Types of duplexes to avoid in my first house hack?

Question

I am investing in my first BRRRR property this year. I am looking in the Minneapolis/Saint Paul (Twin Cities for the locals) area. There are some reasonable options but I'm coming across three types of properties, specifically, that I'm curious about. Bank owned (foreclosure), vacant category (depends on the city, but officially declared vacant and needing repairs), and auction properties. Are any of these typically too much hassle, particularly for a first-time investor? I have a modest background in home renovation and a strong background in real estate, just not on the purchasing side of everything (valuation).

Also, any other tips are helpful! I’m open to all knowledge!

John Woodrich · Answer

@Tyler Erickson most of the deals come with some work - I have purchased many bank owned properties. No extra hassle there. Vacant and needing repairs isn't a big issue unless you don't have the cash for repairs and aren't able to pay the mortgage while it is vacant. And auctions can be a toss up, I have purchased property sight unseen from an auction and did great. Problem with auctions to a newer investor is that many require a cash purchase.I wouldn't shy away from any of these, just find something where the numbers work. That in itself can be a challenge right now.

Corby Goade · Answer

@Tyler Erickson- Driving for dollars is a great way to find distressed and vacant properties. Even better that you can integrate it in to your day job. It's less likely with a multi that you'd find one vacant, more likely you'd find one in poor shape, poorly managed. A property of any kind that is in poor condition is a sign that the owner is disinterested, not engaged in the market and possibly willing to get rid of the property if you can come up with an attractive way to eliminate their problems. Best of luck!

Corby Goade · Answer

Deals on foreclosures are, more or less, non-existent these days. Due to regulation changes, banks usually hire asset managers and list REOs on the MLS. Most auctions will require cash, so unless you have deep pockets, that option will probably have to wait until you get your empire rolling. If you are willing to do the leg work, contacting the owners of vacant properties is probably your best bet. Also, too many people here don't bother with the MLS, and the fact of the matter is 95% of property sales happen there. There ARE deals to be had on the MLS, you just have to be strategic about it. Good luck!

Tyler Erickson · Answer

That makes perfect sense. I tend to convolute some of this in my head a little too much, but what you're saying is incredibly intuitive. Thank you for the info! I'll definitely be utilizing this technique!

Tyler Erickson · Answer

So simple, but ingenious. I have no problem driving around and looking at houses... I currently do this for my day job, actually, so keeping an eye out for derelict properties may not even impose any extra work on me. Would you say that this is a good strategy for multi-families (under five units), however?

Tyler Erickson · Answer

I'm still in the beginning phases of investing in real estate, but the ball is rolling and I'll definitely need to talk with a realtor soon. I'd be more than happy to grab coffee in the near future! It'll have to wait until I'm back from Europe, however, which will be the beginning of February.

Corby Goade · Answer

@Tyler Erickson- RE; vacant properties- any of the above. The simplest way to do that and learn your market is driving for dollars. When you see a vacant or derelict property, write down the address and spend some time scouring county records to find the owner and approach them.

Amber Gonion · Answer

@Tyler Erickson Hi Tyler, let me know if you would like to meet for coffee to discuss.

John Woodrich · Answer

@Tyler Erickson No need to look at the market twice a day - get setup with a realtor who specializes in real estate investments and they can set you up for a search which will notify you of any properties come available in your target areas.If you are looking for deals on the MLS you will have to be prepared to act fast - get your pre-approval letter ready and research so you know a deal when you see it. Deals have come up on the MLS but they go fast.

Tyler Erickson · Answer

It's good to hear that you're in favor of scouring the MLS. I actually have access to the MLS and check it daily, if not twice a day. The market is a little light in regards to multifamily properties right now in my area, particularly the ones that fall somewhere between totally remodeled and need a complete gut and rehab, but I'm finding many more deals on the MLS than other sites. That, and it's the dead of winter in Minnesota. Nobody wants to leave their house, let alone stage/show/sell a property in this weather unless they have to. Pertaining to the vacant properties... Are you speaking about bank-owned vacant properties? Or privately owned? Is there a resource for vacant properties?Thanks for both of your help! I will probably stay away from auctions for now, but I'll keep an open mind about foreclosures and similar properties.