Advice in Minneapolis, MN market..?

Question

Hello BP,My wife and I live in Minneapolis and have been looking at purchasing our first investment property in and around the West Minneapolis area as we currently live here and these are the areas we're most familiar with. (Minnetonka, Plymouth, Wayzata areas). Our strategy is long term buy and hold, we even like the BRRR method and would be open to fixing up a property. Eventually we'd like to acquire 5-10 rental units to provide some passive income for us in retirement. The market in Minneapolis is very strong. We are noticing that there aren't a great deal of multi-famly units available in these areas. We are seeing a lot of townhomes on the market but these don't seem to yield the best ROI and cap rate for after running a few numbers on them. Does anyone have experience with rentals in the Minneapolis area? Whether that be a multi-family unit, townhome, house, etc... Would you be willing to share more about your experience in this market? What would your advice be for a young couple looking to acquire their first rental property? Thank you!Mario

Bruce Runn · Answer

One piece of advice would be - don't try to force/enter into deals if they don't meet your financial requirements. Sometimes the best scenario is to wait for the right thing.

Mark S. · Answer

I have been investing in the Twin Cities area for the past four years or so. Been doing about two properties a year – all renovations, about half retained as rentals and a half sold. My focus has been single-family homes with a few high-end condos/townhouses thrown in.Would like to do more but as others mentioned the market here is extremely difficult. You can occasionally find something on the MLS but have to hit it just right or jump on it immediately if it looks good. And by immediately I mean within hours of being listed. Doesn’t help that Open Door has entered this market. Your best bet is to get some really good connections with realtors who can bring you off market deals when they learn of them. Of course, those realtors are being hammered by a lot of people like us that want the same thing.

Alyssa Strom · Answer

Welcome @Mario Russo ! I second what @Tim Swierczek said. With as competitive of a market as it is, it wouldn't hurt to expand beyond the West Metro. There are still MF opportunities out there but they go quick or off-market. Otherwise, it's figuring out ways to add value to a property that other buyers may have missed. Although most of the time if a property is sitting on the MLS for a while there are reasons why.I recently did some research on condo investing since I realized I really like the idea of low maintenance properties. What I gathered is that a majority of BP dislikes investing in anything with HOA fees, however, if the price is right they can work. That being said, the most successful townhome/condo buy and hold investors I know bought during the downturn and paid under market value.

Randy Bloch · Answer

The multi family properties in the nicer neighborhoods are pricey and difficult to get the numbers to work. You might be able to get some town home that work, but you really need to find deals outside the MLS. I have two duplexes that i purchased awhile ago, I switched strategies and started buying class A condos in the north loop....the numbers don't work there anymore either. It pretty hard to find properties on MLS that are going to be appealing from #s standpoint. I don't have any good advice on how to do this...I have FT career that keeps me busy and that is why shifted strategies. Happy to answer in specific question you might have.

Bjorik Mutize · Answer

@Mario Russo metro MLS’s listings are running extremely tight margins due to the price going in and the rent generated. The properties are being positioned into beautiful assets but the values they end up listed at might not get you your return goals. Lots of competition and the heat can be felt.I agree with the other posters just as far as looking at near and adjacent cities that you can get decent returns at a purchase price within your intended vision. You want to do this right and now jump in just to jump in. I’m seeing duplex’s in the metro listed for $700k, being bought in days just because it shines, with income not even nearly matching.Work with a good realtor, network at events and find a good team, differentiate your market study, and find other innovative ways to source deals.PM me if you want to bounce around ideas.

Pavel U. · Answer

@Mario Russo join local Nextdoor.com and start writing down contact information for different trades when people leave good reviews. Especially when multiple people say good things about a particular company/person. Then once you buy your property, you'll have a list of contacts to call when things start breaking. Why 2 of each? In case of emergency or some type of urgency, if one is not available you can call your second contact. I own 24 doors, and without my team I would be lost. You'll learn it all after you purchase one and start running into all kinds of situations. It's the best way to learn, while advise on Bigger Pockets is good, experiencing it yourself is best.

Tim Swierczek · Answer

@Mario Russo I’d recommend you look to open up your areas assuming your commute would not become prohibitive. This will allow you to have more opportunities which will be important in finding your first property. Another key is working with a Realtor who specializes in rental properties. You will have acceoto properties that do not hit MLS and you will get much needed advice. Please reach out if you’d like to meet up and talk.

Tim Swierczek · Answer

@Mario Russo send me a message and I'll send you a list of the meetups in the area

Randy Bloch · Answer

I second what Bruce said, don’t overreach. I did this once and it still hurts...I have attended this meeting couple times.https://www.meetup.com/Affluence-In-Real-Estate/events/259283525/ Sent from my iPhone

Mario Russo · Answer

Thanks @Pavel Ushakov. Really good advice. Talk to me more about what getting a team together actually looks like and means before I invest in a property. Am I calling around, talking to these individuals, asking about their services/prices, and telling them "Hey, when I'm ready to go, I'm going to give you a ring?" I'm assuming I can read reviews online before hiring them, but without actually having a property for them to do work on, won't they respond with something along the lines of "When you have a property that you purchase, give me a ring and we can talk?" Pardon my beginner mindset here, I'm trying to wrap my head around Real Estate investing as best as possible as a newby! @Tim Swierczek I guess this question goes for financing as well. How does one go about getting approved for financing without having to run multiple credit checks and taking a hit on your credit score? If you aren't sure exactly when you are going to find a property, but want to be "approved" essentially for when you're ready to make an offer, how does one go about accomplishing this? Account Closed Thanks for the knowledge, this is really helpful!