Where have all the Twin Cities Minnesota Rehabs gone?

17 Replies

So I have been talking to fellow investors in Minnesota and the once hot rehab market has dried up! Yet I'm still seeing 'cash buyer' signage when driving around.

I welcome observations from others in Minnesota. We are not a feisty bunch like those in DFW area, but then again, that is a red hot market.

Its a tough market. I'm in Fargo and we just had a meetup where the consensus was that this is not a flip kind of town. You can't find the deals at cheap enough prices to make it worth it. Its a good rental town though. 

Keep in mind, there are still plenty of investors out there who can make the deals work by slapping lipstick on a pig and calling it good. Those do exist.

Lastly, those cash buyers signage you see is maybe very successful investors. They may have other strategies to find off market homes and that's where they find their leads.

I moved here 2 years ago from Colorado Springs and I have never even bothered to look at the MLS because the deals get snagged up to quickly, are out of my price range, or picked over already. My focus is marketing to off market listings.

The flip deals are still there, but the market has changed. Rents are so strong that the low priced houses are going to owner occs and land lords. We fund a ton of deals in the Twin Cities, the price point is going up and the repair budgets for the deals we are funding. ARV averages over $300k and repair budgets between $50k-$100k. Also seeing a ton of scrape and infill new construction from $350k to $1.5MM. Still a lot of money to be made in that market.

I'm in the same position as you, @David Huynh . I can only handle a few at a time. 

Totally agree with @Steven J. on his insight into the market. The MLS is generally not a good place to look right now. We got a steal of a deal back in 2012, that has already appreciated $100k due to rehab and market. We haven't been able to reproduce that situation yet. Hoping for a change!

FYI - None of my deals have been through the MLS (only 4 working on 5) but they've been all through communicating with the home owner. I'm a young investor and have watched trulia/zillow/mls for the last 4 1/2 years. Prices have sky rocketed.

@Matthew Berry Congrats on the $100k appreciation :)

@Steven Johnson and @ Travis Sperr, your observations on rents is telling. I have focused more of my business on cash flow rentals and the buyers are other there. Had 2 inquires this morning.

My working theory is that as distressed property inventory increases, rents will go up.

Turnkey inventory is the new "rehab".

Check this out: Distressed property opportunities are surging in 2015. So where are they, and who’s buying?

While some newbie real estate investors that have gotten into the industry since 2008 have been griping about a lack of deals, the data shows there are even more distressed properties coming up for sale. In fact; according to the stats there are twice as many.

Rocketing REOs

While some appear to have forgotten there was a foreclosure crisis RealtyTrac reports that bank owned properties leapt up 50% year over year to April 2015. There are a lot more distressed properties in the works too. RealtyTrac reports an almost equivalent number of pre-foreclosures and auction properties too. The Mortgage Bankers Association reporting commercial and multifamily delinquency rates reveals that the number of Fannie Mae loans that were 60+ days delinquent almost doubled in Q1 2015 as well. Many of these are properties which aren’t even included in foreclosure figures yet.

California Foreclosures and Fast Growing Markets

It’s no secret that California has been one of the fastest rebounding housing markets in America. In fact, it dominates Realtor.com’s recent list of the hottest US real estate markets; claiming 10 of 20 places. Yet, even in CA where property prices are up, and days on market are shrinking RealtyTrac says bank owned REOs have climbed even higher; by 74%.

Demand is up too. Online listing portal Realtor.com says visitor numbers have doubled in 2015. So more distressed properties are coming down the pipe. But there are plenty of buyers eagerly looking to snap them up. These are perfect conditions for real estate wholesalers that can virtually flip an unlimited number of house deals using transactional funding.

Best,

aluta continua  

Great article, @Ray Mulli

One observation, though, is that REOs are almost always listed and sold through the MLS. What if inventory increases, but it's mainly on the MLS? And what if the MLS is over-saturated with mom/pop investors looking for property the traditional way?

That could explain why inventory is up, but it's difficult for those of us marketing directly to homeowners. There might be an upward trend in listing with an agent vs. selling direct.

Just musing here. Not an expert on trends.

@Matthew Berry, thanks for the compliment.

So, we are not in disagreement that REO's are trending up. For direct marketers (and i'm one if them) getting a slice of motivated potential REO sellers will become easier.

I've been contacted by a few that were too far gone in the foreclosure process for me to help. I have others that I'm helping. The houses are not rehab material, throw some paint and carpet and you get a turn key rental. Add into that mix tired landlords and you can see why this topic circles back to high rents mentioned by @ Travis Sperr and @ Steven Johnson, turnkey investments and buy and hold investors.

best

Okay so REOs are going up but I would also have to claim that they are ending up on the MLS at over inflated prices. Doesn't matter for FHA and VA and second time home owners because rates are low enough still on loans and now people are feeling the economy is coming back that they are willing to take on the next risk. They are getting picked up but not by investors.

@Steven Johnson, @Matthew Berry, @David Huynh, @Travis Sperr......this just in:

www.bloomberg.com/news/articles/2015-06-08/cerberu...

Cerberus capital to buy 4200 rental homes throughout U.S.

Best.

"The houses being sold to Cerberus are in Indianapolis; St. Louis; Kansas City, Missouri; Chicago; Memphis, Tennessee; and Florida, said the people with knowledge of the matter."

Fortunately, they haven't ventured into the Twin Cities market. I bet that will impact our friends in other markets, though. I know that Florida has been a hot market for a long time. I wonder how that will impact our friends down there.

Hedge Funds have been buying homes in the Twin Cities for years - ask anyone at Renters Warehouse.  We have clients flipping houses to hedge funds that will hold them as rentals. 

@Mark Shaffar I'm aware of Calhoun Ventures and  I know they are now looking to Iowa for deals. 

I just love the twin cities and I think opportunities still exist here if (when) approached from a different perspective.