Minneapolis and St. Paul Metro Area Market for Multi-Unit

[David Moore]

Long time no post, all.  I'm wondering if anyone has noticed the market for multi-units seems to  be really hot right now.  I recently considered listing my four plex, only to reconsider when I saw a decent amount of duplexes now selling between $150K and $200K per unit, and four plexes fetching at least $440K, and going for as high as $900K (in Uptown, of course).  I'm concerned at selling too quick, into what appears to be a high demand wave.  

I remember a podcast on BP once about a Portland, OR investor who sold his SFDU for $89K, only to learn some years later, the buyer resold for $950K.  He said that was painful.  Would like to avoid that same fate.  Any thoughts?

[Evan Kraljic]

My question to you would be what are your long-term goals and would you rather have the cash from sale or the cash flow right now? Are you looking to sell so you can have more liquidity to scale up to something bigger? Or are you sick of owning it and looking for a good time to dump your asset?

One thing I'd always recommend is to look at how your asset is performing currently vs. what it is worth on the open market. So look at comparable sales and/or talk with an agent to see how much money you'd receive at the sale. Then look at how it is performing as a rental, so what rents are you receiving for each unit and what have your expenses been like the last 12-24 months. 

There are a lot of different ways to attack this. One is simply look at the rents you're receiving as a function of it's market value (what is the monthly rent/sale price?). Also look at how much you're cash flowing per door and determine if you could realistically achieve that by purchasing deals that are on the market right now. And how much equity do you have in the property? If you could achieve 100k at the sale and you're only cash flowing $500/month I'd say it's a good time to sell because that's like a pseudo 6% COC return.

In general I'd say selling to try and time the market isn't a good enough reason since real estate is going to appreciate over the long term. But if you think you'd be better served having the cash right now or it's not performing super well from a cash flow perspective then by all means try and sell it. I'm just throwing out some things to think about.