Multifamily buy and hold Minneapolis area, best strategies?
My partner and I are real estate investors looking to level up in the Minneapolis Saint Paul area, looking for input and suggestions about what to do; here’s our scenario:
• Currently rent out a condominium in Saint Paul,
• est. sale price $155k
• $94k left on mortgage.
• Plan to 1031 this $61k towards our next purchase.
• $275k cash for downpayment set aside in addition to $61k condo proceeds for a total of $336k down.
• After closing costs and finance fees etc. we end up with about $1.1M max purchase budget.
• We have a multi-member LLC set up for the venture
We find ourselves on the fence between two approaches.
This market and this budget puts us at a newer (2005+) triplex in top neighborhoods.
Pros of lower doors better neighborhood:
• Traditional financing
• Fewer maintenance calls
• Higher quality longer term renters
• Better long term appreciation
Cons of this approach:
• Higher vacancy allowances
• More risk per unit
• Less standardized maintenance per unit
• Increased competition from newer triplexes the city is heavily encouraging to be built.
• Higher property taxes
The other approach is more working class neighborhood but 5-6 units under one roof. These are usually built in the 1920s or so
Pros:
• Lower vacancy allowances
• Less risk per unit
• More standardized maintenance per unit
• Better opportunity for value creation because it’s commercial
Cons:
• Lower quality shorter term tenants
• Higher cost commercial financing required
• Lower long term appreciation
Thoughts?