Property investment in Minneapolis right now. Wait or jump?

Question

Hi all, I am just starting out on BP and would like get a second rental property. I have 1 rental condo in downtown Minneapolis and am ready to get my second one.

Which kind of property has the most work involved? Sfh vs condo vs town home vs duplex?

What type of property yields the most income?

Are there Fav agents in Minneapolis that specialize in rental properties?where can I find existing rentals on sale so I know exactly how much I will be putting in and what I will get out of it?

What criteria is everyone else looking at in rentals? School district? College area? Low property tax? Etc

Adam Tafel · Answer

@Puja Shah - welcome to BP!

1. The goal is to achieve the maximum return with the least amount of work, and some property types tend to cashflow better than others. For example, a newer condo or town home in Minneapolis might not need many repairs or be difficult to manage, but these properties also aren't going to perform like a 4plex. I stay away from any property type with an HOA, although there are certainly investors who have made a killing in the condo market.

2.   Generally speaking you'll see your returns increase when you have the opportunity to add value. Very few turn-key properties on the MLS are going to beat the stock market in terms of cash on cash return, especially if you're using an investment loan (not househacking). I look for unfinished square footage and cosmetic update opportunities. Turning 2/2 duplexes into 3/3s is a great return on your money, plenty of these to be found in the western suburbs of Minneapolis.

3. There are plenty of agents who also invest, many can be found on BP. Talk with few, get recommendations, find someone who communicates well and is trustworthy.

4. The MLS if full of rental properties, and good agents will have information on income/costs. That being said, it's up to you (and your agent) to perform your own due diligence. Rentometer.com is a pretty good starting point for income projection, although it can be a bit misleading at times. I'm a big fan of walking up to neighbors and asking them what they pay in rent. Probably the most accurate source of neighborhood value.

5. My criteria: I invest in homes/neighborhoods I would live in. I like them to be centrally located, ideally near hospitals/colleges/city centers. Airbnb has been my main strategy over the past 5 years, but I'm beginning to branch out to traditional rentals.

Randy Bloch · Answer

Hi Puja, I have owned SFH, duplexes, condos and a 4plex in twin cities area.  I househack My First two duplexes and SFH in college.  They all have very different pros and cons and the area u buy in really matter as well.  Also, what is your willingness/capability to self manage matters as well.I was starting to build my RE empire when my W2 career took off and did not really have the capacity to self manage and grow.  I shifted to buying condo in the north loop...totally different than my duplexes. Number are pretty tight if u are inVesting in class A condo, that is evident from your first investment 270k for 1,750 rent.

1) what is time commitment you are willing to make.

2) what are your long term goals? Fire? Supplement retirement? Real estate mogul?

3) What is ROI requirement?

4) what is your exit strategy? I know u have not even started yet...but I find this help develop a well thought out plan.

I would not worry about the timing if the numbers make sense...but I’m choosing to hold a little more cash right now and waiting to see how much his recession plays out.

If u are serious about getting started...I would get a team in place. Start with investor friendly real estate agent, mortgage broker, lawyer, contractor, handyman, and CPA.  Make sure they all understand real estate investing. Attend some local meetup to get recommendations or ask on BP.

DM if you have specific questions, happy to answer specific questions or give more guidance.

Noah Chappell · Answer

@Puja Shah Welcome Puja. Contrary to what some have said, this may be a good time to buy when sellers may be spooked & interest rates are low.

Where are you living? You could consider housing hacking a SFH & renting rooms, or duplex.

Seems like you're familiar with Minneapolis, so I'd choose some neighborhoods you like & have properties at a price point that makes sense for rentals (read: <300k, not Lowry Hill, NE, Uptown, etc), then I'd create searches on Redfin, Zillow, & Trulia for the type of property you'd like. You can list by lowest price, time on market, etc. You can take 15min every morning to review & reach out to an agent when you see something you like.

Echoing above, I'd start with a SFH or duplex needing a little cosmetic repair - "paint & carpet", updating kitchen & bathroom. Relatively cheap, check Pinterest for ideas.

Good luck!

Corey Hawkinson · Answer

@Puja Shah The previous two people answered perfectly. I just wanted to say welcome to BP from another Twin Cities real estate investor.

David Barnett · Answer

@Puja Shah

I will address one of your questions.  I've invested almost exclusively in duplexes after my first condo purchase in Uptown.  In general, townhouses and condos have less work due to HOA's.  Any property where you are responsible for interior and exterior are going to have more work associated with them.  With the additional work, the return should be higher.  Condos and townhouses (in general), don't require as much work and the return will be lower.

My focus is generally on a neighborhood or two on the Saint Paul side that I know fairly well.  I'm not a real fan of Minneapolis, especially with the new proposals that are in the works (my opinion).  I use a full service brokerage, property management and maintenance company in Saint Paul.  I believe most if not all of the agents have investments themselves.  Please shoot me a message if you'd like an intro.

Kurt Pauley · Answer

@Puja Shah

Hi there! Here are my two cents.

I think the others are right and you are shooting for maximum return.  Value-add 2-4 unit properties will give you a much higher return than a luxury condo. I am currently focused on 10-50 unit value add buildings. We force appreciation by remodeling the building and increasing cash flow. These deals are hard to find but with hard work it can be done. With the right team in place you can mitigate the amount of "work" involved and focus on other things. I like the phrase "work on your business, not in your business".

Daniel Anshus · Answer

Hi @Puja Shah  I am an investor/ agent in Minneapolis and I also work on a team that has developed a FREE property management software called ZenLord Pro. I would love to answer all your questions but the answers are very specific to your goals. If you would like to discuss Minneapolis and rental properties please dm me and we can talk further

Property investment in Minneapolis right now. Wait or jump?

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