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Updated over 6 years ago, 08/14/2018
Starting out in Minneapolis
Hi Everyone,
My name is Mark. I live in north Iowa and is looking to invest in Minnespolis/St. Paul market. I have been following biggerpocket for a while now, but mostly reading articles and listening to Podcast. I feel I am ready to take my first baby step. Hopefully it would turn out well. If anyone of you have any tip/advice, it would be greatly appreciated.
I would recommend you first learn enough about the market you want to invest in so you don't have to research after a property comes up. Second, get your financing in order and get a pre-approved so you can put in an offer quickly. If you are going to look for properties on the MLS you need to know what you want and be able to pull the trigger quickly. Good luck with your ventures!
Hello and Welcome. I agree knowing your market is the best first step.
Good Luck and if you have any questions tag me and I will respond.
I agree with @John Woodrich @Michele B. it's definitely important to know your market.
However, it's important to know what you want invest in first. What is it you want to invest in, multifamily, fix and flip, BRRRR, wholesaling, note investing, etc? From here you can start to look into areas and sub-markets.
Things you will want to consider:
- What's the influx of people in Minneapolis? Is the population increasing or decreasing?
- What is the job growth like? Is it above or below the national average? Hopefully it's higher.
- What are the crime rates in the neighborhood?
- How are the school systems? Do they have good ratings? School systems with a higher rating tend to usually have better quality tenants surrounding them.
- Who is your ideal renter? What is the average household income for the area. Are the tenant's blue collar, white collar, etc. This is important to know.
- What are the rents going for surrounding the property. You can go to rentometer.com to find the comps.
These are a couple of tips to help guide you into the right direction. I hope you find them helpful.
Best of luck to you and your real estate endeavors :)
Lastly, when you speak with a broker ask them if they have any market reports to share with you from the said area. They usually have this and will be happy to share it with you.
Cheers:)
Any reason you chose Minneapolis / St. Paul over Des Moines or even your local Mason City area? I'm not familiar with the Des Moines area but I've heard from others that are familiar that it's easier to find a cash flowing rental there than in MSP.
I have 4 rentals in Mason City, you can find cash flow here if that is your goal. You wont get the appreciation you would in the cities, but the cost of entry is also much lower also. We have a local landlord meeting every 2nd tuesday of the month. We dont have a REI group per say but you can always connect with the local guys. Runde is the property management company I use in Mason City and once you get over 3 units the property management is 6% and no placement fee, all of my units have been rented with in a week or prior to me finishing them. Our properties tend to sit on the market awhile longer here so there is more room for negotiation and the growth isn't what it is in a metro but we have a large tenant pool and there are plenty of successful rural market landlords just ask Brandon Turner
@John Woodrich Thank you for the tips. I am still trying to learn the market to see which area is worth while looking into.
@Michele B. Thx. Definitely would learn the market first.
@Matthew Baltzell Thx alot for the suggestion. My understanding is that the population and job were both increasing in the past few years with relatively low unemployment rate. (Please correct me if I am wrong. I based above from google searches) . But you did brought up a good point, i should really compare with growth with national average. Thx for the tip.
@Tony Otis I previously looked into Des Monies but feel that the market is similar than that of Minneapolis/St. Paul though it probably requires less capital. I feel that Misp would have better growth than Des Moines hence decided to go for that. Mason City is actually not bad for cash flow therefore I am also looking to invest locally as well.
@Christopher Derr I am thrill to find another investor living so close to my area. May I ask where is the meeting located Cuz I would certainly love to join and connect with the local guys. I pass my Garner few times a month, let me know if you are ever free to grab something together.
@Mark Hong - Welcome.
I love the Twin Cities for the great living environment, good jobs, and good schools (in general). With that said, it isn't exactly known as the cashflow king of the world. Sure it might have some appreciation characteristics but what if that doesn't pan out for you? You could be left making $0 on your investment.
I'd probably go with a "boring" investment in your neck of the woods. I love the Cities but I think your money could be spent move effectively closer to home for you. My concern is that if you want to get into a $150K house, you'll be buying in rougher areas in the Twin Cities (which further complicates long-range investing) or you could buy in a nice middle-class neighborhood in IA (and probably get better cashflow). Initially, the cashflow is what is going to help you pay a bill today or allow you to invest more now while appreciation is a bit of hoping and praying.
I'm sure you could find a fixer-upper in the Twin Cities, but why not find something closer to home that will probably work out better for you in the long run. It's no secret that investors in the Twin Cities are looking for apartments in Louisville, KY and single family homes in the Quad Cities and other cash-flow positive areas. I think that probably says a lot.
Sorry if I'm being a Debby Downer. I just don't see why you'd look up here if you have better markets closer to you. And if you choose to totally ignore my advice, I wouldn't be offended. In the end, you have to do what's right for you. Good luck!
@Josh Collins Thx Josh for the advice, definitely want to be caution when I start out. I actually do invest locally. As part of diversifying my investment portfolio, I decided to go to minneapolis since I don't want all my properties to be in 1 state. Plus, I was lucky to live right in between Des Moines and Minneapolis, so going down to Des Moines or up to Misp is essentially the same. Lastly, this is only personal preference, I really enjoyed the shopping and the fine dinning at Misp.
@Mark Hong I am a native of the Twin Cities and just purchased my first investment property here on Friday. I would be happy to share with you some of my insights about the market but from what I have read in a couple of your last posts I think you are spot on with regards to job growth and it generally being a great place to live.
To @Josh Collins point you definitely will have to spend a little more and probably run the numbers on twice as many deals to find one that works. That being said though, if you are willing to put the time in energy into it and have the money I think it would be a great place to look long-term.
Feel free to reach out @Mark Hong if you want to continue the discussion. I'm curious about your experience investing in Iowa. I spend a lot of time down there and would love to learn more.
@Account Closed Congratulation on purchasing your first investment property. Its always good to connect with fellow investor in MSP market. Certainly will reach out to you if I have questions. Thx
@Mark Hong - If you already invest locally, I totally understand wanting to venture out. Thanks for the follow-up message. I'd still say that there are better markets to invest in in regards to cash-flow. But as far as overall market health (schools, business, jobs, development, influx of people, etc.), MSP is tough to beat. But the cheaper areas will be a bit more challenging to manage so that should be considered as you look to deploy capital. It sounds like you've put a bit more thought into this than I originally realized. I think you'll do fine if you stick to your numbers. Good luck!
Keep in mind what your goal is first, cash flow or appreciation.
Mpls will be a better appreciation bet if you buy in the right areas and the right types of homes, but there's always the risk.
Part of the reason I buy is for appreciation, accumulation of long term debt at low rates as a hedge against inflation.
Appreciation isn't always going to happen, but for the U.S. economy to continue, we'll always have inflation, so having a plan that takes advantage of inflation isn't the worst thing.
Do NOT rely on appreciation as a material factor on whether or not to purchase an investment property. Period. End of Story. If a purchase and hold, the deal needs to work on cash on cash with real world expenses (real mgmt, real utilities, real vacancy, real maintenance) built into the model. If down the line appreciation materially improves the IRR, well, congrats. Good luck!
@Dan D. Thx for the suggestion. The primary goal is to have a vehicle that would hopefully out perform SP 500. I primary focus on cash flow though I am betting on appreciation as well that is why I am buying in Mpls. The property that I am looking for needs to have healthy cash flow and appreciation would serve as the icing on the cake. I feel that a good cash flow deal is gonna help me push through even on the market down turn.
@Brad Schaeppi I am on the same page. Keeping my fingers cross for appreciation. COC is definitely one of the primary factor.