Outstate Minnesota Advice

[Melanie Raine]

Hi everybuddy,

My partner and I are relatively new to the world of investing (May 2016) so our learning curve has been huge. But we're already actively involved in note buying and 30+ unit apartment complexes ("involved" means Anthony Chara's boot camp, MNREIA training sessions and meetings as often as possible, note purchasing club where we're actually investing in one, etc). We'd also like to do wholesaling and/or joint venture rehabs of SFRs.

Where we're getting stuck is that we're finding opportunities in outstate Minnesota (we live in St. Paul) but can't find hard money lenders willing to lend outside of the metro area. And we don't know where to start with finding rehabbers in other towns other than searching Craigslist. Unfortunately, rehabbers in outstate Minnesota don't seem to be advertising on Craigslist.

What we'd really love is to start a partnership with a rehabber who is willing to travel and do the fixit work while we find and secure the properties (I know -- but if you're going to dream, dream big, right?) I don't like the thought of having to find/interview/hire/manage new rehabbers in every market. We'd like to lease option some properties and others we'd just sell, depending on the market, property, etc.

It feels like it's so hard to get started! But we're determined! So if anybody would be willing to offer some guidance for investing in outstate Minnesota, we'd really appreciate it. Anything and everything is welcome, even if it's to not waste our time in those markets.

Thank you, thank you, thank you!

[Michael Schmalzer]

Good morning Melanie,

I can't offer much from the "rehab crew" standpoint; however, I can tell you from a Lender's perspective (I'm Commercial, not Hard Money), outstate is scary. The mindset for many lenders is, "if you have to pack a lunch for a site visit, it's outside your area of expertise," which at this point the deal is effectively a gamble. So the Lender will either need to price the loan package to cover the perceived risk, or pass on it altogether (more likely the latter, as it sounds like you've experienced).

I know you're just starting out, but really focus on building a strong, trusting relationship with a lender. It will be difficult to find a metro lender willing to risk money outstate without a track record. I would recommend, if you are planning to continue to do deals outstate, try to find someone outside of the cities, relatively close to the areas you're planning to invest in, and do every deal with that individual (if they're of high character and reasonably priced). The lender will know the area much better and will be more apt to lend money at a reasonable rate, especially after you do a couple deals with him/her.

If you are looking for a HML, try finding local investing clubs and/or Chambers of Commerce in or near the area of the subject property. If you have 20% down, you could also meet with a local community bank as they are big on long term relationships and will be very comfortable with collateral in their own backyard.

I hope this helps from the financing standpoint, feel free to follow up with any additional questions/concerns.

Best,

Mike