All Forum Posts by: Brad Schaeppi

@Brian R. is correct.  Unless your residential lease has a clause that allows the landlord lessor the ability to provide stated notice and sell the property (yes this is legal), your term residential lease would continue with the same terms and same termination/end date.  Your landlord may be confusing Minn. Stat. 504B.178 as controlling related to "termination of landlord's interest."  It does not.  That only refers to the security deposit.  The Seller may transfer your security deposit to the "successor in interest" (the buyer) or return the security deposit to you (within 60 days).  Typically the security deposit transfers to the Buyer.  If you really cannot move, stay put.  If you can move, listen to a buy out offer.  Who knows, the Seller may make a sweet offer as summarized by @Mike McCarthy.  

Shop around. You should be in the 4s for a SFH type 30 year fixed conventional loan on your 2-4 unit property, subject to your credit score. If the "Minneapolis lender" is a local community bank or credit union that holds the note, yes that is likely their rate. Try going the mortgage broker finance route first. plenty of good options. DM me for good options. I'm not a lender, but know brokers who get these deals done all the time.

Andrew.  Good question.  I now am a real estate attorney, but used to broker small multifamily properties in Minneapolis St. Paul.  I continue to invest on the side.  These pockets and opportunities remain, but you have to be active, know your metrics, pay attention, and act fast on good opportunities.  

1) Ignore all answers here and in your network that do not provide a metric based answer.  Those answers are "noise" and will steer you towards an emotional decision and a bad investment.  Some people are looking to pad their BP stats, others really know their stuff and are here to help.  

2) If not already, start pulling and reviewing sales comps for rental properties in specific submarkets from A to B- (say Lowry Hill East, to Whittier to Powderhorn--as an example).  I would use a map feature for the sales--not zip code.  In Minneapolis now you can search by Minneapolis neighborhood--you need review down to that micro level.  Export the sales data for the different submarkets into a spreadhsheet and start to review the data.  Make sure you have columns for (at least):  Purchase price per above ground SF, Purchase price per gross building PSF, Foundation Size, Gross Rent Multiplier (the purchase price is X.X times the annual gross rents).  You have to be very precise and look at the data because a lot of it throws you off (attic top floor space rented as ASF that you cannot stand in, improved basement space, etc).  

[GRM quickly: $300,000 sold price, $1,100 in place unit rent, $1,200 in place unit rent = $2,300 per month * 12 months = $27,600 gross annual rents. $300,000 / $27,600 gross rents = 10.87 GRM sales comp.] That is a data point. You need to work through many data points across a line of submarkets. Over time you will begin to see patterns. You need to use your homework to your advantage. You should start to see patterns and a range--A location sales selling well over 10x GRM and B- sales selling in the 7 to 8 range (this will fluctuate). Also look for best of breed properties and impact to GRM. For instance, a converted SFH turned into a rental typically does not have the same quality interior space (as a whole) as an original rental duplex from the 1920s with large open spaces and high ceilings). If you have missing data, select a broker who can help fill in the gaps--missing rents, etc.

3)  Start reviewing properties for sale (on or off market) and also exporting that data and dropping it into a chart.  Quickly ask or search for the asking price and the in-place rents.  If a property is old or AS-IS you need to search and find AS-IMPROVED rent comps.  They may be in sale comps of renovated properties, you may have a friend who shared his/her data on a recently rehabbed property in that area.  Either way--you need to know--AS-IMPROVED, not have an idea.  

4) Ultimately, "following the hipsters" is not emotional, but performing arithmetic we all learned by the 2nd grade and organizing and acting upon the data properly. Look for the sweet spot--a best of breed property in a B/B- location with great livable space (not a converted SFH with tiny rooms), with an asking price GRM that is much lower than A area GRM sales comps (based upon your range) you may have something. Obviously run the cost of the improvements necessary to deliver AS-IMPROVED rents once under contract and walk away n due diligence if you cannot make the #s work.

Don't forget to drive the neighborhoods--you will see old tired storefronts closing, new ones opening, etc.  

Good luck!

Jeremy.  Yikes, never fun to discover.  As a landlord attorney in MN, I can only offer general non-Washington advice.  It may be a total loss and not worth your time.  Even if you prevail in conciliation court (you may have ability to notice via publication and last known address in WA), you may only have a paper judgment (no ability to garnish wages, etc.).  If the former tenant worked prior to your lease and during, and you believe is still in WA, those facts increase your chances of collecting on a judgment.  There may be WA state statutes that allow further penalties for purposeful tenant damage (willful, grossly negligent).  Big picture, I believe this may be a tough pill to swallow--and you move on.   Next go around (you or your property manager)--inspect property more often, improved background check/calls, increase security deposit for risks, pull the trigger earlier on material breach of lease (material damage to property), etc.  A judgement in conciliation can be had for a few hundred and a few hours total (without an attorney).  I always recommend--
"Is it good money (cost to litigate) after bad (no job, no money) or good money after good (bank account, car, job, live in state)."  Good luck to you!

While we are on the topic of residential leases, make sure your lease is not an old MHA or otherwise lease that states "landlord entitled to attorney fees if....." A new best practice is to cap or state no attorney fees to either party--the new MHA lease provides this option.   Minn. Stat. 504B.172 years ago flipped this language to tenants as well.  Please trust me--there are new aggressive tenant contingency attorneys in Minneapolis St. Paul whose primary business model is to source contingency based tenant clients (split settlement or court award), an arguable legal claim and a lease that exposes the landlord to attorney fees.  You may face this tactic in a standard non-payment eviction and face a Fritz habitability defense, a rent escrow action, or a conciliation case removed to District Court.  True actionable damages sought are typically small, but the case no longer settles for tenant best day rent abatement #s, etc. but for thousands of additional dollars as a payment to go away or face costly full litigation of the issue and a post trial motion for attorney fees.  Don't forget there are other provisions in 504B that by statute award reasonable attorney fees--unlawful ouster, etc.  

@John Woodrich I agree with @Bruce Runn's method.  Tread very carefully with mixing meters and make one meter a flat fee that compiles with 504B.215.  There is a new bread of pro-tenant attorneys who file rent escrow cases based largely upon the ability to extract attorney fees--translation--a small damage dollar technical defect (shared meter) but you must pay big dollars to settle or to contest the case.  This is no joke.  I actively defend landlords on the meter issue.  504B.215 Subd. 2(a)c has a "failure" provision that links to 504B.221 and "reasonable attorney fees."  While there is discrepancy with the statute, I would not risk the cost of a full litigated trial to find out the answer.  If you receive a tenant notice about a shared garage meter (because you rent out to someone else), take it seriously and see what your options are to separate the garage electric (and subject to any garage lease you may have signed).  If the electric becomes 100% separate, the "violation" has been removed.  Good luck

Late to the game here (just signed up). If you hire a real estate attorney, as with all new business, ask hard questions before hand. What specific areas of real estate law do you practice? Transactions? Litigation? General? Some attorneys focus more on business, some on landlord tenant, some development and entitlements, some a garden variety with no specialty. Ideally you find a real estate attorney who can offer most of what you want. Minnesota State Bar Association has a "Real Property Specialist" designation given to attorneys who complete classes, an exam, and positive peer review. That is one indicator. Happy past clients are also a good indicator. Lastly, buyer beware based upon hourly rate alone. A low hourly rate may translate into savings and may not. For instance, an attorney may possess edited forms that translate into low total hourly bills. As an example, I work in landlord tenant law daily and rarely draft new documents from scratch, but my hourly rate requires me to sell past others with low hourly rates. Also, don't be shy to ask for a flat rate for a service as well. It may not be advertised, but an attorney may agree to a specific scope for a flat fee. Flat fees are common in new LLC work and residential eviction work. Good luck to you all!

John.  

Good question.  I assume you aim to switch Minnesota residential, month to month tenants onto new month to month leases or new term leases as the existing term leases expire.  So long as you provide written notice to the tenant greater than the notice to vacate provision, you are free to require the new leases upon renewal.  There is no Minnesota state law against assessing a late fee on the 2nd (1 day later).  I can say based upon reviewing hundreds of leases across many companies and properties, Due on 1st and late on 3rd (after 2nd) is most common.  If you have manual checks or drop boxes, this extra day may be best to avoid conflicts over the charge.  If you require online payment or ACH, this 1 day grace period may be less of a practical issue.  If I were in your shoes, I would stick to late "after 2nd" and the maximum 8.0% late fee.  At the end of the day, this is a management decision and what "tone" a management company or landlord wishes to take with its tenants.  Good luck to you! 

If you are not impressed, you cannot go wrong with Ballenthin, Funk, & Johnson.  Jeff Ballenthin focuses on real estate specifically, works with large and small investors, and is a landlord.  Best.