northeast minneapolis market

25 Replies

Hi guys!

Quick question for you:

I'm currently looking to buy my first property, which I will "house-hack."  I'm currently analyzing a property that is in Northeast Minneapolis, Minnesota, specifically west of 35W.   I'm a little bit surprised with the ratio of housing prices to rent in the area.  Rent doesn't seem to be as high as I was expecting, relative to the prices of the homes in the area.

Specifically, it's a 4/2 SFH that looks like its in pretty good shape. Preliminarily looking at local rents, it seems like I would get around $1,600, which makes it tough to cashflow without buying at a pretty low price-point, considering most non-fixer upper 4/2s in this market are selling at 200k+

Any general thoughts on this rental market?  Do you guys think I could potentially get more/less rent?  If so, based off of what data/website?  I'm currently looking for a better way to get strong rental comps.  

Thanks so much!

Hi Eli,  I own 3 properties in lower NE Minneapolis near 18th & Central and I have determined the same thing.  I currently am pursing other areas of the metro.

Tim 

PS- are you in any MN real estate clubs?  I just started getting into them.

Tim Swierczek, Lender in WI (#103522) and MN (#103522)
(651) 772-9000

I am!  I went to the millenial investors meeting and the bigger pockets meetup last week!  Very informative!

And thanks for the tip, @Tim Swierczek !   In my opinion, if you're willing to put up with rougher neighborhoods, and therefore lower-income tenants, houses are crazy cheap in brooklyn park, and southern minneapolis.  Since I'm currently looking for my own primary residence, I'm going to pass on these locations, but if I was looking strictly for a rental, those could work!

Any areas of the metro you like particularly?

I love NE, but would have to agree with Tim.  

Tim, good to see you on here!

We are the process of refinancing a 12 unit building bought in 2013.   Raised rents 51% and the value of course is up there now because of this.    I don't think NE is at the top of the market, but it is hard to get the gains you could 3 years ago.    

Hi @Michael Tempel !  Thanks for the input!  wow, 51% increase?  Was that immediately after buying it?  Can i ask for numbers on that?  how much is rent for different sizes of apartments like 3/2 or 2/1s?  Also, why do you think you were able to increase rent like that?  did you buy it and rehab it a lot, or was it just rented below market when you bought it?  sorry for throwing all of those questions at you, but that's a huge increase in rent, and i'm curious!

Also, if I can ask one more question; I see you're a property manager in the area. What do you think a nice looking 4/2 SFH with anywhere from 1400-1800 sq ft could rent for in northeast near central ave? I know there a lot more variables that go into that, but I'm just hoping for a decent guesstimate.

Thanks for everything!  

Eli,

Your situation seems to be one many new investors (including myself) are running into in the metro area. As a general rule, higher quality property = less risk = less cash flow. In my opinion this is especially true after a long trend of rising prices in the MSP real estate market.

Good luck on finding and hacking a house!

Dylan

I have a duplex and a mixed-use in NE Mpls.  In the duplex, the remodeled 3/1 unit rents for $1600, and the other 2+/1 unit rents for $1100 but is yet-to-be-renovated.  My daughter's friends tell me they cannot get into a decent NE 3br for less than $1800.   So, yes, it's not free living as you might find in some markets, but especially when house-hacking there are other considerations.  Besides rents are rising.  Buy in the winter when prices are lowest and buy cash from a wholesaler (or be the wholesaler).  You should do very well for yourself that way IF you like the neighborhood as I do!

Heidi Pliam, Attorney
612-888-0998

Hi @Heidi Pliam ,

Interesting!  How many sq feet are those units in the duplex?  

The house I am looking at is north of broadway. If i could get 1800/mo+ for a 4/2 renovated SFH in NE, I think I could cashflow on the house I'm looking at. Do you think there is much of a significant difference in rents between houses located north/south of broadway? It seems possible people would be willing to pay more to be south, closer to the city. And yes, I plan to buy soon, so most likely in the winter.

As for buying from a wholesaler, any tips on that?  Know any good wholesalers in the area?  I don't plan on buying with cash for my first house right now, but when looking for strictly investment, rehab deals down the road, I would love to work with some wholesalers.  

@Eli Sunderland

Hey Eli,  I think there are still plenty of very good opportunities for house hacking.  While it may not pay 100% of your expenses, lots of places are able to come close or at least cover the mortgage.  Once you move on to your second hack, the 1st one is cash flowing income to help you buy that second one.  I've helped 3 couples  in the past 3 months house hack duplexes since they're friends of family and extremely happy with their purchases as their total outlay is between $0-$400/month so when you include principal pay down, they are living for free.  Some of the best advice I can give new investors looking to do this- get in the properties and see if there are additional opportunities to add bedrooms, increase rent, rent garages ect. which changes the formula.  I just bought another duplex today and have pretty tough requirements so there are opportunities.   Good luck

@Eli Sunderland if you are going to house hack, is this your first property? If so, I highly recommend buying a 4 plex on an FHA loan. Full disclosure I'm a loan officer, having said that the numbers on an FHA 4 plex cannot be beat, even if you put 25% down conventional. Seriously,if your interested reach out to me and I will walk you through them. No obligation

Tim Swierczek, Lender in WI (#103522) and MN (#103522)
(651) 772-9000

Looked in NE as well. Couldnt find any deals. South Minneapolis is great as long as you stay south of 39th. Do some drive thru-s in the neighborhoods down there. You wont pass the 2% test, but you should be able to find something around 1.25-1.5%. Feel free to reach out for any help. 

I am house hacking a duplex down here, so far - so good. 

@Eli Sunderland Where did you find the info for that bigger pockets meet up last week? I've been to a few real estate 101 classes run by some Realtors and I've been looking for similar events to meet other real estate people. Also, I just bought my first duplex this last summer so if you're interested in hearing my process just let me know. Thanks

Tom

I have seen success in the lower part of MPLS, right of 62 and cedar area. It's pricer, but people will pay in the high 1k's to low 2k's it looks like due to being close to the airport, Bloomington, downtown, VA area. St. Paul seems to be on the rise for investors. South side of Maplewood, North St. Paul, have a lot of older homes that need a little work but seem to have higher rents when listed.

@Eli Sunderland There are deals to be had especially in the multi famliy space. The catch is these deals do not fit with in FHA guidelines. The numbers work better with each additional unit the building has. The cost per unit goes down with each unit the building has as well. I'm bias on 4plex buildings but for House Hacking with FHA financing, a 4plex will perform better than the other residential options.

@Bruce Runn - I'd love to hear any specifics on the duplexes you've purchased that you are willing to talk about!  I'll shoot you a message on here.  

@Tim Swierczek - This is my first property! I am planning on using either an FHA loan or a different low down loan I found. And ya, I agree, the cashflow on a 4plex seems pretty hard to beat!

@Matthew Lindquist - Can I ask how you find your deals?  Right now, I pretty much just scan zillow and realtor.com every day.  

@Tom Cramblit - go to meetup.com and search for minnesota real estate meet ups.  I believe the 2 i attended last week were titled something like "millenial investors focus group" and "bigger pockets bi-monthly meetup," or something like that.  Anyway, I'd love to hear some specifics on your property!  I'll send you a message.  

@Gregory Brooks  - I'm curious where you find these deals.  My only strategy for this currently is searching typical real estate listing sites such as zillow and realtor.com. Also, you listed those estimated rents, how do you find those?  My current strategy is looking at "for rent" ads on craigslist or using the "rent zestimate" on zillow.  

@Dan Coleman - Hey Dan!  Nice to see you on here!  I totally agree!  I'd love to buy a 4plex, using my low down deal, but I am struggling to find anything relatively affordable that isn't in a rough neighborhood.  Any tips on locations?  

Thanks all of you for your time and advice!  I really appreciate it!  

also, @Dan Coleman , why do you say the properties in the multifamily space do not fit FHA guidelines? They are too run down?

Thanks,

-Eli


@Gregory Brooks - I'm curious where you find these deals.  My only strategy for this currently is searching typical real estate listing sites such as zillow and realtor.com. Also, you listed those estimated rents, how do you find those?  My current strategy is looking at "for rent" ads on craigslist or using the "rent zestimate" on zillow.  

Craigslist as a lot of homes for sale by owner. Edina Reality is pretty good as well. Edina reality has a nice layout to show comps as well. For rent I use zillow and other websites and price out the area. For estimates I use rentometer and ziply.com. 

Originally posted by @Eli Sunderland :

also, @Dan Coleman , why do you say the properties in the multifamily space do not fit FHA guidelines? They are too run down?

Thanks,

-Eli

FHA loans can be used for duplexes. But a lot of the duplexes under 200k have some problems getting approved for FHA. FHA guidelines are very picky. They will fail over paint being old.

Greg you make a good point that FHA can be hard on older properties. I still assert that FHA is the way to go for a 4 plex specifically since conventional will not allow you to buy a 4 plex for less than 25% down even if its owner occupied. It makes sense to search far and wide for the right 4 plex to qualify FHA. They are not easy to find but if you are open on area 3.5% down on a four plex at a 3.5% rate even with the MI is cheaper than any conventional rate you're going to find on a 4 plex.

Also if you are willing you can combine it with an FHA 203K on a 4plex the rate will increase but you open your options.

 https://www.fanniemae.com/content/eligibility_info...

Tim Swierczek, Lender in WI (#103522) and MN (#103522)
(651) 772-9000

@Eli Sunderland

@Gregory Brooks

- By definition multi-family buildings 1-4 units are considred residential real estate. With that it does fit FHA standards. But FHA loans are designed to help the owner occupants own Single Family houses. 3-4 plex building are generally investment vehicles and have more deferred maintenance, these issues frequently get called out during appraisal. Condition is a huge factor with FHA, especially paint. Simply having chipped paint can stop the loan process. And in the language of the loan, FHA loans cannot be used for investment purposes. Underwriters are picky because the loan needs to be able to sell on the secondary loan market.

My point is factoring in, condition, underwriting and the fact that the loan is not to be used for investment purposes. It's not the most ideal loan product because the interpretation of an investment property is very subjective. Most lenders don't want to see multifamily properties financed FHA because there is a grey area. Especially 3-4 units they get more push back.

Underwriters will question why you're moving from one duplex to another but would not blink seeing someone move from a single family house to another single family house. The formal standards of FHA says yes multi-family fits the guidelines. But when you break down the loans small print, the loan is designed to exclude investors/multi-family properties from using the loan product.

I'll mention that I just closed on a duplex yesterday that was off market and complicated but worth the time/effort to get.  It wouldn't be for a new investor as I do renovations on properties I buy and specifically look for under valued duplexes that have upside in equity when work is done, but it shows there are properties out there to pursue.  It is in Uptown just off Lyndale so prime location.


- Can I ask how you find your deals?  Right now, I pretty much just scan zillow and realtor.com every day.  

This is not a good way to find deals.  You need to get MLS access to learn the market, then you need to be communicating with motivated sellers to find off market deals. You should also find a good investment agent to help you find a deal.  The stuff on zillow and realtor.com is garbage. You'll be looking for years for an actual "deal."  

Account Closed - How do you normally go about finding motivated sellers?  Do you use the methods I see a lot online, such as direct mail?  Or is your agent usually able to find these off market deals for you? 

Thanks!

@Eli Sunderland  

Direct mail, online lead targeting, agents, lenders, other investors, neighbors, family, friends, random people in line at the grocery store, etc etc etc.

95% of this game is finding good deals.  And 95% of the way to do that is people.

Talk to everyone you can and always let people know you are looking to buy real estate.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.