Newbie / Los Angeles, CA - Seeks Minneapolis & LA rental mkt thoughts

[Francis A.]

Hello (for the first time),

I have to say that this is a great and informative site! I’m crash coursing my way through the podcasts and soaking up knowledge. Thanks for sharing all this valuable ins and outs of real estate. I’m not sure of what my specialty will be but at the moment I’m still leaning towards duplexes, tris’ and 4-plexes.

A little background:

My wife and I just closed on our first duplex last week in Los Angeles. We’re going to live in the larger 3-bed room apt and rent the 1 bedroom apt upstairs that has a separate entrance. We would like to hold long term and build a portfolio that kicks off cash flow and also appreciates over the long term. We’re about 3 miles away from USC. Anyone that knows Los Angeles will tell you that downtown LA has come a long long way since oil baron Phil Anschutz opened the Staples Center down town LA in October 1999.

Fast forward to 2013. The new mayor of LA has launched a program called “Great streets LA”. Our cross street is part of that program.

http://www.lamayor.org/mayor_garcetti_issues_first_executive_directive_to_launch_great_streets_initiative

http://la.streetsblog.org/2013/10/10/day-102-garcetti-launches-great-streets-initiative/

Duplexes and the occasional triplex in near to “above average” shape in our area seem to start around the 300k mark.

I would love to keep buying around our current duplex but using the 50% rule, I’m realizing that in order to buy another duplex in say 12 months, I may have to look at Minneapolis (where I have family). I am looking at the area that fans out from the University of Minneapolis in a 3 to 5 mile radius.

I have seen multiple duplexes listed in Minneapolis for as low as 150,000. I am forming a relationship with a local realtor who tells me that there are even more duplexes etc. to be found in great shape for as low as $130,000 and possibly lower.

Without doing the entire math and factoring the land-lording etc aspect of it all, $800-$850 and $700-$750 rent in a $150,000 duplex looks mighty interesting.

As I stated before, for proximity and practical reasons, I would LOVE to keep buying duplexes/Tris/4-plexes in our zip code here in Los Angeles but the little knowledge I’ve gleaned so far indicates that this would mean we tackle this by either going after foreclosures or “subject to” (sp?) route?

I’d love to hear any and all pointers with regards to people who are doing what we want to do, or anyone who feels inclined to share their thoughts in this regard.

Thanks ever so much!

Francis

[Chris Christianson]

Welcome @Francis A. . I guess after last winter I'd focus my energies on LA for a few more years...

My question for you in regards to Minneapolis is are you looking for turnkey or rehab? As a former student of the University of Minnesota I'm quite familiar with the condition of the rentals that sell in the mid 100's and rent for under $1000. I think unless you plan on slum lording (bad idea), have a very dependable handy man on call or plan to invest some money in rehab, you might be in for some expensive learning lessons. Most of the cheap homes within a few miles of the Minneapolis campus are early 1900's vintage. They are also classic examples of differed maintenance. Knob and tube wiring or worse, amateur hybrid wiring, galvanized supply lines, non functioning windows, pealing lead paint and rotted exteriors. On top of that, Minneapolis is undergoing a major surge in rental growth and the city is starting to crack down on out of town (absentee) landlords by threatening more frequent inspections.

http://www.startribune.com/local/minneapolis/260623841.html

Minneapolis is a great place for rental income right now with avg rent at $1000/month but if you're thinking around the $130k range for duplexes any where near the U and are under the impression that they are at or above avg or livable condition I fear you're being a bit mislead. I've been looking at duplexes for about a year now. I'm looking in South and NE Minneapolis. NE is patchy and South, especially South West is pricey. You can find properties around $100k that need 30-50k of work but once the work is done they'll be worth $200k-$300k+ and they aren't going to be in prime rental areas.

In my opinion, the deals in the Minneapolis neighborhoods that you'd want to try and manage from a distance are fixer uppers that will require work before you would rent them out. Without some work you might be in for a maintenance nightmare or a lot of expensive fines from the city.

Good luck and I'll be interested in hearing how things work for you.