same terms your tenant signed.
- Tenants on a lease stay through the end of the term unless they breach it. We price the remaining months into our offer instead of asking you to buy them out.
- Month-to-month tenants have a periodic tenancy, and Wis. Stat. 704.19 requires at least 28 days' written notice to end one. We decide after closing whether to keep the tenant, and many times we do.
- Security deposits follow the tenant, not the seller. Wisconsin requires the landlord to return the deposit, minus allowed deductions and with an itemized statement, within 21 days after the tenancy ends (Wis. Stat. 704.28 and ATCP 134.06). The usual way to handle this at a sale is to credit the deposits to the buyer at closing so the new landlord can make that refund later. Bring your deposit records and any check-in sheets.
- Showings are allowed. Wis. Stat. 704.05(2) lets a landlord show the unit to prospective buyers at reasonable times, and ATCP 134.09(2) sets the advance notice at 12 hours unless the tenant agrees to less.
When the tenant is the reason you are selling
Most landlords who call us are not tired of owning property in general. They are tired of one unit and one situation. A few of the common ones:
Rent has stopped coming in
Wisconsin eviction starts with a written notice. Under Wis. Stat. 704.17, a month-to-month tenant who falls behind can get a 5-day notice to pay or vacate; a tenant on a lease of a year or less generally gets a 5-day notice to pay with a right to cure, or a 14-day notice to vacate. If the tenant stays, the case is filed as a small claims eviction in Milwaukee County Circuit Court, and a judgment is enforced by the sheriff through a writ of restitution. Contested cases take longer. We can buy the property in the middle of that process and take over from there, so you are not the one standing in the courtroom.
The unit came back in rough shape
A deposit rarely covers holes in the drywall, a ruined floor and a basement full of left-behind furniture. We buy rentals in the condition they are in, including the junk, so the repair list is no longer your problem.
Access is a fight every time
The law lets you show the unit with notice, but a tenant who is uncooperative can still make every visit tense. We usually need one walk-through, and sometimes photos are enough, so you are not scheduling weekend after weekend of strangers in someone's home.
Taxes to plan for (talk to your CPA)
Investment property is not treated like the home you live in. The capital gains exclusion for a primary residence does not apply to a rental you never lived in, so a few other rules decide what you owe.
Depreciation comes back
The depreciation you deducted while you owned the rental lowers your basis, and the IRS taxes that portion of your gain at a federal rate of up to 25% when you sell. It is often called depreciation recapture. The amount depends entirely on your own deductions and holding period, and it applies no matter who buys the property.
Capital gains, federal and Wisconsin
Gain above your adjusted basis on property held more than a year is taxed at federal long-term capital gains rates. Wisconsin taxes capital gains as income, but it lets you exclude 30% of most long-term gains, so the state tax lands on the remaining 70%. Your preparer can tell you where your numbers fall.
Deferring with a 1031 exchange
If you plan to buy another investment property, a Section 1031 exchange can defer the gain. The deadlines are strict: a qualified intermediary has to be in place before closing so you never touch the money, replacement property has to be identified within 45 days, and the purchase has to close within 180 days. We are happy to set our closing date around an exchange schedule.
Why Milwaukee landlords sell their rentals to us
The tax math is the same whoever buys, but the exit is not. We take the building with the tenants in place, with a pending eviction if that is where things stand, and with whatever repairs it needs. There are no showings to set up, no rehab to finish first and no vacancy to carry while you wait for a retail buyer. On top of that, Wisconsin charges the seller a real estate transfer fee of $3 per $1,000 of value (Wis. Stat. 77.22), and we cover our closing costs. If you want a figure to plan around, request a no-obligation offer or call (414) 400-6116.