All Forum Posts by: Jake Hartnett

A 3/4 bath will be less desirable for families with small children because the kids can't take a bath. In a three bedroom unit families are probably a large portion of your renter pool. If you think you can rent it to adults then you are probably fine with a 3/4 bath, but depending on your location and local market you might have longer vacancies waiting for the right tenant. If you are close to a college, or nightlife you might be renting to a group of adult roommates anyway.

Welcome back to MN  @Maggie Hanjani,

I am an agent and investor in the Twin Cities, I owner occupy a duplex in S. MPLS and I am closing on another duplex next month. Feel free to PM me or give me a call if you have any questions or want to get a coffee and talk real estate.

Happy Investing.

Noel,

$1000/month cash flow is easy to find anywhere - if you are willing to pay cash, if you are planning on financing a deal, then $1000/month would mean a fairly large deal, or a class C-D-F neighborhood. As Amber said, larger deals are very competitive in the Twin Cities right now, so a good return is hard to find, but a high cash flow is easy if you have a lot of money to put down.

Save Money - 'Nuff Said

Network - Books and podcasts are great but they only go so far. Network with other investors, agents, lenders, contractors, management companies etc. in markets you are thinking about moving to. There is only so much you can do without getting in front of people. Get on Portal emails from agents to get a feel for deals in different markets.

Define Goals and Criteria - Probably the most important. If you don't know where you are trying to go every road will lead you there. ROI, cash flow per door, rehab you are willing to undertake etc. Know exactly what you are looking for so you will know when to pull the trigger.

Set a deadline and work backwards - I find this very helpful. Ask "what do I need to do by ___ Date to accomplish my previous goal."

1/1/18 close on a 4-plex

"What do I need to do by 10/1/17 to close on a 4-plex by 1/1/18?"

10/1/17 move to target market

"What do I need to do by 9/1/17 ...."

etc

and work backwards to what do I need to do this month, this week, today, right now. Do this once a week at a dedicated planning time and plan your week around your weekly goal while keeping an eye on your other goals. I like Sunday nights for this.

You are way more likely to accomplish your goals (even little ones) if you write them down, and even more likely if you tell someone else who will hold you accountable.

Good luck!

I love to see actual rents and lease expiration dates. You can't fudge those numbers and they tell me what I need to know about turning over units, and potential cash flow in the first year until I can get the units up to market rate rents.

Starting out with a four-plex is definitely the way to go if you can find a deal. You can get in for 3.5% down FHA, then you can "upgrade" (in the bank's eyes) to a duplex for 5% down, and then you can upgrade again to a SFR for another 5% down before you have to start coming up with 25% down that is normally required of investment properties. If you start with a duplex or SFR, the bank is going to have trouble believing that you are upgrading to a larger property, they will assume you are building an investment portfolio which they do not want to lend on with only 5% down.

Do not overprice your house.

You get the most interest in the first week it hits the market. In this market if a house has been on the market for two weeks I'm worried about what is wrong with it. By that time its at the bottom of everyone's MLS feed and everyone forgets about it. We call it stale bread. After you drop the price a few times why would anyone buy it? It gets cheaper every week. Its like a deflationary economy; don't buy anything because it will be cheaper next week.

This market is so hot you are better off underpricing your property, generating a ton of interest, going into multiple offers and calling highest and best. Once people have already offered at the original low price and you call H&B, fear of loss is now driving their decision making instead of hope of gain. And fear is way more powerful than hope.

You can see this fear/hope in psychological/economic experiments. People will offer way more for an object they are holding in their hand than they will for the same object that they are not holding, because they pony-up to not lose what they feel they already have. After someone has made one offer on a house, they are already invested in it, they feel its theirs, and they are willing to pay more to not lose it.

Dylan,

I love your passion and enthusiasm. I personally think flipping and BRRRRing are the fastest, most leveraged ways to build capital in real estate, so I like where your head is at. That being said, like the other guys, I don't think its the best place to start. You need a place to live, so you might as well buy a house or a duplex. You will learn a lot about the offer process, the market, the paperwork and legal issues, you will also dip your toe into home maintenance and paying bills and having tenants.

I learned a lot when I bought my duplex and it has given me a great education about the wider world of real estate. I thought I knew everything until I was boots on the ground. There is a big difference between the 30,000 ft view you get from the podcast and the 2 ft view you get when you are replacing a toilet or chasing down a rent check or calling the city about code.

Once you own your own home you will be better positioned to flip and rehab and get more involved with the riskier side of real estate.

I work in Minneapolis and Saint Paul and most homes I deal with were built between 1890-1930. The first thing I would do is go to the basement and check the electric panel. You are looking for a breaker box with 100 amp service. Fuse boxes aren't the greatest, but they still work. Less than 100 amp service might not be enough power for a modern lifestyle.

I have a fuse box in my rental property and it works just fine. If you see romex then the house has been at least partially rewired. Many times I see older homes where the basement and first floor have been rewired but not the second floor, because it is harder to access those wires. Its not the end of the world if you have old knob and tube wiring. There are thousands of houses with this old wiring and it works fine, until it doesn't. As far as I can tell if you don't touch it and it doesn't get wet and critters don't get at it then there is no reason for it to stop working - but I'm no electrician.

With plumbing I always look for a copper main. A lot of people are having to replace their hundred year old water mains and the cost around here is $5,000-$10,000. Also look for lead vs copper pipes in the house. Sometimes people only replace the horizontal pipes because they are the first ones to clog up, and they are much easier to access.

Another thing I do is scope the sewer drain. If that fails it can mean $10,000+ to replace it. A $200 test is cheap peace of mind.

I personally don't get too hung up on old mechanicals (my furnace is 60 years old and still going strong!) but you might need to budget their replacement down the line.

As far as I know there is no good way to estimate how long they will last, the probability of failure just continues to increase until they fail at some point, but they might last forever.

Hope this helps.

@David Moore, @Account Closed

The same thing happens with any residential appraisal for a traditional sale as well. The appraisal remarkable comes in at exactly what the sale price is, or occasionally less. It never comes in over the sale price. On my duplex they used all three methods. Two came in right at the sale price and one came in $1000 over the sale price.