Looking for opinions on investing in greater Minnesota
Plymouth, MN · Member since 2017 · 3 posts · 1 vote
Looking for opinions on investing in greater Minnesota
Most Popular Reply
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
8yI know many people to invest in outer cities. The main things that come to mind are as follows:
1. Is it worth it? Sure you can purchase properties cheaper but are you getting enough return on your investment to take on the nuances of investing out of your market? If you are looking to build up your BP cred and try to build your "units" go for it. I wouldn't even look at COC return - I have seen several triplexes with 25% returns but they only produce $4k of cash flow... That isn't worth my time or risk.
2. How are you going to handle the small stuff? As mentioned above, how are you going to handle the call on Tuesday night that something isn't working or the drain is backing up? This can be done with locals on the ground but I would work on getting that setup first if it was your plan.
3. Do you know the market? These cities typically have smaller populations. This increases the changes of your property sitting vacant for a while and can make these very hard to sell (hence why they look more appealing). I would develop an escape plan which may involve finding a great deal if you can fire sale if needed.
I am not going to comment on the cities you mentioned but they are very different in size and opportunity. And withing St. Cloud for example, there are areas which are great and others which are horrible... I have clients who are doing well with this buy many decide it isn't worth the potential headaches.
-John
13 Replies
- Real Estate Agent · Minneapolis, MN · Member since 2017 · 138 posts · 87 votes8y
@Andrew Morem Welcome to BP! great questions. I don't have knowledge of the greater MN market. I can tell you there are quite a few properties in MSP that cash flow well, that are on the MLS. Talk to an investor friendly agent and they can help you. A fast way to get started would be to house hack a property in Plymouth or neighboring town or closer to where you and the wife work. That would increase your savings rate!
If you are going to manage it yourself, me personally, I would not want to drive 2 hours to a property. I feel that would get tedious. Say you have a toilet problem or a simple fix. you would have to drive 4 hours total to maybe fix a 15 minute job. Again, personally, if i was self managing I would want it to be local to me, that way I can swing by that day when I run an errand or on the way home from work, or if there's a crisis I'm 30 minutes away and it doesn't ruin a whole Saturday.
- Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes8y
I know many people to invest in outer cities. The main things that come to mind are as follows:
1. Is it worth it? Sure you can purchase properties cheaper but are you getting enough return on your investment to take on the nuances of investing out of your market? If you are looking to build up your BP cred and try to build your "units" go for it. I wouldn't even look at COC return - I have seen several triplexes with 25% returns but they only produce $4k of cash flow... That isn't worth my time or risk.
2. How are you going to handle the small stuff? As mentioned above, how are you going to handle the call on Tuesday night that something isn't working or the drain is backing up? This can be done with locals on the ground but I would work on getting that setup first if it was your plan.
3. Do you know the market? These cities typically have smaller populations. This increases the changes of your property sitting vacant for a while and can make these very hard to sell (hence why they look more appealing). I would develop an escape plan which may involve finding a great deal if you can fire sale if needed.
I am not going to comment on the cities you mentioned but they are very different in size and opportunity. And withing St. Cloud for example, there are areas which are great and others which are horrible... I have clients who are doing well with this buy many decide it isn't worth the potential headaches.
-John
- Plymouth, MN · Member since 2017 · 3 posts · 1 vote8y
@Adam Widder Thank you for the advice. I agree that it could be a lot more of a time commitment to manage more distant properties, definitely something to think about. Any recommendations on investor-friendly agents? I've looked over many of the older posts in the MN forums so I have seen some names thrown around, but just thought I'd see if you had any additional thoughts.
@Dustin S. Good question. A couple of the areas I've mentioned have had some shrinkage of population in the past couple decades but looks like they're leveling out. I'll look into it more.
- Investor · Crystal, MN · Member since 2013 · 486 posts · 277 votes8y
My wife and I own 4 properties in Albert Lea, and they are really profitable. The ones for sale now are not bank owned beauties, but beaten up rentals. Still, there is value there. We also own a 4 plex in the metro.
The key in Albert Lea is to get a good, long term tenant. The contractor contacts are the best. High quality contractors at 1/3 the cost of what you pay in the cities. We have two properties with long term tenants. We pamper them. The one thing to keep in mind is resale. The smaller towns have less buyers, have more investor interest, which means more low price offers when you sell.
Our appreciation on our four plex in Crystal is crazy good.
We get calls that mean we have to go to Albert Lea about once a year. I have a good handyman who is my emergency contact, and the city is a breeze to work with. I also network with other investors, and get great contractor leads from them, and sometimes we get together and just chat. I really like Albert Lea.
We self manage all of them. Showing them for vacancies is the only hard part, but we deal with it.
- 8yRyan TulejaPro MemberRedmond, OR · Member since 2017 · 98 posts · 36 votes
I have a small SFR in St Cloud that I self manage from Oregon. It's an odd situation, so I'll not go into too many details, but I will chime in that you should absolutely understand your options when it comes to getting work/service in small towns. Get your plumbers, electricians and HVAC folks figured out before you need them (probably a good idea no matter where you invest, but super important where those services can be harder to come by) and understand their on-call policies.
- Professional Engineer · Minneapolis, MN · Member since 2017 · 117 posts · 75 votes8y
I have a rental in St Cloud. There are definitely areas you'll want to avoid in that city and areas that are pretty good. Rents can be good in the right areas as well. It all comes down to getting to know the area, getting to know the city development plans, and finding good contractors as others have mentioned. I am getting acquainted with contractors there currently. Ive had a few bad eggs already. I work close enough to st cloud to be worth my time, but if I didn't work nearby, I probably wouldnt invest there. Thats my limited experience. best of luck!
- 8yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
@Andrew Morem I think investing in smaller towns can be great but it's usually best for locals. I personally wouldn't invest in an area like that for several reasons, unless the area was big enough to support a larger property and professional management.
For myself I only look to invest in large metros. They see more appreciation, generally have higher rents and lower vacancy. Vacancy is a killer and can really hurt your cashflow.
The Moorhead Team5140 Reviews - Plymouth, MN · Member since 2017 · 3 posts · 1 vote8y
Thank you all for the responses!
@John Woodrich Good point on the absolute value of cash flow rather than COC. I think I was focusing more on the COC potential before. And I certainly don't know enough about areas within the markets, at least yet. More to look into!
@David Moore Glad to hear a success story! A few people have mentioned potential resale issues which I need to spend more time analyzing. Yeah, real estate in Crystal has gone way up the last few years! We bought our first house in Crystal back in 2012 and just sold it this spring. Considered keeping it as a SFR but we needed the equity to fund a major renovation on the new place in Plymouth.
@Ryan Tuleja Thanks for the comment. Contractors have been mentioned a few times so I can see how important that part of the plan would be.
@Isaac Braun Thanks for the feedback, if we consider St. Cloud more seriously I may have to ping you about areas to avoid if you're open to that.
@Jordan Moorhead Great point. I think maybe I discounted looking around the metro because of the price appreciation over the last few years, but it sounds like the consensus is there's still value to be found around here. Now I just need to get my wife to move from considering investing to actually purchasing a property! :-)
- Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes8y
@Andrew Morem if your wife is on the fence, investing in greater MN is probably a bad idea for your first purchase. She isn't sure about it now but if you pull the trigger and have to spent time out of town working on it I can't see it winning her over for the next one... Will probably think it isn't worth the risk (debt) and hassle. She is more likely to shut the door on purchase number 2.
- Real Estate Agent · Minneapolis, MN · Member since 2017 · 138 posts · 87 votes8y
@Andrew Morem Currently, I do not invest in MSP, we're moving there next summer and we'll begin investing there. That being said, @Jordan Moorhead, above, is a RE Agent who specializes in working with investors, he's set up MLS search for my criteria and has helped me gain knowledge while I'm currently out of state. He's an investor himself.
My 2 cents on convincing your wife or for the women on the site, your husband, or SO... My wife was getting lost in the numbers and didn't care about that and she's an engineer. What she cared about was the other life values and what the 3rd form of income would mean for our family 10 years down the road or early retirement. See what emotionally or intrinsically motivates her and show her how real estate will make that come true. There's many successful women investors on the site and threads on this I'm sure, but that worked for me, now she wants to dig into the numbers with me.
- Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes8y
To qualify my comments - most of my properties are 30-60 minutes from Mpls/STP. I don't currently invest in either Mpls/STP because I know a few areas very well and there are a lot of eyes on the bigger cities. You can do well outside of the cities but you have to know your areas well and make it so it isn't a lifestyle issue. I live north of the metro so it is easy for us to manage our properties out of the cities. We are currently working on a flip in the south metro and the drive is taking it's toll on my wife and our guys. Don't plan any more down there.
- Rental Property Investor · Apple Valley, MN · Member since 2015 · 24 posts · 19 votes8y
Adding to other comments, if self managing and investing beyond a half hour from home, make sure you have tradesmen contacts local to the rental. You might be surprised how quickly a rental can chafe due to a rough patch + distance.
You don’t have to do the work to self manage, just the right, trustworthy people who can.
If looking in the South Metro, look up Steve Collier, with Remax. Specializes in SFR investments and is a former tradesmen. Done a couple deals with him and have been very pleased.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.