Minneapolis, MN · Member since 2008 · 50 posts · 12 votes
We are in the market to buy and hold and plan to put down 25%.We have a seasonal real estate agent working with us, who is also a friend. Rent in the areas we are interested in is about $1300 – $1550 for a 2 bds/1 ba.
We were thinking of a duplex priced at $440k, built in the early 1900s and has funny, damp smell in the basement. We asked for info on the property: details, incomes, expenses and have not received it yet. One unit is currently vacant. Now within one week, they received two offers!I was thinking that even at $390k, it still would not be a good buy, so why are these properties moving so fast? Are these buyers relying on future appreciation? Or am I off base in thinking that the price is too high?
Real Estate Agent · Saint Paul, MN · Member since 2014 · 95 posts · 82 votes
10y
Congratulations @Jackie Sladky, I also just had an offer accepted on a 4-Plex in Saint Paul. This will be my first proprty.
I was having the same issues as you, high prices that are not justified by the rents. I started networking like mad, going to REIA groups and telling everyone what I was looking for. I got some good leads on off-market deals but the one I am pursuing right now I found on Craigslist. If your current deal falls through I recommend forgetting about finding a deal on the MLS. Comb Craigslist FSBOs, go to REIAs, call property managers and ask if any of their clients' buildings are for sale, send mail to properties you like, call "for rent" posts on craigslist. You will probably get the best deals from the worst landlords (because they are bleeding money and are sick of the hassle) so call the ones with no pictures, or bad pictures, the ones that don't list the rent, have misspellings etc. If they have nice pictures and clear information about the property they probably have a good head on their shoulders, and they will probably not want to sell or want to sell for more money because the property makes money.
The areas where I see potential deals are Powderhorn/Phillips in South and some neighborhoods in North in MPLS, and Midway/Frogtown, W 7th, and the E and W side of Saint Paul. The housing stock tends to be older in these neighborhoods but there are always some newer builds. Personally, I think there is a significant drop in value when you get older than 1920. Some of these neighborhoods I listed can be a little rough, so I look for an independent coffee shop/cafe, coop grocery stores, and trendy bars moving in. If you see some of that activity there is a good chance the tenant pool will improve over time.
Its really competitive right now, so the good deals go to investors who dig deeper.
@Jackie Sladky, I emailed you a spreadsheet I use for analysis of rental properties. It factors in cash flow, loan reduction, tax impact and appreciation to help you decide short and long-term ROI. Good luck with the property!
Real Estate Agent · Saint Louis Park, MN · Member since 2015 · 213 posts · 82 votes
10y
@David K.that would be excellent if you are willing to share your spreadsheet. I have been following and reading this thread - great stuff from many folks.
Investor · Crystal, MN · Member since 2013 · 486 posts · 277 votes
10y
@Jake Hartnett I agree with your take on Powderhorn/Phillips. There is a large working class population there, and the rents are good. On networking, I gave up on MLS after seeing so many four plexes listed at high prices with high capex. I got our four plex by sending letters. Two contacted me, and we now own the 4 plex, and I have a lead on two 7 unit buildings this summer. All by just sending letters.
Investor · Crystal, MN · Member since 2013 · 486 posts · 277 votes
10y
@Tim Campbell - Sure. I've lived in Crystal for 25 plus years, so I really think I know this area well. I got my 14 year old son in on the game, and told him to start sending letters to multi-fam owners in a two mile radius of our house. i showed him how to ID them on the county property ID website. I also gave him specific zones I knew had multi's in great shape. We sent just 25 letters, and I got two contacts on the same day. We stopped sending them. The letters were basically boiler plate that said, "I'm an investor in the area looking to buy a multi family property, and are you interested in selling, or do you know someone who is in the Crystal, New Hope, Robbinsdale area."
Real Estate Agent · Minneapolis, MN · Member since 2015 · 112 posts · 40 votes
10y
@David Moore Thanks for sharing your letter strategy. 2 out of 25 is a great ratio. I'm used to getting 1 response out of 100 letters sent and looking to tweek my strategy. I also love that you have your son involved. My son is 18 and currently getting his RE license. I think letting him take over the letters is a great idea.
Minneapolis, MN · Member since 2008 · 50 posts · 12 votes
10y
Sorry for not respond sooner, and we were so busy with work and the purchasing process. The answer to why we didn’t like the Hopkins duplex is simple. We are new and still inexperienced. We were thinking of looking only at areas that close to our current house, not areas that investors can make money. Now my sister wants to jump in with us, so we will look at the suburb next, but that has to wait.
Here is description of what we are getting into: The property we are closing is in uptown (according to us) or borderline powerhorn (reality). Its structure, plumbing, electric systems are sound. Roof and garage need work - $15k. It’s the worse looking building on the block. It’s ugly (it can be painted) trash and dog poops everywhere, and there is a mattress laying in the backyard. We have estimate for the trash out already.
It has 4 units, all have rents about $200/month lower than the market. We saw tenants in three units when we inspected the property. All seem reasonable and live there for at least 3-4 yrs without any rent increased. Three leases already expired and one will expire on the day after we close. All units need some improvements: flooring (very dirty carpets), kitchen (ancient cabinets, ugly and cheap countertop),… We plan to have people in two units move out and then renovate. The other twos we’ll propose rent increase.
Current management company: owner is own of town but management company is local. This company just collects rents and does nothing. Tenants told me of the poor service and by just looking around in and out of the building, it’s obvious. If you are an out of town investor, you should make the management company take pictures and send them to you monthly. This building looks really sad but then, the owner may not care, more about him later.
Now about the tenants: three of them try their best to make the place feel like home, since the rent is low and the location is ideal. One family (with two kids) has a dog and is borderline hoarder. The dog is friendly and well taken care of (I judge people by how they treat their animals). These people have to go. Their place is full of stuff with little place left to walk around and smells bad. The toilet is leaking for six months (not major work), but they did not report (maybe didn’t want visitors). They looked nervous when we inspected the place, and when we came back a few days later with the roofer, the yard was cleared of dog poops.
Here’s our plan: with current owner’s agreement, send letter letting tenants know that we are buying the building and that we will reach out to them. On the closing day, deliver instruction to two units that we want to keep and serve the notice to the other two tenants. One or both will leave. The one with the dog may not. In this case, we’ll promise to give them a brand new TV or cash if they leave.
Now we need to build connection with professional people! So far, we already have one handyman referred to us and know of one small, honest general contractor.
About the current owner: my agent found out that he is an old doctor living in Florida and just want to get rid of the property. What makes my offer more solid: The other two higher offers were not accepted because they involved FHA loans with little over 3% down and would take months to close, if it closes.
Investors take note: 1) landlords using the worse property management company may want to sell, and 2) the home we bought 5 yrs ago was also from people moved to Florida.
Minneapolis, MN · Member since 2016 · 62 posts · 29 votes
10y
I've read so many articles promoting the benefits of FHA and 203(k) loans, but based on @Jackie Sladky 's comments above, this is a less attractive option for sellers. As a first time buyer I'm worried that by going this route I'll be at an even greater disadvantage to investors with cash in a very competitive market. I just looked at a place in Powderhorn yesterday and there were 4 other groups on the property at the same time.
I really hope your investment does well. Having purchased a four plex myself recently, I will say there are some challenges. If you closed, I'd love to hear more details about how you turned the tenants. I do find investors are a little too quick to offer cash or other stuff to get a tenant out. If they are month to month, the AG site in Minnesota essentially says you need to give them a 30 day notice to vacate. You can tell them you are updating the unit, and they can apply again after the update. Most won't, but if you give them a reasonable explanation, they may go along, and you don't have to offer then incentives.
Minneapolis, MN · Member since 2015 · 6 posts · 0 votes
10y
This has been a very helpful discussion. My wife and I are searching for a duplex to start our journey into real estate and it is tough to find a place that fits the numbers.
David K. Could you please send me the spreadsheet you shared. Thanks for your willingness to share. This is what makes bigger pockets so helpful.
Wholesaler · Thief River Falls, MN · Member since 2013 · 40 posts · 3 votes
10y
@David K. Would you be willing to share your spreadsheet with one more investor?
I'm currently looking at properties in the Twin Cities, but I live in Thief River Falls, MN - next to Canada. :-)
I own an eye clinic with my daughter in St. Paul, MN so I figured I am there much of the time so it would be nice to look at investments and snag a good deal.
Rental Property Investor · MN · Member since 2015 · 186 posts · 149 votes
10y
It's getting tougher and tougher to find good deals, have to be quick - the moment it shows up on MLS, call your agent and go see it asap, same day, within hours, and make an offer "on the spot" - if numbers make sense that is. If you wait 1-2 days, you're too late, someone else will take it ;)
I just closed on a duplex few weeks ago, and my offer was accepted on 2 more, pending inspection.
Rental Property Investor · Waukesha, WI · Member since 2016 · 43 posts · 13 votes
10y
@Account Closed That's amazing! Were all of them found through the MLS? Most of the numbers I've been crunching aren't as favorable as I'd like, but I'm still learning the ropes of analyzing properties, especially house-hack MFR.
@Account Closed That's amazing! Were all of them found through the MLS? Most of the numbers I've been crunching aren't as favorable as I'd like, but I'm still learning the ropes of analyzing properties, especially house-hack MFR.
Yup, I'm MLS only, and always been :) The 2 that are pending inspection are both 'commercial', well, 1 commercial, 1 mixed-use (commercial main level, 2 bedroom apartment second level). Good areas only... I only buy in South Minneapolis.
Rental Property Investor · MN · Member since 2015 · 186 posts · 149 votes
10y
@Eric Bate to help with number crunching, download these apps for your phone: Redfin, HotPads, Nextdoor, Trulia Mortgage.
In Redfin you can see what's available on MLS. Can setup "alerts" based on your specific criteria/searches and it'll alert you the moment a match is found.
HotPads so you can see what people are asking for rent in a particular area. Rent-o-Meter etc are all crap.
Nexdoor is so you can see what neighborhoods are posting, you'll be surprised what people are willing to pay for rent in some neighborhoods ;)
Trulia Mortgage so you can quickly see what your payments will be like.
By the way MLS 4699073 just dropped $10k, GREAT location, but I haven't seen downstairs yet... just upstairs unit. Not real duplex, but good 'starter' one.
Rental Property Investor · Waukesha, WI · Member since 2016 · 43 posts · 13 votes
10y
@Account Closed Thanks for the tips! It looks nice, but it's unfortunately a little above my price range. Still working with the mortgage lender to figure out what I can afford, but it'll probably be closer to the $150k range.
Minneapolis, MN · Member since 2016 · 3 posts · 0 votes
10y
Hello fellow Minneapolis investors! It's really exciting to be a part of this collaborative community. I just want to say that I appreciate everyone's contributions. I hope to be of help some time soon as well. I'm currently looking at purchasing my first duplex and I've got to say, man it is tough! I'm finding that the market is really hot and the numbers just don't seem to work out very well :-/. I recently had my purchase agreement excepted on a duplex in the Seward neighborhood, but the appraisal came back $35k lower. Perhaps my analysis was off. Anyone else have trouble with appraisals?