My name is Kevin Laurion and I want to introduce myself to the Minnesota forum group. You can take a look at my profile for a quick background on my family and I as I don’t want to bore you with that. Haha.
My wife and I are new to the real estate investment game and we're looking for advice/help/pointers for people that have been there, done that. We are looking for a property at this point to purchase and hold. We want to go SFH or Multi family, but we'd be open to either if the property/location/numbers are right. We live in the northern metro suburbs so we would want to keep the property semi close (within an hour) to us as I'd like to manage it ourselves, to start at least.
I have been watching the public markets for some time now to get a gauge on what type of properties are listing for and also selling for. We are very fortunate in that we can save ~$4k a month and have saved ~$80K, thus far in which we are comfortable spending ~$65K of that for the initial purchase/reno upfront costs. We would then look to do traditional financing for the remainder with a purchase timeframe being this late fall/early winter as this is a little bit “better” time for buyers.
Questions I have for current investors/rental owners:
- -Will the amount of money listed above be able to get use a decent semi-fixer upper property that will have some cash flow after a few years? Not looking to get rich over night, but don’t want to be losing money long term.
- -A number of the listed duplexes in the MPLS/STP area are mostly pre-1930 era. What are the major pitfalls with these properties? I am comfortable doing general reno and maintenance, but not full renos with the electrical/plumbing/etc.
- -I want to learn as much as possible before my purchase, so doesn’t anyone recommend a podcast/book that will help me as a first-time buyer?
I’d love to and will attend some of the MN Meetup get togethers to shake some hands and meet others in the industry. Please message me or comment if you have any insight or 2 cents on the aforementioned questions. Your time and knowledge are greatly appreciated!
1. Yes you should be able to use that for a down payment + rehab and make some decent cashflow.
2. Biggerpockets has a library of good books for first time investors. I also recommend the Millionaire Real Estate Investor.
I'm always open to network if you'd like!
Welcome @Kevin Laurion ! You've come to the right place and yes definitely try to attend as many local networking groups as possible. You definitely have enough cash saved so kudos on that. If you are looking for a single-family BRRRR I'd join a few wholesaler lists to see what's going on outside of the MLS. Many of those properties are overpriced with a generous ARV but you'll be able to run the numbers, review comps and act quickly when you find the right deal on or off the market.
From a rental perspective, more doors are better to account for any vacancies. That being said, many of the small multi-family properties are in Minneapolis and Saint Paul and tend to be older. Each property has its quirks and in general older properties tend to come with more of them. The age of the property shouldn't make or break a deal but definitely something to consider when deciding what type of rental portfolio you'd like to build. You can always back out after inspection if there are major red flags due to age.
The BP podcast is probably the best one for beginners. Since there is endless information out there pick a few areas you want to learn more about and focus there. (i.e. screening tenants, finding off-market properties, rehabbing, etc.)
@Kevin Laurion It's certainly enough to do what you want to do. PM me if you'd like to meet up and talk strategy.
Hi @Kevin Laurion , welcome to BP!
@Alyssa Strom answered all of your questions really well! Since your looking to self-manage, I'd recommend that you stay closer than an hour away. You're going to start hating your property that first week you have to go out there two days in a row and drive more than 30mins each way.
I manage a few properties in Otsego and would be happy to meet up and share a little bit about the market.
Great answers and cosign on all of the above. Welcome to the forums! PM me if you ever want to grab a coffee and talk shop
Welcome Kevin! You're on the right track and everyone has given great information above. The BP podcast and books are enough to get very knowledgeable on investing. Just pick the podcasts you like and enjoy. The first book I read was "The Book on Rental Property Investing" and it was great! Good luck!
@Kevin Laurion - Welcome to BP and congrats on the decision to invest! As many have said on here meetup with as many investors as possible and network. There are plenty around the cities and each have their own types of people at them. Find someone you jive with and start asking questions. There are many ways to invest in RE and tons of opinions of how to do it. Feel free to DM me if you're interested in meeting up.
@Kevin Laurion I am newer to REI. I own two properties right now - one in Burnsville (a duplex built in 1976 and a town home in Shakopee built in 2005). I am currently looking for my third property. The two I currently own are just OK. Meaning, I didn't really hunt for the best deals. But, like Brandon says - just get in. Most of the properties advertised on MLS are retail and will post a challenge to get a good cash on cash ROI. It also seems that the multi-family properties advertised are old and expensive. The issues with older properties is the deferred maintenance and CapEx that might be on the horizon. I am dealing with that a bit on the duplex I own, and it is new compared to the ones you are talking about. But, congratulations on making the choice...and I can't wait to hear about your successes!
I have several rental properties in the East metro - both multis and SFH. The things to look for when you purchase are the roof, age of furnace & water heater, a clear sewer line, strong water flow (I've had 2 properties that needed the water line from the city replaced), and fully operable windows. These are the bigger CapX items that I like to take care of on acquisition so managing is smoother. Along with some cosmetic upgrades, they should also help to rent the place out quickly. I own 2 townhomes and suggest you may want to dip your toe with one. Most exterior work is provided by HOA - lawncare, snow removal, maintenance, etc.. this makes management a bit easier. Make sure you account for the HOA fee in your numbers, though. Also, I use Buildium.com for management and find it indispensable.
Feel free to connect and ask more questions. You’re in a good position money-wise but spend it wisely. Add 20% to your rehab budget for safety. Good luck!
Thank you both for the insight on your personal experiences in the RE world thus far. I appreciate it!
Jay, I did know about the meetup last night but unfortunately my wife had to work at the hospital so I was on daddy daycare duty. But I absolutely plan to attend many of these soon so I hope to shake your hand at some point and introduce myself.
Joe, my wife and I purchased our first home last year and had the unfortunate scenario in that the air of our furnace and AC were both overlooked by us (first time buyers) but I was more disappointed that our inspector didn’t mention that they were both 20 years old. But ya live and learn so I wont be making that mistake again. And that is one thing I really want to learn about and get more information from local RE investors is how they run the numbers and how they assume expenses in the area. I’ve never done a reno or much house repair so I don’t have a great idea of how to run those types of numbers.
Again, I appreciate it guys and will reach out if I have any additional questions.
Can i get your thoughts on how Im running the numbers for this SFH property that was just listed? the address is:
1106 Wakefield Ave, Saint Paul, MN 55106
I have the estimated numbers that i enter into my calculator and then the final numbers I get as well. I put in the CapEx,utility estimates , and snow/lawn in the "other" section. I put the rent price at 1650, but most newer comps are 1800-2000. Any insight on if Im computing the number right or accurately would be GREATLY appreciated!
@Kevin Laurion the biggest advice I would give you is to get more precise with your rental income number. You say the rental market is 1800-2000, yet you use 1650? Why is that? Do you not want to buy properties? If you underestimate the low end of rent by 10% then you will likely never buy an investment property and you will constantly be in conversations with people about how the numbers never work. If the area rents are 1800 figure out what finishes those homes have and what makes a home a 2000/month home, then figure out if those rehab costs offer a good ROI. You don't have to assume 2000, but be realistic with your numbers. People are making money in this market but you can't do it if you "conservative" your way out of deals.
Thanks for the reply Tim. I put 1650, because most the comps are newer as I started. Newer as in the age of the property is like 10-20 years old where this one is 80+ years old. So I’m assuming that a 1920’s house that is updated won’t fetch the same rent as a 2005 house that is updated. If that makes sense. Should I not be doing that?
And if I’m seeing rental listing for 1800-2000, then I would want to be at the lower end of that spectrum to keep the vacancy periods shorter. And maybe even have a “buffer” in the market turns and higher rent properties aren’t renting for as much. But again, I’m new so maybe I’m being to cautious.
@Kevin Laurion Your thought process that newer updated properties could rent for more is on the right path, but here is where the money is made. You defined a potential pitfall but also a potential glitch in the matrix. You now need to dig deep on research to see if this place will rent for at least 1800 or if 1650 is its more likely number. The answer to that question will tell you if you found a winner. Its time to do more online rental searches and even call the listings. Remember those people are investors so I recommend telling them the truth, your a new investor and your looking to buy and would like to ask them some questions about the rental market in the area. I think most investors would be happy to answer you. Just keep to the important questions and respect their time. You may find there is not much to rent in the area and that tenants don't care about the age of the house provided it's been updated. I don't know in this case but you need to know this answer.
@Kevin Laurion the rents you’re assuming sound a little low if the comps are $100-300. Vacancy in the twin cities is around 3% so people don’t have troubles renting their property.
The sale and appreciation costs are skewed too. Historical appreciation is 3% and realtor fees are 6%.
@Kevin Laurion you can also put snow and lawn on the tenants for SFH.
@Jordan Moorhead thank you for the reply and your insight. I would put the snow/lawn on the tenants to keep monthly expenses down. I am in an industry where we work of "worst case scenarios all the time" so my mindset is always to think that way. So I will have to make sure i dont always use that mindset when running numbers. Thanks again for the reply.
I've also heard a lot of positive things about the realty services you provide so i will be reaching out soon to maybe sit down with you and my wife to discuss next steps in the process.
@Kevin Laurion just try to be as accurate as possible and talk to active investors. Look forward to it!
@Kevin Laurion welcome to BP. I also live and invest in the northern suburbs. As a newer investor I would recommend attending a couple meetups if you can and getting connected with other local investors and real estate agents who know investing. They will help you find a good investment and know from personal experience what to watch out for. Lot of good advice above.
@Kevin Laurion I think your numbers are reasonable. But, being too conservative is an issue too. Prevented me from buying my first property for a long time (almost 20 years, don't be me!). Only thing that got me off my a** is a divorce where my X took half my assets. So, I needed to get more aggressive to replace that...and I finally bought my first, then the second. And, like Brandon and the other 'experts' will tell you - just jump in. Start the journey. But learn. Education costs money. Some more than others. Don't be stupid...and it looks like you are NOT being stupid at all. But a % here or % there, or $100 there or somewhere else doesn't really matter if you are in it for the long haul. But, make sure you have the $ to support the varying expenses while learning. #education. I only own two properties now (3 doors) and I'd say almost all that could have gone wrong has (including eviction, writ, sherif, massive Capex, etc.). But, big picture, I am still black...especially if I budget for education.
Other than whats already been said, I don't think you're real far off. A few things I've been doing different (right or wrong, I'm also new) I get rents from my agent who is also a PM which I feel are better than my guess. I also factor in increases in maintenance and rent for sure. Raising rent over time will help your long term numbers. Looks like you're planning to play the long game so annual increases will be important (if the market allows). I've been focused on the cash flow now with the intent to 1031 3-5 years down the road into something bigger. Setting the vacancy to 3% will help and seems to be accurate. Closing costs look a bit low but that depends on lender and deal I suppose. My lender caps the sellers contribution at 2% so I'll always be paying at least 1% is my understanding. Value after repairs is something I think I need a lot of work on so no clue if that number is accurate or not. Comparing to like properties is probably a good start. 1% appreciation also feels low. Not sure how you got to $2500 for other expenses but I've been breaking down every expense (water/sewer, trash, etc.). I'm also looking at multi-family so I expect I could be paying those. Be sure to check the county website for taxes. Just looked at a four-plex that the listing showed a number for taxes but there was a $1400 increase coming in 2019 for some reason or another not shown in the listing. I assume the number will also change if the purchase price is much higher than the assess value from the county.
@Kevin Laurion , If your numbers look good to you with the more conservative rents, that’s great! I always lean a bit more conservatively when running my numbers as well. It looks like you have everything figured in except any management fee. I assume you’ll self manage - even more reason to keep it near you. I ask my tenants to do the snow removal but I take car of the lawn because it avoids the hassle of babysitting them. Well worth it to avoid the constant notices from the city and it keeps the perceived value of the property/rents up.