Renting out a 350k house in Savage, MN

[Christian Rasmussen]

Greetings BP. 

I recently found a property located in Savage, Minnesota - and after a couple days of talking with the owners, they agreed to the idea of seller financing (AWESOME!). Normally, I would go through with this deal without thinking too much about it (well, of course I obsess over every deal...) - although this house is a bit different than anything I've done before. All my rentals are rented for $1,200 a month and under. I haven't tried tapping into the higher end rental market as of yet - and frankly it scares me a bit. I don't want a property to be sitting vacant for 3 months while finding a tenant. I also don't want to have sporadic renters (people flying in to Minnesota for business for a couple months or something like that). I've asked a couple fellow investors/agents and neither of them gave me a definitive answer. They both said, as I had assumed, that the rental market for high end houses in the twin cities is very slim, and I could find myself in trouble pretty easily by not being able to find a renter for a few months at a time. That being said, I'm a determined man and I get what I want....... =) 

So BP - I ask you. Any members in MN that have had success or have been unsuccessful trying to rent out higher end houses? Or any members from other cities that maybe have been through a similar situation? Any input is greatly appreciated. 

Looking forward to your responses,

Best,

Christian Rasmussen

[Alexander Lang]

Hi @Christian Rasmussen,

I generally tend to try and stick to the 1% rule myself at a minimum. I know the goal is to hit 2% of the purchase price on the rent but on higher end homes you really stretch that percentage due to the acquisition costs. What do you think you could rent for and what is the purchase price you agreed upon?

I'd say if you can figure that out with how much you are "buying it" for and what you can rent in that area that would be a start. I am currently living in Savage and can tell you that there is nothing under $200k (even the smaller 2-1's in downtown savage) and average prices are $215-250k making your 1% rule come in at roughly $2150 - 2500 a month in rent (possibly to break even). It is a very nice place  and neighborhoods are great, but on the higher end for sure like you mentioned.