Rental in Minneapolis

[Andrew Lorei]

Hello BP,

This is my first post 😀

I am planning to purchase a college rental property by the University of Minnesota (likely on the east bank/Como area for Minnesotans). I will be partnering with one other guy on the deal. He lives in the area and would manage the property. I am out of state most of the year. 

Things to consider

1. We both have great credit but are self employed. Both of us would need a co-signer for FHA

2. We have 20k pooled to invest (enough for FHA, definitely not enough for traditional 20%)

3. We can access another 40-60k through private money 

4. Purchase price would be in the 190-270k range 

Any recommendations or ideas on the best way to structure the deal? 

*Let me know what else I can add to make it clearer

Thanks,

Andy

[Marc Jolicoeur]

@Andrew Lorei I hope some Minneapolis investors with first hand knowledge of owning in that neighborhood will chime in but I have been hesitant on this area for a couple of reasons:

- There has been a ton of new apartments built near the U in the last 5 yrs.   The inventory situation has completely changed since 5 years ago.

- With the light rail opening up a couple of years ago, living near the line has become more popular with students than como.

- 4-5 years ago the going rate was $550-$560 per bedroom within 1 mile walk of the Dinkytown McDonalds, and the rent dropped off significantly the farther away the walk to campus was.

- Since the housing market is strong, I see landlords trying to sell on the MLS for top dollar. I feel many are reporting income that may have been true a few years ago but probably has come down in the last few years. A few times, I asked for the numbers and found the landlords were using old numbers for income and may not be reflecting that price per bedroom has decreased recently.

Anyway - I think there could be good deals out there and I have no reservations of owning a student house in that area but just be careful you are not sold a cap rate or cash on cash return projection that the seller cannot prove with existing leases.