Miami Florida · Member since 2018 · 11 posts · 6 votes
Hi everyone! Newbie here in Miami Florida. I've been learning as much as I can for the past few months and am now in the process of looking at props. I'm interested in buy and hold to rent but am not finding any great deals here in Miami. The market is extremely expensive and between high taxes and HOA's it's making it very difficult to find anything worth investing. My family lives in Minn. and so I am seriously considering looking for props up there which would mean long distance investing. This makes me pretty nervous as a newbie so I'm looking for advice. Thanks!
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
8y
There are many properties for sale in Duluth that look good but after following the market a bit it seems that these properties don't really appreciate. That being said, if you are looking to invest in some of the older properties you better take a hard look at CapX as any major repair will take a big chunk out of your cash flow.
Investor · Duluth, MN · Member since 2017 · 52 posts · 83 votes
8y
Hey Bruce!
Happy to help, I’ve been investing in Duluth for a long time. Our management company helps property owners from all over buy and manage rental property here in Duluth. Shoot me a message if you’d like to connect!
Cheers!
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
8y
There are many properties for sale in Duluth that look good but after following the market a bit it seems that these properties don't really appreciate. That being said, if you are looking to invest in some of the older properties you better take a hard look at CapX as any major repair will take a big chunk out of your cash flow.
Miami Florida · Member since 2018 · 11 posts · 6 votes
8y
Thanks Michael. What's the rental to buyer ratio like in Duluth? Rentals go quickly? Or do they tend to sit for a while? Also, I noticed that you have to have a rental permit. What's the deal with that? We don't have those in Miami.
Miami Florida · Member since 2018 · 11 posts · 6 votes
8y
Thanks for that info John. I have noticed that the props tend to be very old. Appreciation is a concern which is the upside of properties here in Miami. However, how much appreciation do you think there should be for buy and hold rentals?
Most of us purchase for cash flow but have potential appreciation to fall on if we are buying for the long term. Our goal is not to hold it for 10 years, collect some cash and hope to break even.
Craig - the problem with no appreciation is that you have to be spot on or very conservative with your repairs and replacements budget, especially on a very old house. You will not add much value to many of these houses by putting in a new furnace, replacing the roof, or adding windows but they will kill many years of cash flow. You don't add much on a normal house located in an appreciating market but generally when you sell you will get some of that money back vs getting no money back on the improvement...
Bruce - if you follow the market there seem to always be cash flowing rentals for sale at reasonable prices in Duluth. The real question is why - is this the case when many markets have tightened up?? I haven't figured that out yet. And on the rental licenses, many MN cities have them. Duluth is a little more of a pain, I believe there is a fee for converting a property to a rental (if it wasn't already), rental license fees, and if you don't have enough off street parking you pay more fees. And don't even think about vacation rentals up there - believe they have 60 licenses city wide and a long waiting list....
There are many people on here who manage and invest in Duluth who can chime in. I know things have been changing but there is some red tape involved investing there.
Investor · Duluth, MN · Member since 2017 · 52 posts · 83 votes
8y
There is a little red tape with the rental license in Duluth, but all major cities in the Midwest have them - it common in the region anyway.
Duluth definitely is more of a cash flow market than an appreciation market. You won’t see a property double in value in 10 years often here (I have had several, but yes it’s rare). That said, there is more normal appreciation at least in the past 10 years - everything is up 20-30%.
Cash flow is the ticket here. It’s easy to find a 9% or better cap rate here and with some effort and patience / willingness to do a little remodeling you can find 10-11 % cap rates. That is literally unheard of by several % in the high appreciation markets. You typically get one or the other.
The reason as to why Duluth is a cash flow market has to do with our costs of construction. Duluth has next to zero vacancy which is driven by the housing shortage that exists (in both rental and homeowners housing) and that is due to our cost of construction locally. The city is permit heavy, topography/bedrock for new housing can often add cost, and Duluth is very pro union in the trades. All together it costs 20% or more to build new here than in the Minneapolis area. It’s almost double the cost of new construction in Florida! Anyway - those the forces that create the housing shortage and what drive rent rates up here locally!
It is an old housing stock, so yes there is a little sharper due diligence needed on potential capital expenses - but there is also a boatload if opportunity if you’re good at sizing up those costs. There are so many lanes for success investing in real estate, it really comes down to your individual skills set.
Miami Florida · Member since 2018 · 11 posts · 6 votes
8y
Wow! First off, I want to thank you all for taking the time to share with me your insight and experience. I greatly appreciate it.
@JohnWoodrich once you pay the fees, how long are they good for? A year or more?
Also John and Michael do either of you know about any winter month policy in place that forbids landlords from evicting tenants? Could you shed any light on this or any other laws that might be in place that could potentially hinder landlords from evicting tenants for breach of contract.
@Michael what would you say renters typically look for? For example, here in Miami they typically look for 3/2's and neighborhoods that are located in zones with better schools.
Miami Florida · Member since 2018 · 11 posts · 6 votes
8y
Wow! First off, I want to thank you all for taking the time to share with me your insight and experience. I greatly appreciate it.
once you pay the fees, how long are they good for? A year or more?
Also John and Michael do either of you know about any winter month policy in place that forbids landlords from evicting tenants? Could you shed any light on this or any other laws that might be in place that could potentially hinder landlords from evicting tenants for breach of contract.
What would you say renters typically look for? For example, here in Miami they typically look for 3/2's and neighborhoods that are located in zones with better schools.