Minneapolis multifamily investing advice?

Question

I'm a current duplex owner with the goal of continuing to invest. However, in the current market, I've struggled to find a deal that makes sense. I currently have 60k in cash as well as a 200k HELOC on my current residence. I've been primarily looking for another house hack in a nicer neighborhood in Minneapolis that would cash flow when I moved out, but I'm open to considering other things. I'd love to get any input on other strategies that would be worth be considering as well as any tips on building my network.

Alyssa Strom · Answer

@Daniel Anshus Great point! To clarify I meant a customized yellow letter/direct mail piece.

Noah Chappell · Answer

@Evan Kraljic love your thought process with that 4 plex!

Evan Kraljic · Answer

Yeah finding cash flowing properties on the market right now can be difficult. With your HELOC and cash on hand you're definitely in an advantageous situation though as you could look at some triplexes/fourplexes that may be priced out for a lot of investors, myself included. You could try checking out 2021 3rd Avenue S, Mpls 55404. High price tag at 720k but it is a fourplex in Uptown, and an absolutely massive one at that (7500 sq ft!!). Also, in the description it said it's open for owner occupant starting in November which works for you house hacking, and it has been on the market for 3 months, so you could offer under asking and have a shot at it getting accepted. At 5% down and 2.5% interest rate (maybe optimistic even for owner occ, but that's what it defaulted to) the PITI is ~$4300/month or at 20% it is ~$3400/month. It also lists out $5300 in monthly rents combined for units 1, 2, and 4, which I'm assuming means unit 3 is the one you occupy.

I'd say even at the 5% down option once you consider paying for water/sewer/garbage and budgeting for reserves like capex/maintenance/vacancy you'd be close to living for free there. Not to mention for a massive loan like that you are getting over 1k/month in principal paydown basically right off the jump. If you decided to go with 20% to avoid PMI or when you move out yourself cashflow would only get better of course.

Now I have no reason to sell you on this place, just went through that exercise to show that with how low these interest rates are some of these 3/4 units with a higher purchase price can still cash flow.

Bruce Runn · Answer

@Alyssa Strom

I know you are an advocate but one of the best reasons for newer investors to work with an experienced multi family realtor is to have someone to do a reality check to see how their profit formula's are working or not working.  I've met with a couple people lately to show them how I do it with self management/low vacancies, and true capex costs as they were using Bigger Pocket generic formulas that would ultimately rule out buying any property.  They had every contingency in the world built in which may be good for a worst case scenario but doesn't represent what actually happens in the real world.   The biggest fallacy was that they needed to build in a management company expense.  I'm an advocate that self managing teaches you the business that you will need to be successful and it's not the great financial option as it takes such a huge portion of your profits, especially if you only have a couple properties.  I understand some people work way more than full time and they can't or don't want to attend to details of managing but it's been the pathway to our success.

Justin V. · Answer

@Evan Kraljic

I’ve been looking at that condo conversion too. I have a hard time believing it’s 7500 sqft, but it’s pretty. The condo part added hiccups for my lender and me otherwise I would have toured it.

I’m closing still. There isn’t as much meat on the bone these days, but I can still cashflow on the right property. I can’t 2016 (when I started) cashflow, but don’t think that will happen again and have accepted it.

Bruce Runn · Answer

@Abraham Reddy

I'd suggest going back to people you've networked with before that own a bunch of properties in your target neighborhoods as maybe they are selling a couple of them in Spring and it would be worthwhile to see if any fit your criteria before they put them on the market?

Daniel Anshus · Answer

@Alyssa Strom be careful with the letters l. Nar has stated that it is infringing on fair housing

Noah Chappell · Answer

@Abraham Reddy we're in the same boat, I'm also sitting on some money, was waiting for the supposed "correction" early-mid next year, though I've come to realize the market fundamentals both locally in Minneapolis and nationally remain strong, and paired with rental assistance, etc, approved in the new stimulus package, I suspect prices will only continue to rise. I did see that nationally Minneapolis did take a comparatively large hit price wise, at least in the single fam market, so I wonder if although it's a "seller's market" it's in fact the time to deploy some capital. With all that said, a good deal is a good deal in any market, and I think it really just comes down to grinding away.

Abraham Reddy · Answer

@Alyssa Strom Thanks for the insights! I’ve tried letter writing for specific properties, but not in larger groups.

@Corey Hawkinson I'm probably too picky as well.

Corey Hawkinson · Answer

@Abraham Reddy Alyssa said it perfectly! I’m another Twin Cities investor looking to expand. The deals are difficult to find right now. Not impossible, but difficult.

Or maybe I’m way too picky. :)

Minneapolis multifamily investing advice?

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