Newbie moving to suburbs of Minneapolis

[Jessica Wood]

Hello!

My family and I are relocating to Minneapolis in December and we will be lucky enough to be investing in real estate full time.  We are looking to invest in the western suburbs as well as the Edina/Calhoun area.  Neither of us will have W2 incomes but we have investment income as well as rental income.  

Our plan right now is to pay cash for a very modest primary residence and refinance when we get up to minneapolis. We would live there for two years and then rent it out. Assn docs say you need to occupy for 2 before renting. While we lived there we'd put in new showers, flooring in kitchen and bathrooms and paint kitchen cabinets white, etc. Make it a more appealing rental unit. 

I have one rental property in Edina that is paid off. I've been renting it out for about 4 years or so & lived in it prior to that. I've spent about 4 hours of work on that place in 4 years so I've been really lucky as far as tenants go. 

Are there specific banks in the Minneapolis area that will be better at lending based on net worth vs. verifiable income?  I currently bank with Wells Fargo but am open to developing relationships elsewhere. 

Our primary goal will be to get single family homes cash flowing ASAP. 

Since cash flow is important to us, we are considering putting as much as 50% down on these properties. Thoughts?

We are leaving a farming operation in Iowa and going into this full steam ahead. Wish us luck! 

[Tim Swierczek]

@Jessica Wood  First you are doing amazing and one thing I like about RE investing is that there are many ways to do it.  That being said you asked for advice and while your method is working for you I think you would be better served to put 25% down on all your properties and re-leveraging the to this level.  Then buy as many good deals as you can.  You should be able to easily cash flow as much or more than with your paid off home and you will now be spread out over many properties.  This will minimize risk as @Kevin Powell points out, and it will grow your net worth in the process.  The best news is someday you will have more paid off properties, and while you may think you can do this by paying off a property at a time rental real estate does not work that way.  if you have 1 property paid off you have 1 set of renters paying your profit each month and while its bigger monthly cash flow on one property it is not necessarily bigger cash on cash return on your equity.  When you get more properties, say 5, you have 5 people paying down your mortgage at once instead of one person giving you money to buy one property.  In that case you loose time and lots of it.  By the time you save up for your large down payments you are giving up equity.  If you subscribe that the market is appreciating then you lose a portion of that down payment each year to that appreciation on the house you were going to buy, instead of receiving the appreciation and the principal reduction from your potential 5 tenants you are giving the appreciation to the seller of your future investment property.  Be safe in your investments but be careful not to be too "safe" it will cost you hundreds of thousands of dollars.