Any thought on house hacking in Minneapolis / St.Paul, MN in 2023?

Question

Hey, any thought on investing in Minneapolis / St.Paul, MN area in 2023?

How's the market there? I live in CA so I have no idea at all. Is the state developing?

I just checked on Census Bureau and it says that the population is decreasing. Should I be worry on that?

Can someone help me?

Thanks!

Evan Kraljic · Answer

The Twin Cities market has been steady, it's not likely to boom like some of the sunshine states but it also has a very diverse economy and is pretty affordable relative to other metropolitan areas that size, so it is also going to be more resilient to downturns. Which I think is arguably more important at this moment since we've already seen the boom and some of those cities (Phoenix, Austin, Boise, etc) have had a pretty significant correction, albeit still much higher than the pre-pandemic prices.

Also I wholeheartedly agree with @Bryon Andrews last point. My general theory on real estate investing is that it's good to be aware of the macroeconomics, but ultimately at the small scale it comes down to your ability to find and create value at the property level, independent of those macroeconomic forces. I underwrite my deals for stabilized yield after the remodel and also how much margin am I creating in terms of ARV minus my all in costs - purchase + closing costs, remodel + holding costs - I'm not factoring in any rent growth/appreciation to make the deals work. That all should be considered, ESPECIALLY on commercial assets, but if I have to get down to that level for small multifamily properties it probably means it's not a good enough deal.

With that said, you say you live in CA so I understand why you're asking these questions. I'm going to be inherently biased as someone who's lived here almost all my life and currently invest here. With the US as your oyster, I think the Twin Cities would be an okay choice but probably not my pick of the litter, and that has more to do with the regulations that have been implemented for landlords here, which will continue to get worse especially if Minneapolis elects a more "progressive" mayor and city council. PersonallyI think people over-react to these a bit too much, but it's still a pain in the ass to some degree and if you had any choice I'd pick a more business and landlord friendly area to invest.

I saw you made a post asking about Columbus, Ohio too. Strictly from an investment standpoint I would favor Columbus over the Twin Cities, but that's just my 2 cents.

Bryon Andrews · Answer

@Hansel Gunawan my wife and I have been house hacking just outside of St. Paul and Minneapolis for the past 5 years. It has opened up a ton of opportunities.

As an agent who works with house hackers, I see it still makes sense. Remember, there are 4 core ways to make/save money in real estate. Cashflow, loan paydown, appreciation and taxes. As a house hacker, I don’t put a ton of weight on the census bureau stats. If I were building a large multifamily complex or investing into a syndication, then yes, I may look more into those statistics.

Tim Swierczek · Answer

To answer your question, I think Minneapolis is a great market for House Hacking. It offers a great combination of duplexes compared to many markets. It has a decent rent-to-price ratio. It has a solid appreciation, and Minneapolis has a housing shortage. I would not be worried about a decreasing population. Even though that could be a long-term issue, MSP has a shortage of homes, and if you look at demographics it's not likely to affect B or C rentals for 20 years. We have a diverse industry base and a highly educated workforce. The political environment is a bigger risk to landlords, but Minneapolis has shown restraint, and the demand for rentals in Minneapolis is such that it will take a very long time of declining population before a small landlord who cares would have a problem.

Ryan Thomson · Answer

@Hansel Gunawan I have seen a couple of your posts (4 now) saying you are interested in house hacking in other markets. I think it would be really good for you to take a step back and share your goals and desires with the group. Once we hear those we could probably give you some advice on how to pick and areas or what you should do.

Can you also help us understand why you are looking at lots of different markets? There is a strong chance you will overwhelm yourself looking at 5 different markets. House hacking in any decent growing city will produce tremendous returns compared to renting. So it really comes more down to where do you want to live. and where can you afford to live.

Any thought on house hacking in Minneapolis / St.Paul, MN in 2023?

Any thought on house hacking in Minneapolis / St.Paul, MN in 2023?

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