St Paul MN Rental Deal Opinions

[Byron Bohlsen]

Hi Folks!

Just getting starting out in real estate investing. Interested in buy and hold and rehab and hold. I am hoping to get some opinions from experienced investors, especially ones familiar with St Paul. I think I want to get 1-3 low-middle income properties with strong cash flow potential to get capital growing quickly.

I have a coworker who is moving out of state and will be looking to sell his duplex in Frogtown neighborhood. Based on my research Frogtown would traditionally be classified as a C- or D+ property, in the last 2-3 years some community and religious groups have been fighting to improve the area. Unless someone knows different it seems this work has transformed the community into a solidly C class area, still poor but gang activity is down.

The Deal:

Large 4/1 down 2/1 up duplex, around 3k sqft total built in 1909. Two different attics, one I believe could be turned into a studio. Was thinking a coin op laundry and maybe secure storage could be put in the other attic. The duplex is also sitting on a 1.5 or maybe double lot. I am fairly certain I could fit a single or double wide on the lot and turn the place into a 4plex (assuming St Paul will let me put one there..).

Purchase Price: 120k plus 3 percent seller paid closing costs

Current rents: 1250 for 1st floor, 775 for top floor. If I finish the attic I expect additional 500, additional 800-1000 if I can add another structure to the lot. Current tenants are primarily college students, I met a few of them and they seem ok.

I would pay for heat and water. Water is a good 100/month. The attics are not currently insulated so during the winter time the heating bill can hit 300-500/month. I would have to finish the attics before winter or insulate and throw away and finish down the road.

Place has some deferred maintenance, I could spend spend 2-3k on misc preventative things (flashing, 1 of three electrical panels is fuse panel, etc). Windows should be replaced in the next couple years. Roof is less then 8 years old.

What do you guys think?! Especially interested in the opinions of people familiar with St Paul and Frogtown etc.