All Forum Posts by: Marc Jolicoeur

@Dave Crussel 

  Welcome to BP!  

I am also a beginning investor in the Twin Cities with one great unit cash flowing already; and like you, looking to buy 9 more in the next several years.   I am getting ready to buy my second property in the next couple of months too with similar criteria as what you are looking for.

I've been looking for townhomes, SF, and Duplexes on the MLS. There are lots of ugly houses that require lots of rehab. I rarely find anything listed for less than 100 times rent if you factor in the needed repairs.

There are some townhomes south of the river that might work, but I have yet to see any HOA that was less than $200/mth. SF homes in NE MPLS might be the best deals around lately.

The only areas where I see better than 1% of purchase price are the low priced homes in North Minneapolis, Frogtown, and Payne-Phalen.  Personally, these do not appeal to me very much because I also want to attract the professional/commuter clientele and don't want to deal with 90 yr old house issues like leaky basements, old wiring, cast iron pipes, etc...

I would very much like to connect one on one and compare notes. Are you using MLS searches? Have you found anything close to your ideal criteria? How are you calculating cashflow? Have you joined local meetups or RE clubs?

Welcome @Benjamin Biancini !

I am a landlord for over 2 years now and I am about ready to buy my second Rental investment.     I was able to do a cash-out refi on my first place (Farmington Townhome) since it appreciated 50% in less than three years and now I have downpayment money for my second investment!  Bootstrap Investing!

I am actively looking but will only buy something if it's in a great area that has growing rental demand, good schools, trendy, gentrification, no driveby gunshots, etc.... 

Currently looking for townhomes or SF in the 'burbs, or SF or duplexes in the cities.   I am looking for something turnkey, or where I can rehab it for under $30K.  At the same time, it has to be at least 7% cap rate and cash flow of at least $200 per door after all expenses and $500 gross cash flow before costs for management and maintenance. 

It also has to have no large deferred maintenance issues like foundation work, roof, leaky basement, furnace on last legs, etc...    I don't want another large fix for several years.

Experienced investors in the twin cities are probably snickering at me now saying that what I am looking for does not exist. It certainly is difficult to find these types of deals on the MLS these days.

I wrote the above to give Benjamin the idea to define his own criteria to evaluate properties.   Benjamin, if you want help calculating cap rate or cash flow numbers, there are good calculators on BP; but I also recommend building your own in a spreadsheet.   If you want help or an example, I would be happy to share mine.

@Sonny S.  , @Raj Gandhi ., @Brian K. . @Blake Olson  or @Mark Turnbull , let me know if you have any leads on possible deals that might meet by criteria!!!

@Chris Lefstad I found this thread because of a Minneapolis keyword search.  I have a few comments to add here.

- $1350 per month sounds like too low rent for a single family home in Minnetonka. If your place is in Minnetonka, I would have expected it to rent it higher.  How many bedrooms, baths and garage?  It's a single family home and not a townhouse right?

- Western burbs are hot and expected high growth in population and jobs.   I would expect you can bet on pretty good appreciation in the next 5 years if your place has good bones.  Your $175000 home is also below median so it will continue to be attractive to first time home buyers. In 5-10 years when millennials start making families, there will be even higher demand for good homes in good school districts.

- 25K in cash from your equity does not give you enough 20% downpayment to buy anything better as a rental around here.  $100,000 houses in Minneapolis may cashflow better but are risky purchases due to location or condition. 

Even if you only paid down mortgage principle and only made positive cashflow when there were no vacancies and no major repairs, I would suggest you keep the house and practice being a landlord for a few years.  

Also consider leasing it with an option to buy.  When you get paid off by your tenant buyer, you would have probably $40K or $50K or more in equity.

Tom, 

I am in Minneapolis too. I see the exact same thing you talked about near the Nortbound brewery in South Mpls.

Also, around the new light rail lines. The stations become retail and apartment hubs.  I am curious to see how University/Frogtown does over the next couple of years.

I think other leading indicators are the establishment of a new Starbucks/Caribou location, yuppie food co-ops, and new restaurants with outdoor patios in the older neighborhoods.  

Minneapolis is really undergoing a renaissance, possibly at the expense of the exburbs so I am not sure if this is typical in other cities.

I do not think Walmarts and McDonalds are good leading indicators. They build in the gaps between other locations where there is a population and growth to support a new outlet.   They typically build on vacant land in the open areas where new construction is hapening. They are not infilling in older housing stock neighborhoods and I have never seen them build on existing older commercial areas.

Hi Tim,

There are several other Minnesotans on the site so just ask if you have any questions.

I am a novice investor myself with one great rental at the moment, saving up to do several more.

Marc

I want to add that you should also have a table saw and chop saw and not try to cut by hand; or else it will take you a lot more time.

This is probably a good DIY project but I will add some tips I have learned from a couple of home laminate projects.

1) Do not take cheap shortcuts. One time I butted the "groove" part of a board to a board I had cut that had no "tongue" because I did not want to waste a board so of course the pieces looked great initially when installed but later the one board would move when walked upon and create a gap.

2) remove all baseboards and re-install them afterwards. This is very easy to do if you have a brad nailer with 2" brads. As a novice, it could look like crap if you use hammer and nails manually.

3) Leave enough gap around the perimeter to allow for expansion as prescribed in the instructions. I have had trouble before and had to uninstall/reinstall a portion of the floor because one edge was abutting directly against a tile floor without the gap.

4) use a sharp flat hand saw to cut the door jambs and door stop. Use a piece of laminate scrap to determine what level to cut at. Lay your hand saw flat on the scrap spacer to cut at the right height.

5) Do not ever bang on the edge of laminate in order to slide the tongue into the groove. The boards are designed to click together. Depending on the manufacturer, this could be easy or more difficult. If you are banging excessively, you are not doing it correctly and you will damage the edge, making it that much more difficult to attach the next one. I have found that I can use my hands and tap boards together to get them to snap in place. Anytime you use a hammer or mallet, you are playing with fire.

6) A laminate puller tool is useful to snap boards together when you are working tight to the wall. Be gentle, do not bang too hard on the puller tool.

7) An underlayment with foam or recycled fiber works well to dull the sound from laminate clapping against the subfloor. It makes the floor sound less cheap.

8) Don't leave too large of a gap at walls. IF you leave too much gap, the baseboard may not cover it and you will need to add quarter round all over the room. Take note of the width of your baseboards and how much gap room you have at the base of your wall. Sometimes, the drywall ends high enough that you have more gap room before the base plate.

A large recreation room, hall, and closets took my dad and I about one long day to install before baseboards.

@Jon Holdman, and forum readers. Please help me analyze the numbers of my first Subject To potential deal.

Goal: long term rental cash flow

property : Large Townhome 3BR/2BA worth $150-$170K

mortgage balance : $140K

Mortgage payment : $680/mth 30yr fixed term

Assn. dues : $153/mth

Rent comps : $1400-1500/month (strong rental market in MN)

No rehab needed. Built 12 years ago.

Taxes 1800/yr (guessing as homestead tax is currently 1459)

Cash to closing: $5k for title work, attorney, closing costs

Liquid cash reserves: $15k

Seller already has purchased a new property and the unit is now vacant.

What else do I need to think about?

Marc

Don't forget to estimate the costs of selling now. RE agent cost of $200K sale could be $12K and you probably need another $5K to pay the buyer's closing costs. $17K of costs equates to 5-7 years of cashflow @ $200/mth.

And, consider the holding costs while you have a vacant townhome and for sale. Selling could net you less cash than you think.

I would consider the location, amenities, and rental demand. If it's a very high demand property as a rental, you may be able to assume low vacancies for a few years and someone else is paying off that mortgage for you every month.

If the demand or location is just average, then heed the other advice above and use the equity to buy something that produces more cashflow. The vacancies will happen.

Robert,

I have a townhome in Farmington, MN that brings in $1300 in rents easy. I got it for $104,000 during the housing downturn and it brings in enough cash to cover future maintenance, capex, and possible vacancies and still bring me $200 in cash. I think my return is 8% if I remember correctly the last time I rant the numbers. It has a monthly HOA but I also got it at a lower mortgage interest rate of 4%.

I also self-manage but I am always planning in case I get sick or die - I want my spouse or kids to be able to hire a property manager.

Now, When I am looking at other properties to acquire, I am looking at similar properties in the $120K range. These would work. But when they get to cost $150K, the numbers don't work anymore. Then, you are praying for no vacancies and no repairs which is not reasonable in the long term.

I would say look for properties under $140K. Or properties that can carry a larger rental asking price. Or, use an even larger downpayment.

Good luck and please share what you end up doing.