Anyone knowledgeable about Minneapolis/St Paul market?

Question

Hello, I'm 30, married, and my partner and I relocating to Minneapolis/St Paul area in a few months. I was wanting to buy a duplex or triplex and live in one unit while renting out the other(s). I was wondering if anyone here was acquainted with the market in this area? I've done some google research, but nothing beats some real world experience. Is this a strong market for rental investments? What areas of the twin cities would you suggest I look into specifically?

Thank you,

~M

Marc Jolicoeur · Answer

@Maegen I. I find there are duplexes that work well if you put down 20%. The 1% rule is possible but getting hard to find. I jut got a duplex in a good Minneapolis city location for $308K that should rent 1600 on each side. This is roughly an 8% cap rate if you ignore the type of financing.If you are trying to do FHA 3.5% down the mortgage numbers are different and it may not cash flow as much. Also note that as an FHA buyer you will be in the bottom of the pile when there are multiple offers and I think everything around here is going into multiples if its priced lower, or if its in good shape. Inventory is very low. To make your offer stand out its best if you are able to bring more money in DP in case the FHA appraisal comes in too low. Also you need to be ready to make offers quickly and to do many offers before you will get one. (I spent one year making 50+ offers before I got the duplex I mentioned) The fundamentals for buying rentals is strong. You will find lots of good tenants. Prices for property and for rent are appreciating. Of course it really depends on the specific location.

Bruce Runn · Answer

Account ClosedI'm finding as an investor, I get very good cash flows on duplexes in Minneapolis (all over the 1% rule) I just find that single family homes can't cash flow at all. They are almost always a similar price as a similar duplex in the same neighborhoods but get much less rent than the 2 units in a duplex. I only look for properties that are very close by where I know the market extremely well so when a property is available, I know the comps, rents, neighborhood ect. I'd find investing out of state too far out of my comfort zone.

Account Closed · Answer

Hi Maegen,I live in Minneapolis. IMO, this is NOT a strong market for cash-flow. At the beginning of 2016 we looked into buying a duplex and living in one half thinking that the rent from the other side would cover the mortgage. We quickly realized that plan would not work in this market. The 1% rule currently does not apply in Minneapolis/St. Paul. For example, our very small home (less than 1000 sq ft) appraises for around $250K and we could only get $1500-$1600 if we rented it out. At $250K, we would need to get $2500 in gross rent to cash flow. SO we decided to stay in our current home and we now invest in buy-and-hold SFHs out of state in markets with strong cash flow...oh! Haha, one of those markets we purchased investment property in is Indianapolis, where I now see you are from! We have two rental properties in Indy--both of those properties are MUCH newer and MUCH bigger than our home and we paid less than HALF of what our current home in Minneapolis would sell for. :-/I am so sorry to be the bearer of bad news. It's POSSIBLE if you went 45-60+ minutes out of the metro area, you might be able to find something that would cash flow, but I don't know how strong those rental markets are. If you message me, I can give you the name of a real estate agent who does a little investing himself who MIGHT be able to give you some direction. When we changed tack we ended up not using him, but he was very nice and had excellent follow-up, so it might be worth shooting him an email... I'd be happy to answer any other questions that you have. We LOVE it here in Minneapolis, we just can't figure out how to make it work to invest for cash flow here right now...Erica

Pavel U. · Answer

There are definitely great deals you can find, just need to be quick and ready. I just picked up a duplex in A/B neighborhood (1 mile to Uptown, 1 mile to Lake Calhoun, 1 block to Kingfield) for 350k. One unit will cash flow 1700-1800, another for 2000-2400. My buddy just closed on a duplex 1 block from Lake Nokomis for 233k. Once remodeled (give or take 50k total) will cash flow 1800 one, 2000 or so other.

Tim Swierczek · Answer

All great comments. The answer will depend on what type of area you are willing to live in. A, B, & most C neighborhoods in Minneapolis or St Paul will be hard to cash flow. You might have the best luck in a some C, but mostly D neighborhoods in the two cities and the B/C in first ring suburbs.

Peter Owens · Answer

Welcome to Minnesota . . . Positive contributions from everyone - hope you find what you looking for . I would recommend the services of http://cobbrealestatedeals.com their services have truly been helpful.

Maegen I. · Answer

oh wow, I just got to work and logged in. Thank you everyone for your replies! And yes, we are from Indy and have heard it's a good place for rental investment. The problem is we won't have the full 20% for a down payment and we're thinking an fha loan would work for a multi family if we lived in part of it. We are having to go to Mn for work/school. Anyway, we will keep thinking on this and share our decision/progress!

Amber Gonion · Answer

I agree about the things going quickly, have an agent that is checking twice a day for new listings, have your pre-qualification letter ready, and make sure both you and your agent have a flexible schedule to see units the same day. We have had tons of properties with agents calling for highest and best 24 hours after being listed. The prices are not ending over list, but they are getting a couple of low ball offers with 24 hour expirations and they feel they need to rush to get a deal. The deals are those with a empty unit, which sound perfect for what your looking for. A little patience and a little flexibility with the 1% rule and you will find something.

Franchesca Ramaker · Answer

Welcome to Minnesota! We are looking to do the same in the Twin Cities area and are finding it hard, but not impossible to find properties that cash flow. I would suggest northeast Minneapolis or St. Paul for cheaper properties and maybe a fixer-upper. Everything is going pretty fast, however, so be ready to jump on any good opportunity. I'm finding that duplexes are just too pricey for cash flow so we are now looking at SF homes to fix up and rent. Good luck!

Amber Gonion · Answer

The rental market is strong. We deal with duplexes and up for our clients. We are finding there are many duplex opportunities at decent prices. 4-plex are going quickly, and at premium rates. There are many areas in first ring suburbs where deals can had, it really depends on where you will be working and your budget.