All Forum Posts by: Joseph Lee

@Rich Leone- when I said ADU, I was actually referring to an internal ADU. In Minneapolis, your proposed third unit in the attic could be considered an ADU. Up until recently, that could only work on an owner-occupied property, but the city council voted to change it so they're allowed on homestead or non-homestead properties. Here is a city of Mpls page showing the different kinds of ADUs, including internal.

http://www2.minneapolismn.gov/www/groups/public/@cped/documents/webcontent/wcms1p-136454.pdf

Again, I really only have knowledge on Minneapolis rules, but hopefully this can help you ask the right questions about St. Paul rules.

@Michael Schraepfer- do you think the $300k build price is realistic? I have no idea on your background, so that's not meant to be offensive. I realize that'd be $200/sq ft, which seems like a fair number, but shoot...if you're able to make that work for $300k, I think you'd be able to make yourself plenty of money building and holding or building and selling to others.

I'd love to hear your updates if you proceed with this. Sounds like a super interesting proposition if you can make the construction costs work.

Hey @Rich Leone, one thing to look into (beyond zoning) is if you can have a non-owner-occupied ADU. This may allow you to add that additional until without upgrading the entire building to IBC code (commercial code) instead of IRC (residential). Otherwise there are going to need to be changes to more than just that new unit. 

We ran into this when looking at converting a SxS duplex with walkout basements into a tri or quad. We ended up deciding to add bedrooms and a bath instead. Much lower cost and much less of a headache. I'd advise looking into this bedroom/bath add as an alternative.

Hopefully someone with more knowledge of St. Paul specifics can chime in on the zoning and ADU topics.

I’d echo what Evan said- it doesn’t really matter if there is a flat tax rate for the county or what it is. I mean, it matters, but it doesn’t tell the entire story. You’re also taxed by the city, by the school district, and any other special taxing districts, which are likely in the metro. The tax rate also depend on the type of building and its use (commercial, homestead 1 unit, non-homestead 1-unit, homestead 2-4 unit, etc.). 

The easy way is using past tax amounts and proposed amount for the next year.

Good ole Fertile...I grew up in a similarly small town about 25 miles away and am very familiar with the area.

High level- there’s nothing special about Fertile. It’s just like every other small town in the area that has a high school in town (at least it has a school going for it).  

Some of the small towns in the area do have a shortage of housing, so you may have an easy time renting it (Digikey keeps growing, commuting to GF continues to be cheap), but this seems like a less-than ideal situation if you were to purchase it. It’s quite unlikely you’re going to find other good deals in Fertile, so you’re only going to have one property there. You’re either going to have to drive to Fertile to do anything for that ONE property or find a completely different team than you’d have in GF (but maybe I’m wrong...maybe service areas would be that large). If it were a 6-8+ unit multi, maybe it makes sense, but the juice doesn’t seem worth the squeeze on this one. If you really want to do your due diligence, call up a local realtor and ask them some questions about property value, how long stuff sits on the market, rental demand, etc. Facebook for-rent groups, city website postings, and newspaper classifieds are probably how you’ll find other units for rent in the area. Either way, good luck!

Hey Alexander,

I’ve had Jeff Lee at Skyline Electric do two fuse box replacements as well as some other work. Was very reasonable on price (lowest quote I received) and his team does great work. I’d recommend giving him a call. 

I’ve had good results with Metro, good  pricing (but did not hire them) from MSP, and good pricing but not great work from Golden Valley Heating and Cooling. Note that this was on all natural gas forced-air systems. 

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.

@Nate Uzlik- ended up going with quartz from Ikea. Can't beat their pricing if you get it during their kitchen sale. They actually contract the install through Princess Granite, which @Glen Dall recommended, so you're essentially buying it from them, but saving quite a bit of money since you're actually buying through Ikea.

Here's a newby question for you guys- is taxable value directly related to purchase price, i.e. are you basing your assessed value challenges on a 1-to-1 comparison to comp sales? Am I right to say that a person won't win a challegne of an assessment if the assessed value is less than the purchase value? 

The area where our duplexes are located in SE Mpls has had assessed values far below purchase values, but they seem to finally be catching up (and eclipsing), so I haven't considered any of this until now.