Looking for opinions on investing in greater Minnesota

[Andrew Morem]

My wife and I are preparing to get into rental property ownership for the first time. We're considering buying an investment property (single family, duplex, or small apartment building) in greater Minnesota since the cost of properties is lower than in the twin cities. I'd probably want to keep it within a couple hours of where we live since I'd manage it myself, so places like Saint Cloud, Albert Lea, or Austin would be candidates. Does anyone have any experience investing in these areas? Are there risks that I should consider that wouldn't be a factor in the twin cities? Or, does it even make sense to focus on greater Minnesota, and instead just look for deals closer to home? 

Thank you in advance for any insight you could provide! I'm looking forward to becoming a more active member on the forums here! 

-Andrew

[John Woodrich]

I know many people to invest in outer cities.  The main things that come to mind are as follows:

1.  Is it worth it? Sure you can purchase properties cheaper but are you getting enough return on your investment to take on the nuances of investing out of your market? If you are looking to build up your BP cred and try to build your "units" go for it. I wouldn't even look at COC return - I have seen several triplexes with 25% returns but they only produce $4k of cash flow... That isn't worth my time or risk.

2.  How are you going to handle the small stuff?  As mentioned above, how are you going to handle the call on Tuesday night that something isn't working or the drain is backing up?  This can be done with locals on the ground but I would work on getting that setup first if it was your plan.

3.  Do you know the market?  These cities typically have smaller populations.  This increases the changes of your property sitting vacant for a while and can make these very hard to sell (hence why they look more appealing).  I would develop an escape plan which may involve finding a great deal if you can fire sale if needed.

I am not going to comment on the cities you mentioned but they are very different in size and opportunity.  And withing St. Cloud for example, there are areas which are great and others which are horrible...  I have clients who are doing well with this buy many decide it isn't worth the potential headaches.

-John