Single-Family Kingfield Re-Development

2 Replies

Investment Info:

Single-family residence other investment in Minneapolis.

Purchase price: $217,000
Cash invested: $45,000

Purchased this single-family home with prime location in the Kingfield neighborhood of SW Minneapolis. This is the only single-family on the block- most others are 2-story quads, with a 3-story new-build quad right next door. Currently zoned R5 and will see similar zoning after 2040 plan implementation. Currently renting out property while nvestigating re-development into a small multi-family (4-8 units).

What made you interested in investing in this type of deal?

This is a great example of a property not being used to it's "highest & best use." The city of Minneapolis is very pro-density and there continues to be an appetite for new-build apartments in this area of town. The same factors that made this very unattractive to a single-family residential buyer (only SFH on the block, next door to a 3-story building, 4-5 doors down from a main transit way, house with a horrible layout) made it extremely attractive for a re-development.

How did you find this deal and how did you negotiate it?

Found property on the MLS. Was being sold by an estate and had already been on the market for 2 weeks with one price reduction. Came in below asking ($210k vs. $240k) and settled on $217.5k, with some further reductions after inspection.

How did you finance this deal?

Conventional 30-year fixed rate mortgage with 20% down.

How did you add value to the deal?

TBD.

What was the outcome?

TBD.

Lessons learned? Challenges?

Ensure you have multiple exit strategies when buying a property. While the numbers for a small new-build multi-family looked promising, the inputs were almost all estimates, so we didn't feel comfortable as having that as our only exit strategy. We're confident that, as a worst case, we can come out this deal with a small gain as a fix-and-flip, or short-term rental, along with much more knowledge about small development.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

AJ Petterson of the Advisory Realty Group, Gus Kellom of Envision Capital, Dave Klutch of Harmony Homes Inspections, & Edgewater Title Group all did a bang-up job.

Whats the lot size?  I'm curious what design you come up with, I'm working on 2 similar projects in S mpls.  One triplex that will start this fall and another little house that's zoned R5 i'm looking into how many units will fit. 

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