How to Analyze Duplex in Minneapolis

[Jackie Sladky]

We are in the market to buy and hold and plan to put down 25%.We have a seasonal real estate agent working with us, who is also a friend.  Rent in the areas we are interested in is about $1300 – $1550 for a 2 bds/1 ba.

We were thinking of a duplex priced at $440k, built in the early 1900s and has funny, damp smell in the basement.  We asked for info on the property: details, incomes, expenses and have not received it yet.  One unit is currently vacant.  Now within one week, they received two offers!I was thinking that even at $390k, it still would not be a good buy, so why are these properties moving so fast?  Are these buyers relying on future appreciation?  Or am I off base in thinking that the price is too high?

[Jake Hartnett]

Congratulations @Jackie Sladky, I also just had an offer accepted on a 4-Plex in Saint Paul. This will be my first proprty.

I was having the same issues as you, high prices that are not justified by the rents. I started networking like mad, going to REIA groups and telling everyone what I was looking for. I got some good leads on off-market deals but the one I am pursuing right now I found on Craigslist. If your current deal falls through I recommend forgetting about finding a deal on the MLS. Comb Craigslist FSBOs, go to REIAs, call property managers and ask if any of their clients' buildings are for sale, send mail to properties you like, call "for rent" posts on craigslist. You will probably get the best deals from the worst landlords (because they are bleeding money and are sick of the hassle) so call the ones with no pictures, or bad pictures, the ones that don't list the rent, have misspellings etc. If they have nice pictures and clear information about the property they probably have a good head on their shoulders, and they will probably not want to sell or want to sell for more money because the property makes money.

The areas where I see potential deals are Powderhorn/Phillips in South and some neighborhoods in North in MPLS, and Midway/Frogtown, W 7th, and the E and W side of Saint Paul. The housing stock tends to be older in these neighborhoods but there are always some newer builds. Personally, I think there is a significant drop in value when you get older than 1920. Some of these neighborhoods I listed can be a little rough, so I look for an independent coffee shop/cafe, coop grocery stores, and trendy bars moving in. If you see some of that activity there is a good chance the tenant pool will improve over time.

Its really competitive right now, so the good deals go to investors who dig deeper.

Happy Investing.