Attempting BRRRR in north minneapolis or st paul

BRRRR - Buy, Rehab, Rent, Refinance, Repeat
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Attempting BRRRR in north minneapolis or st paul

Rohit Kumar
New to Real Estate · South Minneapolis · Member since 2020 · 6 posts · 1 vote

Greetings, I am a rookie investor with just one duplex which I am house hacking right now in twin cities. I am in process of completing David' book on BRRRR. Here are some of the points that I need some direction on

- Since Rehab cost in bigger cities is more, do investor shift their focus to smaller cities where they can drive back and forth within a day. How do you manage it with regular 9-5 job, until you find a reliable team there. Also I believe there is too much competition within the cities. I am planning to use my savings for entire project so looking for smaller project(<100k) which limits me to fewer neighborhoods. Should I change this and use savings just for rehab and use hard/private money lender and go with regular size project(150k-200k). Smaller project would enable me to damage control better in case something goes sideways but it would limit me to not so nice neighborhoods.

- With market delinquencies, do you think there is risk of ARV going down by the time I get done with the BRRRR which might be end of this year probably.

- Does anyone references in twin cities for rockstar investor friendly GC, wholeseller and hard money lender? Please feel free to direct message me. Also let me know if I can help with with any of your issues or can value add in exchange. I also want to get creative with rehabs so investor friendly aspect helps since they might know answer to most of the common problems.

- Does anyone know of a property manager who can manage the property where I plan to rent by room.

- Why do people prefer Minneapolis as compared to St Paul? Is it because of demand supply, more employers and higher rents? or are there other contributing factors like difficulty in getting permits, inferior city maintenance, taxes etc?

If you are inn twin cities area then I would love to buy you lunch/coffee and picking your brain on some of these questions.

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Corey Hawkinson
Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes
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@Rohit Kumar if you’re talking about more than 3 bedrooms you will want to research Minneapolis and St Paul rules. I haven’t looked in the last few years because my path has taken a different route but I know when I looked it was illegal unless you were specifically licensed as a sober house, charity or some other organization. Otherwise they did not allow rentals to more than 3 individuals who were not related.

You could possibly attach a quick adoption form to your lease where you adopt every tenant, thus making them all related. My wife rejected that idea though. One of my many amazing ideas that she has rejected.

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  • Alyssa StromBusiness Member
    Real Estate Agent · Saint Paul, MN · Member since 2015 · 224 posts · 214 votes
    5y

    @Rohit Kumar I'd recommend chatting with a few local hard money lenders since you will be very hard-pressed to find anything under $100k in the metro. @Sean Blomquist is a great person to start with. Since it's your first BRRRR and you have a 9-5, I'd recommend sticking closer to home and being patient in finding the right deal. I've got a few PM recommendations but any specific reason why you want to rent by the bedroom?

    Minneapolis vs St. Paul was mainly about personal preference until the last year. Now more investors prefer the suburbs due to new rules/regulations on landlords and other dynamics in both cities. Although most investment properties in Mpls and St. Paul are still selling in multiple offers in a weekend.

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  • Rohit Kumar
    OP
    New to Real Estate · South Minneapolis · Member since 2020 · 6 posts · 1 vote
    5y
    Thanks @Alyssa Strom for the insight. I have a process where Rent by bedroom works great above 5-6 bedrooms, it helps with vacancy not dwindling to complete 0. Also I try to furnish and it removes damages caused by moving. Great for people who visit short term for a project or internship etc. Limits the total number of people in the property. I have done it myself but I do know it requires higher level of time commitment.

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  • Noah Chappell
    Investor · Minneapolis, MN · Member since 2016 · 254 posts · 228 votes
    5y

    @Rohit Kumar good job in looking to move ahead! 

    You could try shifting out to a suburb or to a close by small city like St Cloud, though with a major rehab I'd want to be there at least 3x weekly, if not daily, and that might be tough to swing working 9-5 and drive an hour each way. Thus, I'd probably go with @Alyssa Strom good advice and find a hard money lender to cover the acquisition, then use 40-60k of your own savings to complete rehab before refinancing out. 

    Finding hard money shouldn't be hard, you could here on BP, with a google search, by asking your investor friends, or at the back of the bar.. I kid I kid. 

    I personally feel looking into my crystal ball that the market will soften mid 2022, which should give you some time before refinance concerns. 

    I used to prefer Minneapolis because I thought it was flashier and had higher appreciation, but I've come to prefer St Paul because it's more quiet and there's no rent control, crazy tenant screening restrictions, or rent control on the horizon that I've heard of.. 

    Do sent me a message if you're ever around and want to get coffee, I'd love to see your duplex! 

    1Reply
  • Corey Hawkinson
    Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes
    5y

    @Rohit Kumar if you’re talking about more than 3 bedrooms you will want to research Minneapolis and St Paul rules. I haven’t looked in the last few years because my path has taken a different route but I know when I looked it was illegal unless you were specifically licensed as a sober house, charity or some other organization. Otherwise they did not allow rentals to more than 3 individuals who were not related.

    You could possibly attach a quick adoption form to your lease where you adopt every tenant, thus making them all related. My wife rejected that idea though. One of my many amazing ideas that she has rejected.

    3Reply
  • Leah Tesch
    Realtor · St Paul, MN · Member since 2020 · 17 posts · 21 votes
    5y

    @Rohit Kumar congrats on getting ready to take the next step! My husband and I are currently house hacking our first property, a duplex in Saint Paul, so I’m right there with you!

    Many of the comments above mine have already given some great advice. I just wanted to add that the more you practice running the numbers and do your market research, the more you'll be able to narrow down what market works best for you to invest in. One of the best parts about long term rentals is that they can still make you money when the market softens or crashes. So even if a BRRRR doesn't have quite the ARV you expected due to the ups and downs of the market, you still have long term rental income to fall back on, particularly if you ran your numbers.

    No one can quite predict what the market is going to do, so it always seems scary if you try to time the market in that sense. The high prices you’re seeing right now is a crazy spring market, but it’s basically just appreciation being realized really quickly due to the even higher demand and even lower inventory. It doesn’t mean the prices are going to come down necessarily, it’s more likely they just won’t keep rising at the same crazy rate.

    My husband and I both had full time 9-5 jobs when we started and it was not easy doing most of the work on our own rehab even while living in the property (granted, it’s a big house that needed a LOT of work!). So if you’ll be really hands on with the next property, I want to reiterate what others have said that it might be in your best interest to keep it close. If you go the PM route, I recommend starting by reading Brandon and Heather Turner’s Book on Property Management and establish some criteria and questions that you can use to find the right PM for you.

    As for tenant screening, just a heads up that Saint Paul has recently adopted new policies that are closer to what Minneapolis has had for a while, making it harder to screen tenants. You can read more about the policies here, and they’ve released videos to walk through what you can and can’t do for screening:

    https://www.stpaul.gov/departments/financial-empowerment/stable-accessible-fair-equitable-safe-housing

    1Reply
  • Leah Tesch
    Realtor · St Paul, MN · Member since 2020 · 17 posts · 21 votes
    5y

    Hey @Noah Chappell, just a heads up that as of March 1 this year, they’ve adopted stricter tenant screening rules in Saint Paul: https://www.stpaul.gov/departments/financial-empowerment/stable-accessible-fair-equitable-safe-housing

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  • Leah Tesch
    Realtor · St Paul, MN · Member since 2020 · 17 posts · 21 votes
    5y

    @Corey Hawkinson I believe that’s still a rule but I think it’s up to four non-relatives now.

    Love the adoption application idea. Way to get creative! 😂

    1Reply
  • Corey Hawkinson
    Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes
    5y

    @Leah Tesch Thanks. At least someone appreciates my great ideas. 😂

    0Reply
  • Rohit Kumar
    OP
    New to Real Estate · South Minneapolis · Member since 2020 · 6 posts · 1 vote
    5y

    @Noah Chappell For sure, I will DM you. Appreciate the insight!

    @Corey Hawkinson I know someone who has used this same idea :P. I am sure you must have lot of other ideas up your sleeve

    @Leah Tesch Lot of good points there. I just started reading Long‑Distance Real Estate, David did mention the PM thing in his BRRRR book as well. Finding a good GC is where I am at right now since Rehab scares me. As much as I want to learn doing most of the repairs myself, I feel the more time that I take to finish myself will offset lost rent/my time finding other deals.

    1Reply
  • Joe Schaak
    Investor · Stillwater, MN · Member since 2015 · 106 posts · 44 votes
    5y
    FYI, a federal judge halted the St Paul SAFE tenant guidelines. https://www.startribune.com/fe...
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